CRTC Blasted for Usage-Based Billing Decision

Ivy Tsui is a JD candidate at Osgoode Hall Law School.

With the increasing popularity of streaming videos on Netflix, downloading music on iTunes, and gaming on Steam, internet usage soars. Major communication providers such as Rogers Communications and Bell Canada have been restricting internet usage by charging additional fees when their customers exceed a certain level of usage. For example, Bell is offering 2GB of usage allowance for $21.95/month, which is enough to download only two movies or 400 songs. Any usage beyond the set amount of data would prompt additional charges of $2.5 per GB; after 300 GB of usage, this extra charge drops to $1 per GB.

Small Internet Service Providers (ISPs) have since distinguished themselves from these large ISPs by offering unlimited usage of the internet. By leasing network owned by large communication companies, small ISPs provide a more economic choice for heavy internet users.

However, on January 25, 2011, the CRTC confirmed a controversial decision by the CRTC last October to allow “usage-based billing”, which means that large communication companies can set the rates charged to small, independent ISPs on a per bytes basis. The CRTC has also mandated large ISPs give to small ISPs a 15% discount off retail rates.

As expected, this decision triggered a firestorm of criticism from the Liberals , the NDP, an open letter from the Canadian Federation of Independent Business, and a cyber petition that has now reached over 400,000 people. Using Twitter as the medium, the Harper government promised to review this CRTC decision; specifically, on Prime Minister Stephen Harper’s Twitter page, he tweeted, “We’re very concerned about CRTC’s decision on usage-based billing and its impact on consumers.  I’ve asked for a review of the decision.”

The Liberal Party argued that the CRTC decision is anti-competitive “because it penalizes small internet service providers.” The fear is that large communication companies could abuse their dominant positions. For example, if usage-based billing is implemented, Bell could apply usage-based billing to internet Protocol Television (IPTV) services provided by independent ISPs, but could choose not to charge Bell customers extra based on usage for IPTV viewing.

Although the government has asked the CRTC to review its decision, some critics suggest that the government should rescind the decision pursuant to section 12 of the Telecommunications Act. Allowing the CRTC to reconsider its decision could equate to months of costly litigation that small independent ISPs might not be able to afford. Rescinding the decision would be more closely aligned with the policy directions of the CRTC, which state that it “should take into account the principles of technological and competitive neutrality, the potential for incumbents to exercise market power in the wholesale and retail markets for the service in the absence of mandated access to wholesale services, and the impediments faced by new and existing carriers seeking to develop competing network facilities.”

CRTC chairman Konrad von Finckenstein and CRTC vice-chair Len Katz appeared before the House of Commons Standing Committee on Industry, Science and Technology yesterday, announcing that the final decision on usage-based billing would be delayed from March 1 until May 1. Meanwhile, the commission will review the CRTC decision to “verify” that it protects consumers, ensures heavy internet users pay their own usage, and that “small ISPs retain maximum flexibility and continue to be a key source of innovation in the industry.”

Konrad von Finckenstein said that “internet services are no different than public utilities, and the vast majority of internet users should not be asked to subsidize a small minority of heavy users.”  For instance, less than 14% of internet users are responsible for more than 83% of internet traffic.

However, immediately after the hearing, Tony Clement, the Minister of Industry, said that he would quash any CRTC attempt to implement user-based billing.

The issue of bandwidth-capping has been discussed previously on IP Osgoode, including here, here, here, and here. My view is that over the years, policymakers have created an uncompetitive market with only a few telecommunication giants. Having a strict bandwidth cap will stifle research and development, and discourage new businesses in Canada. It is important to recognize that implementing usage-based billing would leave consumers with no choice but to succumb to the telecommunication giants. However, simply reversing the CRTC ruling might not improve the poor quality of Canada’s broadband industry. An industry-wide reform might be needed to improve quality of service with an accessible and economical market place for all Canadians.

One Comment
  1. This is not the first instance of the CRTC issuing policy that affects competition. Years back it ruled that a subsidiary of a large telecom, which was set up to provide dedicated waves to large users (in this case dark waves for contingency) could not negotiate competitive rates but was required to charge the tariff rates like any other user. This lead to a hefty rate increase, additional charges for previous years and efforts to route bandwidth through a US carrier. I thought it was counterproductive

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