ISPs Position Arguments For and Against CRTC’s Internet Ruling

by Jordan Richardson on November 17, 2011

Now that the dust has settled on the CRTC’s Internet billing decision, various groups and companies have had time to deconstruct the data somewhat in order to release statements as to its pros and cons. As noted yesterday, the regulatory body rejected wholesale usage-based billing and Bell’s aggregated volume pricing scheme to go with a capacity-based approach.

This model gives incumbent service providers two options for charging independent service providers: a flat rate or a rate based on capacity.

Volume essentially refers to space taken up by an object and capacity refers to the amount of a substance a container can hold. Capacity refers to potential, to be perhaps overly unsophisticated about it, which is why Bell and Canada’s other incumbents will be charging for the size of the pipe they buy rather than the amount of data going through it.

Small Internet service providers rent network access wholesale from large carriers. They may have their own networks and even Internet connections, but when it comes to the so-called “last mile” (connections directly linked to customer’s homes) the small providers need to play ball.

“ISPs will incur higher costs as consumers use more bandwidth…Average cost per customer goes up and therefore the retail price may also go up unless other economies of scale can be found or other add-on services allow ISPs to generate additional revenue and profit,” says Tom Copeland, chair of the Canadian Association of Internet Providers.

Copeland added that the overall framework for the decision was a “solid” one in its rejection of wholesale usage-based billing. As a result, small providers can “take on some of the responsibility of network planning, some of the risks, some of the costs, and certainly the rewards if it’s done correctly.”

TekSavvy Solutions Inc. spokesman George Burger says that the economic details of the new plan “is going to make video viewing on the web much, much more expensive.”

Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, obviously would’ve preferred that the CRTC sided with his company’s proposal. But in the end, “its decision does at least ensure that we can now charge our ISP customers for the network capacity they consume.” The major difficulty for Bibic is in the “significant discounts to the monthly rates they pay us for access to our network.”

Rogers, meanwhile, was “surprised and disappointed” by the CRTC’s rates.

With varying parties coming at the decision from varying angles, it’s predictable to see such disparate attitudes (Grouch Marx comes to mind). In some strange way it could be argued that this decision is ideal because nobody really “wins,” including most consumers, but nobody really “loses” either.

For many, the decision is a victory because it stopped the model of wholesale usage-based billing in its tracks. But with only six percent of Canadian users buying services from indie Internet service providers, the majority of consumers will simply not see much difference in how their services are rendered and/or priced.

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