CRTC bows to pressure on usage-based billing

Konrad von Finckenstein, the chairman of the Canadian Radio-television and Telecommunications Commission (CRTC), told a parliamentary committee Thursday that it will delay a decision allowing large telecom carriers to impose their usage-based billing policies on small Internet service providers (ISPs) that buy wholesale connectivity from them.

“We want to make sure we got it right,” he told the House of Commons Industry committee. "We will look at it with fresh and open eyes."

But he didn’t promise committee members the decision would be overturned, a point quickly grabbed by Tom Copeland, owner of a Cobourg, Ont.-based ISP who heads a group called the Canadian Association of Internet Providers.

“The CRTC chair provided little comfort to Canadians or competitive ISPs that the commission wouldn't come to the same conclusion after their review,” he said in an email.

“He was unable to provide committee members with any evidence that last week's decision was made with any semblance of reasonableness and admitted that there was dissention among commissioners over the decision.”

But in his testimony Von Finckenstein made it clear the commission believes usage based billing is a legitimate strategy to ensure a minority of heavy Internet users pay their fair share.

“Ordinary Internet users should not be forced to pay for the bandwidth consumed by heavy users,” he said.

In addition, he said, the commission tried to protect small ISPs – who he called the "drivers of innovation"--- by ordering that the rates large carriers charge them 15 per cent less than they charge their own retail customers. That would give them room to compete in pricing.

“Our whole intent was to make sure the small ISPs remain as a competitive edge to discipline the large companies,” von Finckenstein said.

The chairman also turned aside a suggestion that the CRTC is reacting to pressure from Prime Minister Stephen Harper and Industry Minister Tony Clement, who have publicly said they have "grave concerns" about the decision. There are reports Clement has flatly said the government won’t let it stand. The cabinet has the power to overturn the decision or toss it back into the lap of the commission.

The uproar is around the commission’s decision last month to finalize a ruling it made last year that carriers controlled by BCE Inc’s Bell Canada can impose the same usage based billing policy most of their own customers have been facing since 2007 onto the ISPs who buy wholesale connectivity.

Small ISPs have for years been offering unlimited plans to residential customers as a way of differentiating themselves from the Internet plans of Bell, Telus Corp. and Rogers Communications Inc. However, to combat the rising use of video sharing the big carriers have started Internet traffic management strategies. One of them is usage based billing,  which places caps on the amount of data subscribers can download a month. Use more than the cap and the user pays extra.

Several years ago the CRTC said cable companies could impose their usage based billing policies on ISPs who buy connectivity from them. It followed suit when Bell asked for the same.

However, small ISPs complain the effect is that their rates are identical to the big carriers, putting them in danger of being pushed out of business. Seeing the writing on the wall most have reluctantly changed their rates to impose caps already.

The most popular package has rates of around $30 - $35 a month with a 25 gigabit monthly cap.

In his testimony, von Finckenstein suggested that would be enough for most users. In 2009, the average residential subscriber in the country used 15.4 GB of data a month.

The latest CRTC decision was scheduled to take effect March 1. However, Bell and a member of the public asked for a 60-day delay. “In light of these requests and the evident concerns expressed by Canadians” the commission decided to delay implementation for at least two months.

It will start a review to “verify that it protects consumers and that those who use the Internet heavily pay for their excess use and that small ISPs maintain maximum flexibility and continue to be a key source of innovation in the industry.”

But von Finckenstein also suggested the commission won’t turn back the clock and order ISPs of all sizes to provide unlimited access at low prices.

“I would like to reiterate the commission’s view that usage based billing is a legitimate principle of pricing Internet services. We are convinced that Internet services are no different that other public utilities.”

In fact at one point during the hearing he compared Internet service to paying for home heating. Why, he asked, should a person pay the same to heat their house as a neighbour who keeps the heat higher.

“The fast majority of Internet users should not be asked to subsidize a small minority of heavy users. For us it’s a question of fundamental fairness.”