Bell’s tangled UBB logic
Mirko Bibic, Bell Canada's vice-president of regulatory and government affairs, testified before a parliamentary committee that imposing Bell's usage-based billing structure on independent ISPs who buy bandwidth from the behemoth is a matter of “fundamental fairness.” In fact, from his testimony, and an op-ed piece he wrote for the Financial Post, it seems that Bibic sees a lot of unfairness in the world.
It's unfair that Bell's retail customers face caps and overage fees — Bell started UBB for its own customers in 2006 — while customers of the indies can buy unlimited Internet access packages. It's unfair for lighter users to subsize heavy users. It's unfair that Bell bears the burden of $3 billion a year in network investments, yet wholesale customers get a 50 to 60 per cent discount over Bell's retail customers.
The solution to disparity No. 1 is simple, and it's not Bell's proposal to pass on UBB to wholesalers. Wholesalers already pay Bell for the capacity. That capacity does not change because of the villanous uber-downloader down the street. Charging the ISPs more for the same is patently unfair. No, the solution is obvious: Bell should give its own retail customers a competitive offer. Bell's current structure may be the only instance I've seen of a business model built on discouraging customers from using your service.
As for Conundrum No. 2, I think the argument's on thinner ice, thanks to Bibic's own tangled logic. The vast majority of bandwidth at peak times — Bibic doesn't say exactly how much — is consumed by 15 per cent of users (naturally, of course, mostly users from independent ISVs). That might slow the network, but it certainly doesn't increase the cost for the average user. And Bell already has the controversial tool of traffic-shaping to deal with that.
Bibic also touts the variety of packages available to Bell's customers, from 25 to 75 GB a month. In addition, customers can buy a whopping 120 GB a month for an extra $15. So who's subsidizing whom, here? I'd say the 25 GB user who gets hammered on 10 GB of overage would be subsizing the 196-GB-per-month bandwidth hog. UBB solves nothing here.
As for No. 3, it is truly shameful that Bell's customers pay 50 to 60 per cent more than wholesalers. Bell should really think about cutting its retail margins. Bell is making its costs back, plus margin, from wholesalers under the existing regime.
Metered billing is not about fundamental fairness. It's about Bell trying to protect its content assets from competition from the new breed of content delivery models, like that of Netflix. If I can only watch so much high-definition, on-demand content, I'm less likely to pay for those services; I'll sigh, and put up with whatever's on TV over my Bell satellite or Fibe IPTV delivery system. (A highlight of Bibic's testimony was his obvious frustration when trying to distinguish Bell's Fibe offering from Internet television offerings. Fibe, he said, doesn't travel over the Internet, but a separate network, once it gets to the CO. I got the sense that Bibic was annoyed that Bell's own nomenclature — it introduced the service in a press release as IPTV last year — was muddying the waters. After all, it says “Internet protocol.” Who knew it didn't use the Internet?)
Bibic argued that Fibe is not the same as Internet video because it does not use the Internet, but an entirely separate network. It's cable TV delivered through your Bell connection. I beg to differ. It's content that's being sold, not a delivery mechanism. FedEx does compete with Canada Post.
And content isn't just movies and TV. Voice-over-IP is content, and it competes with Bell's traditional offerings. Applications are increasingly moving to the Internet (I refuse to call it “The Cloud”). That's content, too. Throttling people's usage will throttle competition and innovation. New content-heavy businesses will be at a disadvantage. New usage models for the Internet mean heavier usage, more traffic, and, ultimately, more infrastructure for Bell. The indies will help underwrite that, because they'll need more bandwidth and have to buy bigger pipes. After all, if they can't handle the traffic and it interferes with my user experience, I'll go to someone who can.
Imposing your business model on your competitors because you own the pipes is monopolistic behaviour. UBB is nakedly anti-competitive.

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