Bell’s download caps could choke independent ISPs: analyst

Bell Canada’s intent to put a threshold on the network usage of the ISPs renting its network and remove access to its network would eliminate competition from the marketplace, says the Canadian Association of Internet Providers (CAIP).

Bell plans to place a limit on the Internet usage of its wholesale ADSL customers starting next January. The limits range from two gigabytes a month for slower connections, up to 60 gigabytes a month for high-speed connections. The independent ISPs that rent Bell’s network would be on the hook for extra fees if users went over this limit.

Bell Sympatico customers were cut off from unlimited downloading last year. If independent ISPs aren’t able to offer that option, it will stifle competition, says Tom Copeland, chair of CAIP.

“None of us will be different in the marketplace,” he says. “Anyone that provides DSL will have a 60 gig cap. That’ll be the same whether you’re dealing with Bell Sympatico or any supplier of residential service.”

ITBusiness.ca requested an interview with Bell, and was provided with an e-mailed statement from Jason Laszlo, associate director of media relations. The statement calls “usage-based billing” a fair way to have users pay for the bandwidth they use, “regardless of their ISP.

“Given that there are parts of the network that are shared by Bell and our wholesale clients, a usage based pricing model is appropriate – especially given the tremendous growth of bandwidth consumption,” it says.

It’s the latest maneuver from Bell in a game that is testing the CRTC’s willingness to exert control over what the telecom giant does with its own infrastructure, says Mark Tauschek, senior research analyst with Info-Tech Research Group.

“It seems to be anti-competitive behaviour by Bell,” he says. “The government of the day is not inclined to regulate more than they feel necessary… [so] the CRTC is reluctant to impose their will.”

Bell and CAIP recently exchanged final comments in a public proceeding before the CRTC. CAIP asked the regulator to stop Bell from its traffic-shaping practice of throttling peer-to-peer traffic.

Bell also has an appeal before the Federal Court of Canada asking the CRTC-mandated access of wholesalers to the last mile of its network to be scrapped. The marketplace is now competitive enough that the regulation isn’t necessary any longer, Bell argues.

But without such access, smaller ISPs will quickly be stamped out of existence, Copeland says.

“It’s not practical for competitors to establish their own infrastructure foundation,” he says. “It’s been established for over 100 years now, some of it with taxpayer’s money and certainly with the income of Canadians, when there was no choice and these companies had a monopoly.”

The current Internet service market isn’t competitive, Copeland argues. Most regions see two major organizations trading 95 per cent of the customer base, leaving just five per cent of the market to independent ISPs.

If Bell is able to wrest control of the tariff charged to independent ISPs from the CRTC, it will become nearly impossible for the smaller companies to compete, Tauschek agrees.

“Bell could make it very difficult for competition to survive, just because they have so much power by owning the infrastructure,” he says.

In Laszlo’s e-mail, Bell identifies its wholesale channel as “important.” It points to its recent CRTC approval for its first wholesale promotion.

But CAIP would rather see the CRTC renegotiate the tariff paid for access to Bell’s infrastructure than unpredictable surcharges based on customer use, Copeland says. Aside from eliminate competitive difference, independent ISPs would be strapped to pay for the change.

“There’s going to be a great deal of administrative costs that independents will have to bear,” he says. ISPs that chose not to pass the costs on to their customer would also be hit in the pocket book, shelling out the rate for the extra bandwidth.

“Somehow, I don’t think it’s going to be pennies per gigabyte,” Copeland says.

Bell’s thresholds on bandwidth come just as rich media is starting to boom on the Web, Tauschek says. Average users now consume considerable bandwidth by watching video online and downloading music.

“From the carrier’s point of view, they only have finite bandwidth and they’re starting to run up the ceiling right now where there’s going to be serious capital investments to get more bandwidth,” the analyst says.

Still, the 60 gigabyte threshold isn’t a restraint for most Internet users, Copeland admits. But there should still be an option for consumers who want that sort of service without shelling out for it.

“It’s nothing more than Bell looking to find new ways to generate income without having to dramatically change the way they do business,” he says.

For Info-Tech’s Tauschek, Bell’s actions are another sign the company doesn’t care about its public image.

“They know they’re going to be hated, so what?” he says, “they’re in it to extract value for their shareholders.”

But Bell describes its approach to network operation “three-pronged,” combining usage-based billing with investment and network management.

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