November 15, 2011 8:45 PM

The CRTC released its much anticipated decision on usage based billing this afternoon, rejecting the wholesale UBB model that came within weeks of taking effect and Bell's revised Aggregated Volume Pricing model, in favour a capacity-based approach that is closer to that proposed by the independent ISPs and MTS Allstream. The decision is a clear loss for Bell - its hopes to charge based on volume are out (which keeps the door open for independent ISPs to offer unlimited plans) - but the bigger question is whether Canadian consumers are winners.

On the specific decision, the CRTC rejected the UBB model it approved less than a year ago, acknowledging that it was too inflexible and could block independent ISPs from differentiating their services.  The issue then boiled down to Bell's preferred model based on volume and the independent ISPs' approach who preferred capacity based models. The Commission ruled that capacity-based models are a better approach since they are more consistent with how network providers plan their networks and less susceptible to billing disputes.

With Bell's preferred approach out of the way, the Commission was left to choose between two capacity models - the independent providers' "95th percentile" solution and MTS Allstream's capacity model. The Commission chose a variant on the MTS Allstream model that involves both a monthly access fee and a monthly capacity charge that can increase in increments of 100 Mbps. That model is even more flexible than what MTS proposed, suggesting that the Commission was primarily focused on building in as much flexibility for independent providers as possible. In addition to this model (which the Commission calls an approved capacity model), the large ISPs can continue to use flat rate models which provide for unlimited usage.

During last summer's hearing, it became evident that the claims of network congestion simply did not stand up to scrutiny and so Bell's basis for arguing for a volume approach did not make sense. This fight was about competition and the desire of large incumbents such as Bell to turn independent ISPs into resellers unable to differentiate their services. As CRTC Vice-Chair Len Katz noted during the hearing:

I guess I come from the position that we, the Commission, have already recognized there is a need to create competition, more competition in order to protect Canadians, and facilities-based competition is not yet here.  So it's our job to find a vehicle to create that competition and, in the simplest terms, it is to create an environment where broadband would be made available to a third party through a lease arrangement.

It is clear that Katz's approach guided this decision and the CRTC has tried to craft a vehicle to create much-needed competition. That is a good first step. Yet the reality is the overwhelming majority of Canadians will still be left waiting for measures that will address data caps at the retail level. The wholesale UBB fight attracted national attention, but it always was about six percent of the marketplace. That six percent - the current marketshare of independent ISPs - is absolutely necessary to inject some competition into the Canadian broadband market, yet the large players are most responsive to what the other large players are doing.

In a nutshell, solving wholesale UBB was never enough. The retail issues that truly sparked the public outrage have been left largely unchecked. It is the broader competition issues that have left Canadian broadband slower, costlier, and more capped than many other countries that require political attention. Last February, then Industry Minister Tony Clement indicated that the government would intervene if the CRTC did not reverse its UBB decision. The CRTC complied, but this is only step one. Possible future steps include:

• open the Canadian market to greater competition by removing foreign investment barriers, particularly for wireless broadband services that play a key part of the forthcoming spectrum auction
• work with provinces and municipalities to develop community-based broadband networks that are not reliant on the dominant ISPs
• work with CANARIE, Canada's research and education high speed network, to link local communities and provide alternatives to the dominant providers (I am a Canarie board member)
• impose open access requirements in new spectrum allocation and build open access requirements into new residential developments, municipal construction, and other initiatives
• ensure the Competition Bureau becomes active on this file to guard against anti-competitive behaviour
• pressure the CRTC to tackle the retail UBB issue. This would include stronger enforcement of the net neutrality rules and considering the prospect of Internet Billing Usage Management Guidelines.

Blogger Profile: Michael Geist

Dr. Michael Geist is a law professor at the University of Ottawa where he holds the Canada Research Chair in Internet and E-commerce Law. Dr. Geist has written numerous academic articles and government reports on the Internet and law and was a member of Canada's National Task Force on Spam. He is an internationally syndicated columnist on technology law issues. He is an internationally syndicated columnist on technology law issues.

Posted by Sue Ansell at November 15, 2011 8:45 PM

Categories: Usage based billing

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