Small ISPs make final push for peak capacity pricing at last UBB hearing

GATINEAU, QUE.—Small, competing Internet service providers (ISPs) spent the final day of the CRTC’s hearings on wholesale usage-based billing pushing against the incumbents’ volume-based models and advocating for various forms of peak capacity pricing. “There’s no perfect model. We’re looking for the least imperfect model,” CRTC chair Konrad von Finckenstein said Tuesday, the final day of the commission’s hearings on how incumbent ISPs should charge small, reseller ISPs that lease access to their networks. Most presenters were united on the point that models based on peak capacity had fewer flaws than volume-based ones. Jean Francois Mezei, a consultant with consulting firm Vaxination Informatique, told commissioners that Bell’s argument that different peaks occur at different places is a “non-issue.” He said Bell Canada's argument that competing ISPs paying according to peak traffic would increase their usage for a prolonged periods was “a nice bit of propaganda.” “In terms of the different peaks that Bell brought up—different peaks at different times in different places—it’s a non-issue. It’s not an argument,” Mezei said. “An ISP buys capacity from Bell and Bell delivers that capacity. Yes, Bell will have different peaks here and there, depending on users, that’s their business. We pay for that capacity and Bell should deliver it. It’s that simple. I think this whole process has been made more complicated than it really is.” He reiterated his message from last week that volume-based models create a strong incentive for competing ISPs to implement usage-based billing at the retail level, which limits consumer choice and competition. Mezei added that Bell wants to protect its own retail business. If competitors have an easy way to offer unlimited packages under capacity or peak-based pricing, Bell would lose customers, he said. Matthew Stein, Primus Telecommunications Canada Inc.’s vice-president of network services, took issue with the incumbents’ “midnight madness” special retail offer scenario, which on Monday they argued would lead to increased traffic at non-peak hours to flatten out high levels of usage. He also warned that Bell’s volume model would limit competitors to offering retail usage-based rates. “Per gigabyte rates now, and increasingly in the future, will represent too large a portion of the total costs a competitor will pay to the ILEC for it to not be a fundamental aspect of the price competitors will set,” he said. Mel Cohen, president of small ISP Distributel Communications Ltd., said Bell’s total usage measure would capture every augment-inducing byte of traffic but also every peak that doesn’t require network augmentation, of which he said there are far more. “In all my years in telecom, I have never heard anything so perverse as the suggestion that making greater use of deployed capacity was somehow undesirable,” Cohen said. Bell presented a revised volume billing proposal Monday at the rate of 17.8 cents per gigabyte, billed after-the-fact, and based on actual data usage with no premium for overage data—but it received lukewarm recognition from advocacy groups and was mostly ignored. John Lawford, counsel with the Public Interest Advocacy Centre (PIAC), called Bell’s move to a cost-based rate “an improvement” but said MTS Allstream's proposed model would give competing ISPs more flexibility. OpenMedia.ca and the Canadian Internet Policy and Public Interest Clinic (CIPPIC), which appeared together on a panel, also gave Bell credit for the new proposal, calling it “a vast improvement over its previous offerings.” But they expressed concern over the 17.8-cent rate and said they prefer the Canadian Network Operators Consortium’s 95th percentile peak capacity model—under which reseller ISPs would be charged at sample rate of 95 per cent of their peak data usage. Bell said using the MTS or other peak models would lead to a change in costing assumptions. Mirko Bibic, Bell’s senior vice-president for regulatory affairs, said that if Bell changed its costing assumptions to reflect scenarios under peak capacity models, “you will see the wholesale rates get to a level that’s going to make the commission uncomfortable. It will either be higher than retail or shave those margins.” Bibic also warned that MTS’ model could lead to a revision of the commission’s speed-matching decision issued a year ago. Under MTS’ proposal, a reseller 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 and at one rate. The reseller would purchase a fixed amount of capacity that cannot be exceeded, but if the limit is approached, traffic can be slowed down to manage capacity. Bibic said any wholesale access rate that’s imposed should follow speed matching, which requires incumbents to offer the same services at wholesale that they offer at retail. “This hearing is not to inquire about changing the speed matching decision, and if the commission does that, that’s out of scope and we all know where we’re going to end up,” he said. “We’ll have to end up in court.” Bibic said retail packages vary their speeds according to price, and under one wholesale access rate, reseller ISPs could offer any of the speeds offered by the incumbents. The wholesale access rate would not reflect higher-cost speeds, he said. “The issue I have with MTS having, as I understand, one wholesale access rate for all speeds, it creates a huge regulatory arbitrage which I do not believe is in keeping with speed matching and with proper costing. If we can establish higher speeds to create higher costs, we should have the ability to have different wholesale prices,” he said. MTS said this would be an option but that the model wouldn’t impose it on all companies. Dennis Béland, Quebecor Media Inc.’s senior director for regulatory affairs and telecommunications, said Bell may have a point. If the commission attempts to impose an average access rate independent of speeds, the rate wouldn’t reflect the cost differences borne by the incumbents related to those speeds, he said. On Tuesday the commission also examined the issue of how to get more competing ISPs on cable networks, where there are far fewer than on Bell’s DSL. Last week, Bell said reseller ISPs serve 17 per cent of end users on its network in Ontario and Quebec, driving 29 per cent of total traffic, whereas competing ISPs make up a small fraction of that on cable networks. Cohen, whose company Distributel provides cable services, said rates would have to be made more reasonable to lure in others, but that there are other barriers too. He said competing ISPs on cable can’t match IP addresses to end-users. This prevents them from measuring individual customers’ usage, making unlimited service the only practical option to provide. It also prevents them from limiting customers’ speeds, he said. On Monday, Chris Allen of the British Columbia Broadband Association—whose members all operate on DSL—said reseller ISPs starting out today would see cable as a valid option but that it’s expensive for established ones to switch. End users see themselves as Internet customers rather than cable or DSL users, he said, and there would have to be a compelling price difference for a company to switch. Jean-Francois Léger, outside council for PIAC and the Consumers’ Association of Canada, said the commission should take action to get competing ISPs on cable networks. “ commercial interests are clearly inconsistent with the success of the independent ISPs. Cable companies have been particularly successful at keeping those customers off their networks,” he said. “Our sense is that, in the long term, the commission needs to be focused on keeping track of that and taking some ongoing action.” The commission said that final replies for the hearings, which are to be no longer than 15 pages long, should be filed by the deadline of July 29. mburgess@thewirereport.ca

Small ISPs make final push for peak capacity pricing at last UBB hearing

News | July 19, 2011

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