ISPs still waiting for CRTC on pricing

 Exactly a year ago independent Internet service providers who gathered in Toronto for a conference were hanging on every word of a vital CRTC decision issued that week which set new rules on how they buy access from big carriers.

This week ISPs gathered in Toronto for their annual conference waiting again for the final word of the CRTC on the same issue, which hasn’t been settled because both providers and carriers filed appeals.

“It’s been a good year for the independent ISP in Canada, but it’s been a challenging year,” said William Sandiford, head of the ISP group called the Canadian Network Operators Consortium (CNOC), which represents many of the country’s independent providers.

ISPs had hoped the CRTC’s capacity-based billing model, which replaced the controversial usage-based billing (UBB) decision, would settle their future, giving the independents the ability to match the faster Internet speeds large telephone and cable companies were offering consumers and small businesses at competitive rates.

The commission sets the wholesale rates companies like Bell Canada and Shaw Communications can charge ISPs for access.

Facing mounting public criticism, the Harper government told the CRTC to take another look at UBB. What the commission came up with was a wholesale framework they like, but a pricing mechanism they don’t.

So ISPs who offer DSL broadband service over phone lines have been able to significantly raise the download speeds they offer customers to 25 Mbps. A year ago many were limited to a quarter of that.

But, Sandiford said, his members have had a tough time setting pricing those services because of the fee schedule set by the CRTC. “It’s serious,” he said. “The numbers almost make it uneconomical to offer some speeds. If you look at the capacity and access we have to buy on a wholesale basis (from a carrier) the costs are very close to what the incumbents are selling to their customers on a retail basis. That’s one of the reasons why we know the (CRTC) pricing can’t have been done accurately.”

The problem is acute at faster speeds, where subscribers are more likely to want to download high capacity files like video. That has inhibited the ability of ISPs to offer unlimited data plans which they were known for.

On the other hand, at CRTC hearings the carriers insisted on a costing plan that would have some relation to the amount of data customers download.

Other ISPs said the same. Melvin Cohen, president of Distributel, which offers service in a number of provinces, said capacity-based billing (CBB) has enabled him in Quebec to offer an unlimited access plan he couldn’t before.

But the CRTC set different wholesale rates for each carrier. So the rates for buying access from Shaw in the West and Cogeco Cable in Ontario don’t give Distributel much margin.

If the CRTC pricing stands “we’re going to have problems.”

Marc Gaudrault, CEO of Teksavvy Solutions, said the rates set by the CRTC for DSL providers are “way off” the actual costs of providing service. That’s one reason why his company has switched to buying access from cable providers and offering cable Internet access, he said.

The company has dealt with the costs in another way by allowing subscribers to download unlimited data – but only between 2 a.m. and 8 a.m.

Matt Stein, vice-president of network services at Primus Canada, said his customers are increasingly downloading streaming media during peak hours. But because of the wholesale pricing rates, Primus has to impose a fee rate that acts as a disincentive to download during those hours.

When asked if that isn’t the goal of the CRTC, Stein said the rates actual penalize high Internet use because the price is “exorbitant.”

So carriers and ISPs asked the commission to review and vary the pricing part of the decision and leave the framework alone.

In his first speech to the association Monday evening, new CRTC chair Jean-Pierre Blais acknowledged there’s been some impatience, but said the issues are complex and a decision can’t be rushed.
“We have to make sure the conditions are there so parties can compete fairly in an open and innovative marketplace,” Blais said in an interview Tuesday. “It’s not about choosing who’s going to win or lose. That’s not my job, and frankly governments get into trouble when they try to do that … “So we’ve got to make sure the rates are fair and reasonable” and make sure the carriers have a “just and reasonable” rate of return.

Blais said that he concluded from his brief talks at the conference with ISPs generally they are optimistic about their future. “And I don’t think they were trying to snow me,” he added.

Blais knows quite a bit about the CRTC and the issues it handles, having been on staff as executive director of broadcasting from 1999 to 2002. After that he spent most of his time in the department of Canadian Heritage in culture-related matters, including foreign investment.

Since being appointed to the CRTC in the summer he’s best known for issuing the commission’s decision on refusing BCE Inc. permission to buy Astral Media’s television, cable and radio stations due to concentration of ownership. Recently the commission also said telco and cable carriers have to give competitors more detailed pricing information in rate hearings.

Sandiford and his members have high expectations of Blais. “He’s taken an open and much more transparent approach to these types of things, he’s acting in a much more consumer-friendly manner, which we think will only help competition.”

The proof, of course, will come in – another – highly-expected CRTC decision.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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