Monday, January 31, 2011

The CRTC, Usage Based Billing, and why they are examples of Regulatory Failure

Anyone who reads my Facebook knows I post a lot about American Politics, but not today. Not today.

The CRTC (Canadian Radio-Television and Telecommunications Commission) just gave Usage Based Billing the go-ahead, and I'm mad. Usage Based Billing (UBB), or “Telecom Decision CRTC2011-44" [1], forces all independent Internet Service Providers (ISPs) to adhere to usage rate plans proposed to the CRTC by Bell Canada. These UBB plans declare a Data Cap, and then charge you "by the byte" for all bandwidth used beyond that cap of 25GB.

Now, anyone who uses the internet even casually knows that a 25GB a laughable limit. A single YouTube video over a quality of 720p can run you 200MB. Windows Automatic Update just became your wallet’s worst troll. Do you use Steam, D2D, or gamersgate? Downloading a game you just purchased can easily be 10GB. Skype is a constant two-way data transfer, the use of which could cripple your monthly cap. And don’t ask me how to split 25GB between 3 roommates. My ISP boasts a download rate of 1 MB/s, meaning I would reach the new limit in a whole 7 hours of bandwidth use. But as much as some would love to simplify the argument into just ‘me not getting to stream as much Star Trek’ online, this issue is much larger.

The Cap: 25GB in Ontario. 60GB in Quebec.
The Overcharge: $1.90 per GB in Ontario. $2.35 per gigabyte in Qu├ębec.
Begins: March 1, 2011.

All ISPs in Canada will now unilaterally create (and alter existing) subscription fees based on this decision, and that is where the problem arises. It should not surprise you that the main proponents of this decision were Bell Canada, Bell Aliant Regional Communications, and TELUS Communications Company, all large corporate Telco’s who stand to gain very much from this decision. Canada’s telecommunications infrastructure of DSL cables are owned by Bell Canada, meaning that all ISPs currently must lease from Bell their usage of this network as a “Gateway Access Service”[2] at a wholesale price. Internet and cable subscription services are then sold to the consumer by ISPs that bundle and advertise at competitive commercial prices. However, as all ISPs will now be matching Bell’s bandwidth limits and pricing scheme, that competition is gone.

All ISPs in competition with Bell just got told by the CRTC to adhere to service plans that Bell says they can offer, all while still leasing the right to offer it from Bell. This is called a monopoly. In fact, because of the CRTC’s approval, it is a government-granted-coercive monopoly [3].

As yet I have not addressed the fairness of Bell’s pricing scheme, because I did not want this post to devolve into commercial rationalisation of low quality of service versus crap prices—but that is not to say that it’s not very much worth addressing. As previously stated, Bell has set the overcharge price of each GB at $1.93 in Ontario. While this price point is easily framed as “a couple dollars here and there” to some users, it is important to put this figure into perspective.

How much do you think it costs Bell, per gigabyte, for your traffic to be routed through their network? CEO Rocky Gaudrault of the cross-Canada ISP “Teksavvy Solutions Inc.” gave us the view from the top:
“IP transport of internet data is somewhere between $3 and $10/Mbps for companies like ours... So, doing basic math we're talking of $3-$10 per 300GB of data... So, 1 to 3 pennies per gig of downloading on the Internet transit side.”

The Cost: $0.01 - $0.03 per GB
The Overcharge: $1.90 per GB
Bell’s Profit per GB: 6666.66%, assuming it costs Bell $0.03/GB.

I don’t think I have to tell you that that kind of profit margin defies the realm of reason for thousands of other Canadian businesses, who nonetheless go unfavoured by the CRTC. Despite efforts to overstate the cost of bandwidth and understate its network’s ability to handle it, Bell continues to make over 6500 times what it actually costs them to provide you with Internet Service. A single look at Bell Canada’s 2010 Q4 profits of CAD $3.98 Billion (a +4.8% rise from Q3 alone)[4] casts serious doubt on their need for government-aided inflation. The growth of their subscriber base by 523,000 new connections in Q4 seems a logical dismissal of their claims at ‘expensive network congestion’. Nonetheless, with this recently rendered UBB decision, each ISP in Canada has no choice but to match their level of extortion.

Quite simply, The CRTC’s approval of such an obvious conflict of interest is the true issue with Usage Based Billing. In its own words, the CRTC exists “To ensure that Canadian communications contribute fairly and equitably to Canada's economic, social and cultural prosperity through regulation, monitoring and public dialogue”. How then can they support such a decision which gouges the Canadian consumer in favour of corporate interest, and reduces our economy’s digital competitiveness?

The situation seems far less illogical when you realize that the CRTC’s current Vice-Chairman of Telecommunications, LEONARD (LEN) KATZ, spent 17 years working for the Rogers Group of Companies.[5] During that period, he performed ‘regulatory’ and ‘business development’ responsibilities for the corporation, before actually becoming President of Rogers Business Solutions. From 1974 to 1985, he worked as “Assistant Director of Policy Development and Regulatory Affairs” in a senior capacity at Bell Canada. While such “experience” may seem to make Mr. Katz an authority in his field of work, it also makes him dangerously subjective. It leaves him with the potential for personal gain during his work with the CRTC. It compromises his ability to regulate without bias, and makes him a liability.

It is very important that this issue not be construed as a “vote with your dollar” consumer circle jerk, which implies that a simple switch to another ISP exists as a solution—it does not. Alternative ISPs have been turned into nothing more than bill collectors for Bell. This discourse must begin and end with a critical overhaul of the regulatory body responsible. The CRTC has acted on the side of corporate interest, and produced a decision which compromises the Canadian free market. This is called Regulatory Failure [6] on the part of the CRTC, wherein “a state regulatory agency, created to act in the public interest, instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating.” Other descriptive terms spring to mind, like ‘hypocrisy’, or perhaps ‘fraud’.

I’d like to draw a little historical comparison here. When our civilization found its feet, we invented the Library. This was a place where people could borrow books so they didn’t have to buy them, so that knowledge was free. Later, we turned borrow into rent, with subscription entertainment. But while the internet is like both of these things, I believe it is fundamentally incompatible with the latter. The internet represents both a vast resource and powerful tool that can define an age. This CRTC decision throws up a barrier to its access. Corporate involvement in this issue violates Canadian Net Neutrality, and simply cannot stand. As a culture, we cannot allow selfishness and corporate greed to wean us off the precious asset that is our Internet. As a generation, we cannot allow corrupt and uninformed individuals to make policy on an internet which defines us, and not them.

So, what to do? There are many approaches to solving this that are already under way. Ideally, the CRTC should be dissolved and replaced with a regulatory body which can function. But, babysteps.

Involvement begins with a rapidly growing petition protesting Telecom Decision CRTC2011-44 on, which can be found in the links below. More importantly, many Canadians have begun phoning in complaints to our Competition Bureau, asking them to address this as a matter which compromises Canada’s competitive business environment.

Finally, and most importantly, we will be rallying against UBB. This Friday, Feb 4th at Yonge and Dundas Square in Toronto. I highly recommend attending, but also reading through some of the citations and links I’ve included— This would sharpen you up and make you ready for a bit of the old ultra-protest.

- Alex


1. Petition Protesting UBB:


3. An infographic overview of the issue:

4. ArsTechnica article on the high cost of UBB:

5. Dedicated anti-UBB resource:

6. How To File a Complaint with the Competition Bureau: