CRTC starts Internet wholesale pricing hearing

Arguably the three most despised words in the country at the beginning of the year were usage-based billing.

The Canadian Radio-television and Telecommunications Commission (CRTC) had just approved it for wholesale Internet pricing, which essentially meant incumbent phone and cable companies could force their billing systems on independent Internet service providers, ending their ability to offer unlimited access plans.

But under huge public and political pressure, the commission was forced to retreat.

On Monday the CRTC begins a six-day hearing again into how it will balance conflicting goals: Create a wholesale pricing regime for residential Internet services that’s fair to incumbents, allows ISPs who have been losing market share to compete them, encourages both groups to offer innovative products and invest in new networks.

It will also wrestle with whether that new pricing framework should include some form of usage-based pricing, but one that doesn’t go as far as its earlier decision which the Harper government said flatly it would overturn.
[You can listen to the hearing through the CRTC streamling audio link here.]
For independent Internet providers like Primus Canada, Teksavvy Solutions and others, the hearing is vital to their survival: After dominating the residential Internet market in the early years of the World Wide Web, they are now reduced to holding a mere six per cent of subscribers.

Having torpedoed UBB, they hope the commission will offer them a way to fight back. For this hearing will also finalize wholesale pricing for a new set of services from incumbents, who were ordered last August to give ISPs access to their latest and fastest Internet speeds.  The commission is so anxious for ISPs to be able to offer their customers speeds that will match those offered by phone and cable companies that it created an interim fee schedule that kicks in July 14. That will be replaced by the final decision, expected in the fall.

The hearing will be dominated by presenations from the carriers, ISPs and public interest groups. But the commission is also collecting options from the public. It has recieved 100,832 comments, including 97,833 from the lobby effort.

The hearing will be technical, delving into the GAS (the regulated Gateway Access Services, which are the speeds and wholesale rates the Bell companies offer ISPs) and its counterpart for cable companies, the TPIA (Third Party Internet Access service); POIs (points of intersection) and other pricing minutae.

Many incumbents say some form of usage-related pricing is imperative, to keep ISP subscribers from overwhelming their networks by downloading huge amounts of data like movies.

Bell has proposed what it calls Aggregated Volume Pricing (AVP) to get around UBB, which may be a focus of the hearing. AVP lets independent providers purchase monthly blocks of capacity to protect against customers who go over their data limits. The ISP only pays a penalty to buy more capacity if its total aggregated traffic goes over that limit, thus putting an incentive on the ISP to keep an eye on heavy users.

For their part, ISPs and public interest groups say that threat is overblown, unproved or at least should be linked to the prime downloading hours when Internet use is at is peak.

There are a number of things to keep in mind as the hearing goes on:

The commission was heartily rebuked by the Harper government’s off-handed rejection of its UBB decision, which allowed BCE Inc.’s Bell Canada and Bell Aliant to impose usage-based billing on the ISPs who buy wholesale connectivity from them.

Under UBB, subscribers choose to buy one of a number of monthly buckets of data; exceed the limit and there’s a financial penalty.

The commission, which regulates only wholesale pricing, said carriers could extend UBB to ISPs as long as the pricing is the same for the carriers’ own retail subscribers.

ISPs complained UBB eliminates their ability to offer unlimited data plans to differentiate themselves from carriers. The government agreed, saying it won’t tolerate carriers setting the pricing of competitors.

So if the commission wants to create a usage-based component to the new pricing scheme, it has to do so carefully.

Remember, too, that in its original UBB decision the commission concluded that as a general rule independent ISP subscribers shouldn’t have to fund the bandwidth used by the heaviest retail Internet service consumers. That’s a principle it apparently is keeping.

Finally, any discussion on pricing will likely touch on the Internet traffic management policies of carriers. By definition, usage-based billing is traffic management, for it seeks to ensure that all of a providers’ subscribers have relatively equal access to bandwidth. The commission’s guidelines for such policies say they have to be transparent – that is, plainly in sight on a carrier’s Web page – and should only be used as a last resort.