Small competitors again fire at Bell’s ‘revenue grab’ wholesale model

GATINEAU, QUE.—BCE Inc.’s aggregated volume pricing model for wholesale Internet services was the target of further criticism at a CRTC hearing Thursday as smaller competitors said the proposal would lead to extra billing, elevated costs and the imposition of per-gigabyte retail billing on small, competing ISPs. At the commission’s fourth day of hearings on retail wholesale usage-based billing Thursday, MTS Allstream called for a peak-period capacity model similar to what Primus Telecommunications Canada Inc. has proposed. Under MTS’ proposal, a reseller Internet service provider (ISP) would purchase an amount of peak period capacity—as opposed to a volume of data—on the incumbent's network on a monthly basis. As opposed to Bell’s aggregated volume pricing model, in which monthly blocks of terabytes are pre-purchased at one rate and overage data purchased at a premium rate, MTS' plan would limit the capacity so it that cannot be exceeded. Mike Strople, MTS’ vice-president of technology and development, said that, as the limit is approached, end-users' service could be slowed down depending on how the competing ISP chooses to manage its traffic. Teresa Griffin-Muir, MTS’ vice-president of regulatory affairs, added that ISPs are monitoring their networks day-to-day and wouldn’t find themselves in a position of sudden congestion where running out of capacity comes as a surprise. Griffin-Muir told commissioners that if a reseller ISP wanted to buy more capacity it would take approximately six weeks to process. “Basically, you estimate how much you get, you get that at the fixed price, everything else is your problem,” CRTC chair Konrad von Finckenstein said. “That’s correct,” Griffin-Muir replied. Strople said the model offers predictability to both MTS and the small, reseller ISPs. He said the model is similar to that of the Canadian Network Operators Consortium’s (CNOC) “95th percentile” system, which would also sell access based on peak capacity measurement, but that MTS' model would lead to more variability because the reseller ISP doesn’t reserve capacity in advance. Strople said the model is similar to Bell’s aggregated volume pricing proposal—because capacity is purchased in advance—but a premium rate is not charged for excess. “The difference is the AVP on top. We believe that also adds the opportunity or the potential to charge twice for the same capacity and introduces the variability or the unpredictability on both sides,” Strople said. In her opening remarks, Griffin-Muir said that Bell’s wholesale model would result in usage rates that are four times higher than under MTS’ wholesale model. Griffin-Muir said volume pricing limits small competitors’ flexibility by forcing them to be cognizant of the volume each end user is consuming at any point in time rather than at peak traffic points. “When you turn to volume-based pricing for wholesale, you’re imposing the same kind of retail construct on the wholesale customer,” she said. Similar to the comments of Primus on Wednesday, Griffin-Muir called Bell’s model an attempt to control what competing ISPs can offer in the retail market, and said that capacity should be sold to reseller ISPs so they can decide how to manage it. “You make it sound like sort of a revenue grab more than anything else,” von Finckenstein said. Griffin-Muir, laughing, replied in the affirmative. The chair also laughed, and said: “OK, I guess we’re going to have an interesting discussion on Monday on this point." The hearings will resume Monday with two days of rebuttals from parties. Jean-Francois Mezei, a consultant with the firm Vaxination Informatique, also appeared Thursday and agreed that Bell’s model offers less freedom to operate. “Capacity-based billing is the method which gives the ISPs the most freedom to shape their retail offering. The AVP one, because it’s charged per gigabyte, provides a strong incentive for ISPs to also charge per gigabyte because they have to cover their costs,” he said. “Capacity-based gives total freedom as to how they charge. They can charge UBB , they can charge unlimited, they can charge by speed, they can charge by whatever they want … in terms of competition. This has the best potential.” Von Finckenstein said that after listening to Bell and the cable companies this week he saw “two fundamentally different approaches.” He said the cable companies seem ready to accept wholesale customers and allow them to use whatever they want as long as they pay for it. “Bell’s approach seems to be based on , ‘We need to put some discipline in the system, some incentives, and make sure that users are fully aware of how much they use, and in effect discipline usage.” When asked where MTS fits in, Griffin-Muir said reseller ISPs should purchase what they think they need and manage their own capacity. If they make a mistake, she said, they’ll have to buy more capacity. “We’re not actually trying to impose some sort of discipline on the wholesale market, which Bell’s tariff is obviously trying to do,” she said. Mezei said where MTS’ model doesn’t allow small competing ISPs to exceed their limit, CNOC’s 95th percentile system does. Under MTS' model, a major event such as the Royal wedding or Michael Jackson’s death would cause congestion at the competitor’s level rather than the incumbent’s. Under CNOC’s proposal, Mezei said, where ISPs could add more capacity, congestion could extend to the incumbent's network. “Whereas when you have a physical one gigabit link and a commit of 200 Mb, when Michael Jackson dies you can go up to one gigabit and that could cause congestion on the incumbent’s side,” he said. “I’m sure the ISPs will hate for me saying , but that’s the reality of it. Whereas when you have a fixed limit on your rate limit, you can’t go over it, so it really shifts the congestion onto the ISP.” Mezei said technological advances make it easier to buy bigger pipes with taps to limit usage that can then be opened when needed. mburgess@thewirereport.ca

Small competitors again fire at Bell’s ‘revenue grab’ wholesale model

News | July 14, 2011

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