Why Bell won

The Canadian Radio-television and Telecommunications Commission heldhearings on Internet traffic management this week in Gatineau, Quebec,and queried executives from Bell Canada on its traffic managementtechniques. A transcript is available at the CRTCWeb site.

Konrad von Fickenstein, the chairman ofthe CRTC, had some pointed questions for Jonathan Daniels,vice-president for regulatory law at Bell, and his colleagues. Danielshad testified that the carrier’s network congestion problem is duringpeak hours, so limiting the total amount of content a user candownloads over a month does not solve its problem.

AlthoughRogers said earlier it manages traffic by limiting the transfer ratesof peer-to-peer uploading, Daniels said Bell’s practices are “confinedto a defined period of time” and are limited to “non-time sensitivetraffic.”

“Some parties have argued that prices can be used tosolve problems of congestion,” Daniels told the Commission. “We agreethat prices provide the appropriate incentives for optimal network useand expansion. However, in today's market reality, prices are notgranular enough to eliminate congestion during the peak hours. Pricesmotivate users to reduce consumption over the month and deal withaverage usage.”

Von Fickenstein asked Daniels what is stoppingBell from making prices “more granular” so they could eliminatecongestion during peak hours.

Peter Vandenengel, Bell’s directorof Internet product management, reiterated earlier testimony fromSandvine, that it would require “education of the (customer) base tounderstand what usage is about, what different applications pulldifferent amounts of usage. “So either they would be using itless when they wanted to use it, or they would actually be incurringprice increases,” Vandenengel said, adding Bell “would have to inject alot of money” into its billing system.

Von Fickenstein thenasked Vandenengel to explain the different between wireless pricing –which gives different rates for different hours of the day, andnormally charges more for long-distance calls.

“You have verywell educated consumers on how to use their wireless phones, why can'tyou do the same thing here?” von Fickenstein asked.

“I think itgoes back to education at the base level,” Vandenengel replied.“Wireless started that aspect many, many years ago. They took thatroute on their network years ago, and they started educating the base.”

Headded using this pricing model for Internet access “would lead to priceincreases, and the vast majority of customers do not want the price togo up in this type of market.”

Von Fickenstein asked: “Or is itthat you are afraid to be the leader and be at a competitivedisadvantage, while others try to lure some of your customers beforethey are forced to do the same thing?”

Daniels replied: “Part of that answer we have submitted to you directly, in confidence.”Von Fickenstein said he had read Bell’s submission and told Daniels to “say on the record whatever you feel free to say.”

Daniels said the “market is not there yet.

“Shouldthe market move there one day, it is possible in the future, but therecan't be an overnight change to the market in that regard. The otheraspect, I would say, in terms of what is different between wireless andinternet usage, is that customers understand when they are using theirwireless — when they make voice calls, they understand how muchbandwidth it uses. It's pretty clear how the pricing mechanisms work.But when you are using the Internet, some applications are much morebandwidth intensive than others, and customers don't fully understandthat yet, and that's part of it.”

Peer to peer throttling was also an issue.

CarlCondon, Bell’s vice-president of network technology and planning, toldthe commission his company has a “Very accurate ability to recognizeP2P.” He added overall, 27 per cent of Bell’s traffic is P2P but thisreduces to 14 per cent at peak hours.

Von Fickenstein noted thatShaw Communications throttles P2P when it goes above a dangerousthreshold, while Cogeco throttles it 24 hours a day, seven days a week.He asked why Bell does it differently.

Condon replied there’s a“pretty big technical difference between the cable networks … and thetelephone networks” because the cablcos measure traffic at the cablemodem, while in Bell’s network, congestion occurs in the aggregationnetwork, with 1,500 links, some of which may be congested while othersmay not be.

In answering a question from Von Fickenstein, Condon said the problem is technological, not economics.

“So even if you wanted to, if you had the money, you couldn't technologically do it,” von Fickenstein said.

“That's correct,” Condon replied.

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