Usage Based Billing

January 26th, 2011 by Potato

I had a fair bit to write about UBB, there are updates to this post:
UBB Update 5, including my submission to the CRTC
UBB Update 4, including a new metaphor. (I didn’t say it was a good one though!)
UBB Update 3, a reminder of the basic economics behind the CRTC being involved in regulating wholesale internet in the first place.
UBB Update 2(b), a very long post on the issue. Also, 2(a) came just before that, as a short summary.
And the first update, including my first letter on UBB to my MP.


Cloud computing – you may have heard of it, it’s becoming quite the buzz word lately. The idea is that rather than everyone having all this computer hardware on their desks or in their laps or (now with smartphones) in their pocket, you put the big giant gobs of data on a central server that you reach over the internet. If you have a complex task but don’t have the computing power on your smart-phone, for example natural language speech-to-text for something more complex than an address book lookup, you just send the audio to the cloud, and let it compute the conversion. It’s supposedly going to be the wave of the future, and some cloud computing start-up companies have already been bought out at ridiculous prices. You can even keep your data there, backed up, safe from a local calamity, and available wherever you want it.

Streaming video is already becoming popular, with internet connections now able to process streaming hi-def movies and TV shows from Netflix, Hulu, YouTube, etc.

But you may not ever see these in Canada thanks to the outrageous usage based billing model the ISPs have started.

It’s also hippocritical. “A bit is a bit is a bit. If you’re a heavy user, regardless of what’s causing the heavy use, you will pay more. That’s the concept,” said Mirko Bibic, Bell Canada’s senior vice-president for regulatory affairs. Somehow a bit isn’t a bit when it’s coming from Bell or Rogers for another service: Rogers’ digital phones, Bell’s IPTV (“Fibe”) and Rogers on demand use the same bits travelling over their networks, but they wouldn’t dream of charging $2.50/GB for that data. In fact, it was the rollout of Rogers’ digital home phone service that first lead to throttling and data transfer caps being implemented on their network.

Not to muddy the waters, but there are two issues with that one: network congestion has been in the past (and may again become) an issue affecting the quality of service, especially at peak usage times. Throttling (as much as I also disagree with how heavy-handed it is/was), is one method to solve that issue. Caps, and usage based billing, on the other hand, are completely unrelated to any notion of congestion: it’s possible to blow through your cap in just a few hours of downloading with the speeds available these days, which you could easily do in the off-hours without affecting the rest of the network. The only good explanation I’ve heard for bit caps is to snuff out on-line competition for Bell and Rogers’ video/TV services.

“The rates are absolutely atrocious. How the hell are we doing above one dollar for extra usage?” said Rocky Gaudrault, president of Chatham, Ont.-based Teksavvy. “It’s in the thousands of multiples beyond what the costs are.”

Indeed, Teksavvy currently charges just 25 cents per GB, or 10 cents per GB in pre-purchased blocks, and that’s their retail price. These charges from Bell and Rogers (which they are now trying to force on their resellers like Teksavvy) are outrageous. From most reports, the actual cost of a GB of data is around a penny, maybe as much as three cents. However, today’s CRTC ruling is forcing Teksavvy to match Bell’s pricing (with as much as a whopping 15% discount). That is extremely uncompetitive. It undermines the whole idea of bringing in competition with resellers of monopoly infrastructure, and moreover, it’s bad for Canadians.

Now, I’m not against charging based on usage. In many ways, that makes sense. However, these charges are ridiculous, usurious even. And just as there are usury laws against charging excessive interest on loans, the ISPs, if they want to charge for usage, shouldn’t be able to apply a 250X mark-up, fees that put whole industries out of business as infrastructure becomes too expensive to use. They especially shouldn’t be allowed to engage in the anti-competitive act of forcing their resellers to adopt their own pricing model (what’s the point in having resellers then?). The ruling doesn’t even make clear if the resellers are getting charged on a per GB basis, or if they can also create buy-in-advance usage plans like Bell can.

The next step is to do something about it.

Open Media has a petition going, which I’ve already signed. I’m going to write letters to my MP, Tony Clement, and the CRTC as well. I’ll update this post when I’m done, but don’t wait for me: write your own! Though you may get stuck with the same fee package, switch to a reseller like Teksavvy if you can, and tell Bell or Rogers why you’re leaving when you cancel your service with them.

The Globe and Mail opinion piece: A metered internet is a regulatory failure.

Edit to add: Ellen Roseman’s blog post. “Since Ottawa has abdicated, Quebec passed a consumer protection law that restricts penalties charged on cellular contracts. Manitoba also plans to impose new rules, although perhaps moving too far into an area of federal responsibility.” Hey, maybe a note to the MPP wouldn’t be out of place, either…

The CRTC ruling itself.

12 Responses to “Usage Based Billing”

  1. This and That: Financial Crisis report, CRTC ISP ruling and more… | Canadian Capitalist Says:

    […] Blessed by the Potato is hopping mad with a CRTC ruling forcing Teksavvy to match Bell’s outrageous internet bandwidth charges. Shame on you CRTC! […]

  2. Potato Says:

    A quick updated post with my letter to my MP is now up.

  3. Rob Says:

    Teksavvy is just whinning because they no longer get a free ride by charging their customers for a service they don’t have to pay for. Prior to this ruling Teksavvy were charging their customers $.10/gb and not paying Bell anything for the usage. Now the playing field has been levelled and Teksavvy will have to pay Bell for usage just like all Bell’s retail customers (who have to pay $.125/gb)

  4. This and That: Financial Crisis report, CRTC ISP ruling and more… | MoneySense Says:

    […] Blessed by the Potato is hopping mad with a CRTC ruling forcing Teksavvy to match Bell’s outrageous internet bandwidth charges. Shame on you CRTC! […]

  5. Stan Says:

    You have a fundamental flaw in your argument here – the phone, IPTV, and VOD services are NOT the same bits as your internet connection. Yes, they travel over the same physical connection, but they are on a separate network. (Just like you share the highway with huge transport trucks. You are on the same road, but are not the same as a transport truck.)

    1 penny per gigabyte is a wholesale cost of bandwidth on a backbone. The cost to get the gigabyte from the backbone to your house in the suburbs is a lot more than a penny. It’s not $2.50, probably closer to $.25. The per-GB cost is not to make a huge profit, it is to stop people from overloading the network. If everyone stated using video-on-demand services like Netflix 6 hours a day, the network would collapse. It takes time to build out the network to support the additional load. The caps have existed in the past, and have gone up each year as the speeds have increased. It’s just that the ISP used to cut you off if you went over, but now they are charging if you go over.

    Yes, usage based billing sucks, but at least try to educate yourself on some details before starting a technical argument. I have no doubt that the caps are in place to limit the amount that customers can use online video, but please try to put up a better argument than this.

  6. Potato Says:

    Wow, I didn’t think anyone actually supported these charges. Here we go:

    Resellers were paying for usage, it was part of the connection they bought. Now they’re being charged retail (less 15%) rather than wholesale rates. They also paid their own way out to the internet backbone. Check out the petition put together (see the update post) for some details on how that works.

    Bell is charging up to $2.50/GB — yes, you can get a pre-purchased bunch of data for 40GB/$5 (12.5 cents/GB), but that just reinforces my point that the usage costs them nowhere near $2.50/GB, and that’s a ridiculous, usurious charge.

    Stan: Which way do you want to have it? Digital phone, IPTV, VOD aren’t the same because they don’t go out to the backbone, but on the last mile of copper to your house, they are the same, and that’s where the bottleneck is. If you’re saying that’s where 99.9% of the charges are coming from, then it doesn’t make sense for those bits to be exempt from UBB fees.

    The “behavioural modification” reason is bullshit. Remember, the networks already have throttling in place to manage network overloading. If they really needed to bring in a financial incentive to stop network overloading, they’d make it a time-of-use charge… but they aren’t.

    And your sentence about the caps existing in the past and going up as usage increased? Not true. In fact, the caps have come down as the ISPs realized they could charge for “overages”. In ~2004/5 when Rogers introduced their Extreme package, it had a 100 GB cap. Then 90 GB, and now 80 GB today. Their Express package has been 60 GB for a decade (even the first time they tried capping then took it away) with no increases. Their Lite service was 25 GB from when it was introduced as an option in ~2003/4 until the day Netflix was announced… then down to 15.

    Please try to educate yourself on some details before starting a technical argument.

  7. Charles Says:

    Stan & Rob

    Please refer to the bandwidth costs in the U.S. where they *also* have placed caps on customer usage.

    Comcast’s high end package is ~$55/month for a usage cap of 250Gb.

    That comes out to about $0.22/bandwidth *retail*, with profit, for Comcast.

    Compare that with the 60Gb bandwidth caps and $2/Gb for overage in Canada.

    Are you telling me that compared to U.S. Telecoms, the big-3 Canadian companies are *that* inefficient that they can’t provide a service for less than 8x their U.S. counterparts? Perhaps their profit margins are just that much fatter; hell, BCE just ponied up $Cdn 1billion+ for CTV, so they cannot be broke.

    User based billing does actually make a lot of sense; high bandwidth users (like me) can pay for more of the network upkeep and upgrade costs.

    I don’t have an issue with that.

    What I have an issue with is the incredible price gouging going on by the Canadian Telecoms.

    It’s either greed, or incredible corporate inefficiencies being shoveled onto the consumer – which would be solved by some *honest* market competition.

    I am *not* a fan of U.S. domination of our markets – but I think it might be time to let Comcast over the border to put the “fear of consumer” back into Bell, Shaw, and Rogers.

  8. This and that: Financial crisis report, CRTC ISP ruling and more… | MoneySense Says:

    […] Blessed by the Potato is hopping mad with a CRTC ruling forcing Teksavvy to match Bell’s outrageous internet bandwidth charges. Shame on you CRTC! […]

  9. Ike Says:

    Its pretty straight forward people.

    It costs nothing to produce an extra bit of data on a given month. The only threat to capacity is bandwidth speed – which the ISPs don’t seemed concerned in controlling offering up to 15Mbps. If they are concerned about the health of the network at any given time, controlling bandwidth speeds is the solution.

    With that said, the report from Bell ordered by the CRTC last year clearly demonstrated that congestion is not an issue.

    UBB is simply a scheme to increase profit margins.

  10. Invest It Wisely Says:

    Why not blow up Bell and the other monopolies and blow up the CRTC while you’re at it? That would be much better for the consumer. I’m not against UBB in theory, but the deck is stacked against the consumer with our monopolies and CRTC populated by telco ex-execs.

  11. Potato Says:

    It’s certainly an option: break up Bell into a regulated monopoly (or even Crown corp) wholesaler for the essential infrastructure, and let anyone lease it (including Bell-content) to deliver retail services (phone, internet, TV, etc) in a competitive way. We’re kind of halfway there with regulated reselling, but the CRTC is falling flat on its face as a regulator.

  12. Midweek Reading: Catching Up Edition | Invest It Wisely Says:

    […] Usage Based Billing (Blessed by the Potato) […]