CRTC firms up pricing rules on Usage Based Billing

In a telecom decision handed down yesterday, the CRTC has mandated that Bell Canada and other telephone carriers must offer wholesale internet access service providers a 15% discount on retail usage Billing rates beginning March 1, 2011.

Wholesale or third-party Internet access (TPIA) providers, such as Primus Canada or Teksavvy, lease internet capacity from Bell and other telcos and resell Internet services to consumers, typically at rates and service levels superior to the phone companies.

The federal regulators decision means that starting in March, third-party Internet access providers will be required to cap internet usage for consumers in Ontario at 25GB. The regulator has set the cap in Quebec at 60GB.

Beyond the provincial cap, the government is now forcing TPIA providers in to charge internet users a Usage Based premium for any usage beyond the 25GB cap. Beginning March 1st, TPIA customers who exceed their cap will be required to pay $2.00/GB to a maximum of $60.00/month for any additional usage up to 300 GB per month. Usage in excess of 300GB per month will be charged a further $1.10/GB. Usage plans where consumers can purchase blocks of additional date will be offered. The current rate will $5/month for an additional 40GB.

Yesterday’s ruling means TPIA providers will pay the phone companies 85% of the retail rate.

The following is the complete text of the Federal regulators decision.

Usage-based billing for Gateway Access Services and third-party Internet access services

File number: 8661-C12-201015975

In this decision, the Commission determines that usage-based billing rates for an incumbent telephone carrier’s wholesale residential Gateway Access Services or equivalent services, and for an incumbent cable carrier’s third-party Internet access services, are to be established at a discount of 15 percent from the carrier’s comparable usage-based billing rates for its retail Internet services.

Introduction

1.      In Telecom Notice of Consultation 2010-803, the Commission initiated a proceeding to consider rate levels for the usage-based billing (UBB) components of the incumbent local exchange carriers’ (ILECs) wholesale Residence Gateway Access Services or equivalent services (GAS), and of the large cable carriers’ wholesale third-party Internet access (TPIA) services.[1]

2.      UBB is an economic Internet traffic management practice (ITMP) whose purpose is to manage Internet traffic on an incumbent carrier’s facilities. Where an ILEC or a cable carrier has UBB rates, the rate structures of its retail Internet service and its GAS or TPIA service are generally the same: there is a flat-rate component that provides access and a pre-set amount of monthly usage, and there is a UBB rate component, whereby usage above pre-set thresholds is subject to further charges.

3.      This decision addresses the issue on which Telecom Notice of Consultation 2010-803requested comment, namely whether UBB rates for wholesale GAS and TPIA services should be set at levels below the carriers’ respective comparable UBB rates for retail Internet services and, if so, to what extent. It also addresses associated implementation matters.

4.      The Commission received submissions from ILECs and cable carriers that charge or may charge wholesale UBB rates, and from competitors that pay or may pay those rates.[2]The Commission also received a large number of public comments, generally opposing UBB.

5.      The public record of this proceeding, which closed on 9 December 2010, is available on the Commission’s website at www.crtc.gc.ca under “Public Proceedings” or by using the file number provided above.

Positions of parties

6.      The cable carriers and the ILECs (collectively, the carriers), excluding MTS Allstream Inc. (MTS Allstream), submitted that wholesale UBB rates should not be discounted relative to comparable retail UBB rates. They submitted that UBB rates shape end-user behaviour and that different UBB rates would lead to different behaviours by carriers’ and competitors’ end-customers. Bell Canada and Bell Aliant Regional Communications, Limited Partnership (collectively, the Bell companies), along with TELUS Communications Company, submitted that, without a wholesale UBB discount, competitors can still differentiate their retail services, both in terms of rates and using other methods. The Bell companies submitted that there is no basis on which to determine an appropriate level of discount.

7.      The competitors and MTS Allstream submitted that wholesale UBB rates should be discounted relative to comparable retail UBB rates. The competitors generally submitted that discounted wholesale rates would provide a margin from which competitors can recover additional costs associated with wholesale UBB, including activities related to customer inquiries and potential discrepancies between carrier usage bills and competitor records. The competitors also generally noted that, because retail UBB charges are not prepaid, there is a risk that customers will not pay them. In general, the competitors submitted that the financial risk is more significant for competitors than for carriers because unlike carriers, whose retail UBB rates are not cost-based, competitors must pay wholesale UBB rates to carriers as a direct cost.

8.      The competitors also generally submitted that discounted wholesale UBB rates would permit continued retail service differentiation. They argued further that allowing a discount would reduce what they characterized as an anti-competitive cross-subsidy from competitors to carriers that results from wholesale UBB rates not being cost-based. The competitors generally submitted that GAS and TPIA services are one input among others they use to provide retail Internet services, that these wholesale services are not resale versions of the carriers’ retail Internet services, and therefore

that symmetrical wholesale UBB charges are not appropriate. The Canadian Network Operators Consortium (CNOC) proposed that wholesale UBB rates be discounted by a minimum of 50 percent relative to retail rates, to redress various disadvantages faced by competitors relative to carriers.

Commission’s analysis and determinations

9.      The Commission notes that carriers’ retail UBB rates are market-based and are not subject to prior Commission approval – that is, they are forborne from regulation. The Commission also notes that the flat-rate component of the carriers’ retail Internet service rates recovers most, if not all, of the associated retail UBB costs. In the Commission’s view, this situation provides carriers with the flexibility to adjust or waive retail UBB rates on a promotional basis.

10.  However, the Commission considers that, for competitors, carriers’ wholesale UBB rates are an additional, direct, and unavoidable cost that competitors will need to recover from rates paid by their retail customers. The Commission also considers that wholesale UBB charges will result in additional customer care costs for competitors, including a review of the relevant carrier’s wholesale usage records and associated UBB charges.

11.  Further, the Commission notes its view in Telecom Regulatory Policy 2010-632 that services provided by smaller competitors bring pricing discipline, innovation, and consumer choice to the retail Internet service market. The Commission considers that, in the absence of a discount on carriers’ wholesale UBB rates relative to their comparable retail UBB rates, smaller competitors’ ability to continue to differentiate their retail Internet services would be unduly impaired.

12.  In light of the above, the Commission concludes that wholesale UBB rates should be established at a discount relative to carriers’ comparable retail UBB rates and that, in the absence of such a discount, the wholesale UBB rates would not be just and reasonable, contrary to subsection 27(1) of the Telecommunications Act (the Act).

13.  Regarding the amount of the wholesale UBB discount, the Commission considers that if it is too large, the effectiveness of UBB as an economic ITMP will be reduced, while if it is too small, competitors’ capacity to recover costs will be undermined.

14.  The Commission concludes that a discount of 15 percent for carriers’ wholesale UBB rates relative to their retail UBB rates recognizes these considerations appropriately.

Implementation

15.  CNOC requested a minimum period of 90 days for implementation. The Bell companies submitted that implementation of the determinations in this decision must not delay the implementation of wholesale UBB rates as set out in Telecom Decision 2010-802. The Bell companies also submitted that they would require 60 days from the date of this decision to implement any required changes to their billing systems.

16.  The Commission notes that wholesale UBB rates were approved for the Bell companies in Telecom Decision 2010-255, which was issued on 6 May 2010. The Commission considers that wholesale UBB rates for GAS should be implemented by the Bell companies without undue delay. The Commission considers that the Bell companies’ proposed period for the implementation of discounted wholesale UBB rates is unduly long.

17.  Accordingly, the Commission directs the Bell companies, as well as cable carriers with tariffed UBB rates for TPIA services, to implement discounted wholesale UBB rates on the basis set out in this decision, by 1 March 2011. The Commission further directs carriers whose wholesale tariffs contain UBB rates to issue revised tariffs reflecting the determinations in this decision, by 1 March 2011.

Policy Direction

18.  The Commission considers that its determinations in this decision advance the telecommunications policy objectives set out in paragraphs 7(b), (c), and (f) of the Act.[3]The Commission further considers that its determinations are consistent with the Policy Direction[4] requirements that (a) the measures in question be efficient and proportionate to their purpose and interfere with competitive market forces to the minimum extent necessary to meet the relevant policy objectives, and (b) the measures neither deter economically efficient competitive entry into the market nor promote economically inefficient entry.

19.  The Commission notes that wholesale GAS and TPIA services are regulatory measures related to network access regimes. The Commission considers that its determinations in this decision are consistent with the Policy Direction requirement that determinations related to such regimes should ensure their competitive neutrality to the greatest extent possible.

Secretary General

Related documents

  • Usage-based billing for Gateway Access Services and third-party Internet access services, Telecom Notice of Consultation CRTC 2010-803, 28 October 2010
  • Wholesale high-speed access services proceeding, Telecom Regulatory Policy CRTC 2010-632, 30 August 2010
  • Bell Aliant Regional Communications, Limited Partnership and Bell Canada – Applications to introduce usage-based billing and other changes to Gateway Access Services, Telecom Decision CRTC 2010-255, 6 May 2010
  • Discuss in Digital Home’s Canadian Internet and Home Phone service forum.

    Comments

    35 Responses to “CRTC firms up pricing rules on Usage Based Billing”
    1. Mikemp says:

      Well it looks like the CRTC are about to try and drive the net back to the early 80’s!

      25Gb think how much data you transfer just to install windows and do the updates, add a few good free programs and update, a free virus scanner and update….. Not much room left for much else …

      As for netflix (goodbye) HDtv over the web forget it 3 to 5 gig per film, so forget using the web for anything usefull if you are a programer look for another job!

      Canada has just become the laughing stock of the educated world

      My 2 dry DSL and 1 wet DSL will go my web sites and my web bussines as well, thank you CRTC for making money for Bell etc but as everybody dumps the net who will lose in the end.

      I will watch more OTA HDtv for free and stick my fingers up to Bell and Rogers oh and land line phone can go as well! will stick to Blackberry on a Wind plan!

    2. Al says:

      Unbeleavable, how this can happened in a democratic country like Canada. What will be the next step?

    3. Kyle says:

      As being on a crappy isp who’s bandwidth is destroyed during peak hours, I can sympathize with something like this for during peak hour usage to help free up some of the net. But for off hours, usage should be unlimited. Bell shouldn’t be so greedy, people would sign with you if your company wasn’t crap.

    4. ChaozUT says:

      This is so lame. It’s like technology is moving backwards -_-

      PS: does anyone know if Yak is affected by this? I’ve been getting unlimited bandwidth usage from Yak for the past few years (Yak is like Teksavvy and essentially sells Bell service).

    5. Jesse Nicholson says:

      I believe this is a pathetic attempt to keep the primitive, old school method of tv alive in Canada. Projections said that subscriptions to services like bell express view and rogers cable were dropping so fast I think the prediction was that within a year the market for these things would have declined over 70 percent. This is the only thing that makes sense and the CRTC being a blood sucking useless organization that makes it money off of regulating radio and television shows just decided to stifle the progress of the tool that is cutting into their pay cheque. Its the only thing that makes sense, kissing up to bell gains them nothing they would be caught getting perks from them. Saving their own hides though makes sense tv subscripts go up, market goes back up their money goes back up.

    6. Richard Lafrance says:

      Gee, will there be any downside to this? It’s just forcing ‘greedy’ internet users to pay for what they use, right?

      What about all the businesses out there vying for access to Canadian wallets? Surely there will ultimately be public backlash against all companies that use banner ads, pop-up ads, “how did we do” surveys, “your download will start after this short video ad”, etc, because we’re ultimately paying for each byte of this ‘content’.

      If you’ve ever tried to watch a video-stream on CTV (eg: last Olympics), you’ll know what I mean. CTV? Bell Globemedia. Where have we heard of Bell? Oh yeah. The first folks who’ll profit by this decision.

      And as the rest of the world strives to make the internet content-rich, and smart-appliances (TVs, smartphones, etc) are seamlessly being connected to the internet in our homes, Canadians are being told, “No… this content is NOT meant for you, except if you’re among the wealthy elite.

      Did the CRTC take this into account? Hell no. By crippling ordinary consumers, CRTC will be responsible for driving Canadians out of the internet global marketplace. This asinine decision HAS to be reversed. With the political saber-rattling that’s just started, I will be SURE to remember which party-in-power allowed for this decision to come down. And I will vote accordingly.

      This decision needs to be brought to the forefront as an election issue. I plan to go out of my way to make sure that it’s seen as such.

      One Very Angry IT Professional

    7. Bill Roland says:

      I am – I believe, justifiably, confused by the outrage at the CRTC over this ruling. Having read through it, in it’s entirety – and every associated ruling as marked within this post and within the CRTCs own information on this ruling, I see no mention of anything that anyone has inferred from it – except that the CRTC has mandated a 15% discount for wholesale internet service provider purchases.

      Please note that it was in May 2010 that the CRTC allowed UBB to Bell – and that this is just the current state of the plan to establish a fair competition system requiring them to offer their services to competitors for a lower rate than they do to customers.

      This is the Internet based decision equivalent to the rulings passed by the CRTC that have allowed competition to enter the Canadian phone company market – requiring the existing communications giants (Bell, Rogers, Cogeco) to offer lower prices to those seeking to resell their product than to those seeking to use their process. Without this ruling, the caps put in place BY BELL would be exactly the same as those listed above – but would be 15% more expensive than noted.

      Yes – there was a previous CRTC discussion that this discount should be 25% – but Bell and Cogeco rightly jumped on that because they are the ones who will be footing the bill for maintenance, hardware service and research/development and would sensibly seek to exit the market (shutting down everyone currently leasing their services) if they were required to make more profit for their competitors than for themselves.

      Read the decision again and note that EVERY REQUEST BY BELL is denied. Bell was refused their retooling time. Bell said there was no justifiable discount. Nothing in this ruling does any of what people are pointing at it for. If there is a ruling that does any of what’s being mentioned it is NOT a recent ruling but at least a year old.

    8. Alex says:

      How about this the CRTC wants to level the playing field right. So why don’t they force bell to hire local personnel to answer customer concerns not have them outsourced overseas. Or how about regulating pornographic, illegal content, and that content that is not deemed appropriate for society to free up some internet traffic and so called “Over Loading of the system”. Data can be transferred trough any type of wiring as a matter of fact if branches thin enough to ga18 or ga22 wire could be put together the data could be transfer trough those as well. This is not a matter of getting equipment paid is all about making the average person look like a fool and gauge them for lacking basic knowledge of how internet information is transferred. The internet was actually created to be a free system where one computer connects to another and that computer to another linking a network, but since there was money to be made Companies like Bell created a restricted connection where all the free connections now become a paid service, and the data gets stored on servers, so basically if you stop and think about it Bell, Rogers, and who ever else make money on someone else work anyways, because all the content on their servers originated from users in the first place, they have only contributed banners and advertising that only adds to the amount of downloads you can do a month. SHAME ON THEM…… Is all the Governments fault for allowing this large companies to Monopolize and label all of us fools…..