CRTC shelves usage-based billing for Internet services

The Canadian Radio-Television and Telecommunications Commission (CRTC) yesterday appeared to have taken a middle-of-the-road stance in deciding on what billing model will be used for the Internet. The move was a “step back” for Canadian consumers, according to one independent Internet service provider.

On one hand, the CRTC seems to have bowed to popular pressure and reversed an earlier plan that would have forced independent Internet service providers to adopt a usage-based billing scheme earlier proposed by Bell Canada. This model has been strongly opposed by consumers, Treasury Board president Tony Clement and small providers who purchase Internet access from incumbents at wholesale price and sell the service to consumers at prices lower than those charged by the larger providers.

On the other hand, the federal telecommunications regulator decided to give incumbent ISPs a choice of either charging smaller ISPs a flat rate or billing them based on the capacity of the small ISP’s networks.

The way Konrad von Finckenstein, CRTC chairman puts it however, the new ruling will not guarantee lower Internet fees for users. But it does shift the blame away from the CRTC.

Competition, not congestion behind Bell’s UBB push

“The bottom line is that you as a consumer will not face a cap or limitation of use because of anything mandated by the CRTC. Any kind of cap or limit, payment per use that you will have to pay is because your ISP decides to charge you, not because we mandate it,” he said.

The chairman also admitted that the CRCTC erred in its earlier decision. “Our original decision was clearly not the best one.”

“It was wrong as was pointed out by a lot of people, including Minister Clement. He was right. We have today fixed it,” he said.

At least one independent ISP expressed disappointment over the CRTC’s ruling yesterday.

“TekSavvy is pleased with the rate structure adopted but the actual rates will increase the cost of Internet for Canadian consumers,” read a statement issued by the Chatham, Ont.-based ISP TekSavvy Solutions Inc.

“The CRTC decision is a step back for consumers. The rates approved by the commission today will make it much harder for independent ISPs to compete,” said Marc Gaudrault, TekSavvy’s CEO.

“This is an unfortunate development for telecommunications competition in Canada,” he said.

Another independent ISP provider favoured the CRTC ruling.

“Obviously, further analysis is going to be required. We’re happy to see that the Commission opted to endorse a capacity‐based billing model. We appreciate the flexibility that this model offers but are concerned about the rates that have beenapproved,” said Mel Cohen, President of Distributel Communications.

“In short, this decision, which allows independent ISPs like us to provide unlimited use Internet plans, represents a small step forward both for consumers and small businesses,” Cohen said.

If UBB were imposed on small ISPs, the larger service providers could essentially determine how much Canadians could use the Internet, Cohen said. “Today’s decision enables independent ISPs like Distributel to continue to offerCanadian consumers unrestricted Internet plans with access to faster speeds.”

Bell had originally asked the CRTC to allow it to charge its wholesale customers (small ISPs) based on total volume of Internet data used. The company proposed a plan where wholesalers will be charged fees for going over a specified bandwidth limit. This was rejected yesterday by the CRTC which adopted instead a capacity rate model based on the Internet service speed.

The capacity rate model, however, means small ISPs will have to pay incumbents more to provide faster Internet to their customers. The rationale behind a capacity billing model is that large ISP like Rogers Communications and Bell spent a lot on their infrastructure to provide fast Internet service directly to the homes of consumers. Large ISPs are the ones who provide the “last mile” Internet connection directly to consumers’ homes.

With the capacity rate, small companies that buy Internet capacity from large ISPs such as Rogers and Bell will now take on some risk. Small ISPs need to determine what the amount of Internet capacity they need to service their customers.

“If they buy too little they have a problem, if the buy to much they have a problem,” said von Finckenstein.
Bell Aliant, SaskTel, Shaw and Telus will continue to offer the flat rate model to their wholesale customers. Bell Canada, Rogers, Cogeco, MTS and Videotron will go with the capacity model.

Nestor ArellanoNestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.

Share on LinkedIn Share with Google+