Bell UBB proposal has the right direction but the wrong price, CNOC says

Small Internet service providers (ISPs) say a new Bell Canada proposal that would see the end of usage-based billing in favour of “aggregated volume pricing” is a step forward with a catch—it's still too pricey. “We don't think the pricing is fair at all,” said Bill Sandiford, president of ISP Telnet Communications and the Canadian Network Operators Consortium Inc. (CNOC), a coalition of small ISPs. “As an organization, we are happy to see that they are at least starting to look at traffic on an aggregate level instead of from a per-user standpoint, but we think that we're still a long way off from coming up with a proposal that's actually commercially workable that everyone will be happy with.” Monday was the first deadline for submissions to the CRTC's review of its wholesale usage-based billing policy. In a surprise move, Bell retracted its proposal to charge third-party reseller ISPs on a usage-based billing basis. Instead, Bell suggested the implementation of aggregate volume pricing, in which the reseller ISPs pay $200 per terabyte, or $0.195 per gigabyte, and $0.295 per gigabyte for excess usage. Small ISPs could pre-purchase blocks of terabytes at $200 each, but if they surpass the pre-purchased amounts, they would pay the higher rates. “Under the AVP proposal, each ISP would instead pay for the total usage its customers collectively generate each month through the AVP ... Consistent with the principle of predictability, such an approach encourages an ISP to monitor and manage its traffic and pre-purchase its intended usage," Bell wrote. “The companies' proposed ... wholesale rates ... are just and reasonable.” But Sandiford disagreed, arguing that the rates should be priced on the same level as essential services, which means the basic cost plus a 15 per cent markup. Sandiford said the prices overall are higher than what Bell previously proposed and that reseller ISPs are paying more for Bell’s wholesale services than Bell’s retail customers. The commission had approved Bell to sell usage-based Internet on a wholesale basis to reseller ISPs at a 15 per cent discount from Bell’s retail usage-based billing prices. Telnet, a medium-sized reseller ISP serving about 15,000 subscribers, used 189 TB of data last month, he said. “As ISPs we have no problem paying and compensating the for the portions of the network that we use. We want to pay them for what we use, but we want to do so on a cost plus a reasonable markup basis, not based on some arbitrary rates that they set,” Sandiford said. “We don't like usage-based billing, period, but on an aggregate basis, if framed properly and priced accordingly, it is certainly a lot more palatable.” But Bell's senior vice-president of government and regulatory affairs, Mirko Bibic said by email Tuesday that Sandiford's assessments are incorrect. “While Bell’s retail customers are able to acquire an additional 40 GB for $5, CNOC’s argument assumes the average retail customer uses every GB they have available without incurring excess usage charges. Most don’t come close to that, whereas 3rd party ISPs will estimate their usage as accurately as possible to achieve the 19.5 cents per GB average,” he wrote. “CNOC also ignores the fact that the vast majority of ISPs will not have to pay for AVP because Bell will provide a significant usage credit up to 41 GB per user on an aggregate basis. As long as the ISP average does not exceed 41 GB per user, it will not have to pay AVP.” In its submission to the hearing, CNOC said that charging costs plus a markup would give ISPs more leeway. “Each service provider, incumbent and Independent ISP alike, will be able to manage its own end-users’ usage. Some service providers may choose to charge for usage, and some may not. Caps and usage rates would be expected to vary among those service providers that do choose to adopt UBB models at the retail level,” CNOC wrote to the commission. Consumer group the Public Interest Advocacy Centre (PIAC) says it also supports a cost-based approach. John Lawford, counsel with PIAC, said in an interview that the most interesting part of Bell's proposal is that it proposes to charge wholesale overage fees of about $0.30 per gigabyte, but now charges retail overage fees between $1 and $2.50 per gigabyte. “What's the incremental cost of a gigabyte? Well it's less than $0.30 and it's certainly less than $2.50,” he said. “We're quite pleased to see that movement.” But Lawford said Bell's solution isn't ideal in terms of what it means for consumers. “In the end, if this AVP thing that Bell is talking about is a little closer to reality and costs, and is fairer, the little guys have some room, and unless there's some way to encourage that they grow some market share, I don't think the result at the user level isn't that different,” he said. Advocacy group OpenMedia.ca said in a release Tuesday that while Bell's proposal is a positive move, it is only a “band aid” solution to the much larger problem of Internet pricing. Michael Geist, the Canada research chair of Internet and e-commerce law at the University of Ottawa, said in an interview the far bigger issue behind usage-based billing is retail pricing and caps. “The hundreds of thousands of Canadians that spoke out against this issue ... are people who are deeply frustrated with the state of competition when it comes to Canadian Internet services,” he said. Geist said he now views usage-based billing as more of a political issue than a regulatory one. “At the end of the day, it is going to fall to our political leaders, whoever forms the government, to determine what steps are needed to address those issues,” he said. Geist wrote in a blog post Tuesday that Bell's proposal is “certainly better than the wholesale UBB approach it replaces.” Rogers Communications Inc. also proposed an aggregated volume pricing scheme, but suggested that the prices be tiered. “Consumers will be well-served by this solution since it will empower small ISPs to offer innovative pricing without reference to the cable carriers' own retail pricing,” Rogers wrote. Shaw Communications Inc. wrote in its comment that it is considering alternatives to the usage-based billing model, including aggregate usage models. kfournier@thewirereport.ca

Bell UBB proposal has the right direction but the wrong price, CNOC says

News | March 29, 2011

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