CRTC’s Decision A Bad Idea

The decision by the CRTC to allow usage-based billing for Internet service is a stunningly bad idea. While it may look to the current big providers that this will be a profit bonanza for them, the reality is that it is more likely to cause a short-term drop in Internet usage, and gives other providers incentive to provide services via wireless (where possible) to circumvent this whole thing. The claims by the big telco providers about needing to raise rates to cover their costs is a smokescreen: their bandwidth costs are fixed, since they pretty much own their pipes already. This isn’t like moving physical material down a pipeline or over a road: the fibreoptic cable doesn’t degrade faster because of more data. This is an opportunity for them to make huge profits by marking up the true cost of bandwidth by several thousand percent.

Perhaps it is time for the regulators to review how core bandwidth and connectivity is owned, run and managed. It may be time to separate that out from the end-user services for voice, data, video and other “content”. I’m not sure that the electrical power delivery model is exactly the one to follow (since they separated generation from transmission from end-user delivery), but the concept is similar.

In the mean time, the federal government is being asked by a number of groups to review the decision and reverse it. Economically, it makes a lot of sense to do so. This change only benefits a tiny number of companies, and hurts thousands of businesses and millions of Canadians.

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3 thoughts on “CRTC’s Decision A Bad Idea

  1. The reason they are lobbying for this is that more and more content is going to be delivered through their pipes (e.g. Netflix), content that was previously delivered through their cable services and they got to charge for it. I can see their rationale and I think in some ways it could benefit smaller users of bandwidth (e.g. me, who rarely watches video on the Internet or anywhere else for that matter but I am paying the same every month as people who use ten times more bandwidth than me). It is true that the marginal cost of bandwidth utilization, once built, is more or less zero, but if more bandwidth has to be built so that my service is not degraded because of some video freak who is a massive consumer of the bandwidth that we share – then a fair solution is the video freak pays for his disproportionate use of the infrastructure and then I might pay less). I noticed this with my I-Pad, I subscribe to 100 GB per month or something for my 3G use, (I prefer it to using the wireless internet which seems less stable) and I never use my 100GB, nothing like it and I consider myself a fairly big I-Pad user. Tiered pricing based on usage would be a great benefit to users like me and other elderly folk who don’t have much need for streaming data.

    • I understand their motivation, but I don’t agree with their claims. Usage based billing wouldn’t be so bad if the CRTC hadn’t approved a 10,000% mark-up on what is billed. The marginal cost per gigabyte is somewhere around $0.01 – $0.02, but they’ve been allowed to charge anywhere from $1.50 to $2.50/GB for overages. Even charging $0.05/GB gets them a healthy 500% margin, and would actually be reasonable.

      That aside, with the available bandwidth that these guys have vs. what is and is likely to be used, a so-called “high consumer” is really a very small part of the picture. The impact that it will have on the average person isn’t even measurable or noticeable. I’ve seen numbers that claim that about 20% of high-speed Internet users in Canada use 80% of the bandwidth, but I have a very hard time believing that. I haven’t seen independent, hard numbers on that sort of thing. For now, there is no way to justify allowing the current ruling to stand in my mind, and it will do far more harm to the Canadian economy overall than allowing it to continue.

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