This week and next week, the CRTC has been having a hearing about the proposed User Based Billing (UBB) that some of the large telecom companies would like to instate. While this hasn’t been getting nearly enough exposure on traditional media to suit my tastes, I have been following it closely online.
As an overview, if the CRTC approves UBB, it would allow the big telecoms to force the smaller Independent Service Providers (ISPs) to charge their users for internet service on a byte-by-byte basis, or charging extra for data over a certain pre-determined level (aka data-capping). The small independent ISPs transfer data through the larger telecoms’ infrastructure – and the large telecoms are implying that this isn’t good for their own customers as it’s causing massive network congestion. This however, as the hearing has progressed, has been shown to not be the case:
Discussion on the lack of a link between congestion and UBB continued as Commissioners Molnar and Denton asked why Bell was promoting a plan that involves aggregate usage rather than peak usage. Molnar noted that aggregate usage is not linked to congestion and that it appeared to simply create incentives to reduce Internet use more generally. Bell agreed, leaving Molnar to respond that this was a problem since it reduced Internet use with no benefit to addressing congestion. Denton continued on the same theme, asking why the CRTC would want to try to reduce Internet use other than in an effort to address congestion.
Add Bell’s acknowledgement that its pricing is not a function of actual costs but rather the market and the conclusion is that all elements of UBB – use of caps, pricing, and size of caps – are a function of the regional marketplace dynamics, not congestion concerns.
Michael Geist’s CRTC UBB Hearing, Day One: It’s About Competition, Not Congestion
Even if the network congestion was the greatest concern in this case, the network gets congested during peak hours, not all day. UBB shouldn’t be the way to handle internet traffic when there isn’t peak load on the infrastructure. The American company Netflix had these comments about the idea of UBB in Canada:
data caps are actually a very poor way to manage demand and limit Internet congestion. All of the costs of supplying residential broadband are for supporting the peak loads, typically Sunday nights for residential customers. Bandwidth consumed off-peak is completely free; it literally has no marginal costs. If ISPs really wanted to limit their costs and congestion, they would limit speeds at peak times. But if their goal is instead to increase revenue, then making consumers pay $1 or more per gigabyte is an excellent strategy.
Source
Unfortunately, if the proposed UBB structure gets the go-ahead from the CRTC, this could have a drastic affect on smaller businesses in Canada. With a lot of media and entertainment going more online, with people doing more research online, this will effect what people choose to do online, leading to an effect on those whose businesses are at least partially dependent on an online aspect. Take, for example, Netflix. If users are charged by their ISPs for all of the bandwidth they are using, soon the cost of viewing a movie on Netflix will outweigh the benefit that users get from viewing the movie. While this is an example of an American company, the same results would be shown for Canadian companies.
There are two reasons this would be bad for Canadian companies.
First of all, it’s going to have a drastic effect on the competition between ISPs. If an small, independent ISP can’t control the price of Internet packages that they are offering customers, they have a lot less to offer customers than the larger telecoms (who often offer discounts for customers purchasing more than one service through them).
Second of all, it’s going to limit what businesses can offer online. With more bandwidth-intensive services appearing online, it limits Canadian businesses with what they offer that their customers. It wouldn’t be in the best interest of a Canadian business to develop an online application that is highly bandwidth intensive if their potential customers would be charged an arm and a leg by their ISPs to use this application.
In short, how this hearing plays out will end up defining Canada’s online future, and that is enough to make me extremely interested in what’s the CRTC will decide about UBB.