CRTC reviewing usage-based billing at request of Bell, chair says

OTTAWA--Following a request from Bell Canada Enterprises Inc., the CRTC announced Thursday it will launch a review of its controversial usage-based billing decision and delay its implementation by at least 60 days. “The decision to review was self-initiated and we did it in light of the request by Bell … saying, ‘Please, let’s delay it for 60 days,’ and make sure that we made the right decision,” CRTC chair Konrad von Finckenstein told the House Standing Committee on Industry, Science and Technology on Thursday. The CRTC’s latest decision on usage-based billing, which set usage-based rates for third-party, Internet service provider (ISP) resellers at a 15 per cent discount off the incumbents’ retail prices, led to a mounting a public outcry and political backlash this week. Prime Minister Stephen Harper and Industry Minister Tony Clement both tweeted disapproval over the decision. Clement stated that if the CRTC does not review the decision, the federal government will overturn it. The CRTC ruling cleared a path for incumbents like Bell Canada to prevent third-party competitors from selling unlimited monthly usage plans. But von Finckenstein told the committee Thursday that the CRTC decision affects a very small percentage of Internet users. He said that out of a total of nine million Canadian Internet subscribers, only 500,000 subscribe to third-party ISPs impacted by the decision. “There are a number of small ISPs that serve approximately six per cent of the market,” von Finckenstein said. “Despite offering innovative services and real competition, the small ISPs mostly rely on the large distributors’ networks.” The problem with the Canadian Internet market is that a small number of users are eating up a disproportionate amount of bandwidth, and many of them are turning to third party resellers that don’t impose bandwidth caps, von Finckenstein said. “We are trying to find economic ways to discipline the use of the Internet,” he said. Von Finckenstein said Internet services should be likened to other public utilities, such as water, gas and electricity, where Internet consumers pay for the bandwidth they use and are not compelled to subsidize the heavy users. “ doesn’t set the caps. We you have to treat your wholesale customers like you treat yourself. That’s the basic principle,” he said. Bell recently set its bandwidth caps at 25 GB per month in Ontario and 60 GB per month in Quebec. If the CRTC’s usage-based billing decision were to go ahead, third party ISPs would be forced to operate with similar caps. The usage-based billing ruling was to come into force March 1. That deadline has now been delayed by at least 60 days while the decision is under review. Von Finckenstein said Bell’s bit caps are reasonable because, based on the CRTC’s Communications Monitoring Report for 2009, Internet users consumed an average of 15.4 GB per month. But William Sandiford, chair and president of the Canadian Network Operators Consortium (CNOC), a coalition of small ISPs, issued a public letter to Clement Tuesday stating that the average customer of a third-party ISP uses approximately 30 GB of bandwidth monthly, a number that will increase. “Usage is expected to increase at a minimum rate of 50% per year and reach 300 GB per month in approximately five years, barring any artificial restraints,” CNOC said. CNOC said the CRTC decision will effectively increase the retail prices for Internet services while constraining customers’ use of popular Internet activities such as audio and video streaming. “ make it virtually impossible for competitive services providers, such as CNOC members, to innovate and differentiate their retail Internet services from those of the incumbents,” the group wrote. Von Finckenstein said he did not believe that allowing Bell to charge resellers usage fees at 85 per cent of the price of the incumbents’ retail prices would stifle competition. “Our whole intent along this road was to ensure that small ISPs remained there as a competitor to discipline the large companies,” he said. Von Finckenstein cited the CRTC’s speed-matching decision, which required the incumbent ISPs to provide wholesale Internet to small ISPs at the same speeds offered to the incumbents’ retail customers, as an example of the commission encouraging competition. “We made the big companies sell at the same speed to wholesalers. We decided on the policy, not the big companies … If it wasn’t for our rules, small ISPs wouldn’t exist,” he said. Globalive Wireless Management Corp. said in a release Thursday that it is pleased with the federal government’s intervention on the issue. “Globalive has always been an advocate for the consumer and for fair competition, so we’re very pleased that the government is stepping in to ensure that competition survives in the Internet market,” the company said. Clement told reporters Thursday, following the meeting of the industry committee, that he is pleased the CRTC followed the government’s lead. But he said the government is prepared to make a final decision on the issue. “Regardless of the outcome of the CRTC’s review, under a Conservative government, this ruling will not be implemented,” Clement said. “As our government develops Canada’s first, comprehensive digital economy strategy, we need to look very carefully at how decisions like these effect the bigger picture.” Clement said the government thinks there should be choice for consumers. “If an ISP wants to offer unlimited access for a flat fee, they should be allowed to offer that in our marketplace. What the CRTC decision was doing was eliminating that possibility and that is what we found unacceptable,” he said. In 2006, the Conservative government issued a direction to the CRTC that said it should rely on market forces to the greatest extent feasible--a signal that the commission should only intervene with regulation where necessary. Von Finckenstein said the commission is ready to return to the decision with open eyes, but that he doesn’t know if the outcome will be different. “We made our decision based on the evidence that was available at the time. Maybe because of all of this publicity, we will find ourselves with more evidence now.” The CRTC has opened a call for submissions on the review and is not ruling out the possibility of a public hearing, von Finckenstein said. “We have had three hearings on this already. It’s not something we do lightly,” he said. The terms of the review will be posted on the CRTC’s website Monday. asmith@thewirereport.ca

CRTC reviewing usage-based billing at request of Bell, chair says

News | February 4, 2011

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