Geist: The real reason we pay so much for Internet
By Michael Geist Internet Law Columnist Sunday February 6, 2011
Last week, public concern with Internet bandwidth caps hit a fever pitch as hundreds of thousands of Canadians signed petitions against Internet provider practices of “metering” Internet use.
The government responded with a commitment to order the Canadian Radio-television and Telecommunications Commission to revisit the issue. Hours later, the CRTC announced that it would delay implementation of the decision by 60 days and review it with fresh eyes and an open mind.
While addressing the CRTC decision is a good start, Canadians will be disappointed — some even surprised — to learn that Internet “metering” is already almost uniformly in place. The “caps” are the existing and common provider limits on usage, above which you are billed extra. They are unlikely to disappear anytime soon, what ever the CRTC decides after its review.
The CRTC usage-based billing case involves the narrow question of whether large providers such as Bell can impose usage-based billing rates (metering) on bandwidth that it “wholesales” to small providers small providers, affecting the rates they can in turn charge their subscribers. This is only a tiny segment of the market.
The existing, almost universal Internet caps are significant. The Organization for Economic Co-operation and Development reports that Canada stands virtually alone with near universal use of caps and our cap rates are set lower than those elsewhere. For example, while U.S. giant Comcast has a 250 gigabyte per month cap, some Canadian providers have caps as small as 2 gigabytes per month.
The caps are already having a consumer impact. Bell admits that about 10 per cent of its subscribers exceed their monthly cap (resulting in an extra charge), a figure that is sure to increase over time. The effect extends far beyond consumers paying more. The extra cost has a real negative effect on the Canadian digital economy, harming innovation and keeping new business models out of the country.
The widespread use of bandwidth caps in Canada is a function of a highly concentrated market where a handful of ISPs control so much of the market.
Addressing the bandwidth cap concern involves far more than reversing the UBB decision. There are many steps that could be taken, but it largely boils down to two main strategies — taking concrete steps to increase competition so that bandwidth-capped service becomes one of several models available to consumers, and preventing the current dominant Internet service providers from abusing their position.
Fostering greater competition should include opening the Canadian market by removing foreign investment barriers, particularly for wireless broadband services that play a key part of the forthcoming spectrum auction. It would also involve working with provinces and municipalities to develop community-based broadband networks that are not reliant on the dominant ISPs, as well as working with Canarie, Canada’s research and education high speed network provider, to link local communities and offer alternatives to the dominant providers.
The government should also impose open access requirements that facilitate the entry of competitors into new spectrum allocation and build open-access requirements into new residential developments, municipal construction, and other initiatives.
Measures to spur greater competition are essential, but it will realistically take several years before new competitors can make their mark on the market. In the meantime, it is also crucial to address the potential for anti-competitive behaviour.
The Competition Bureau has not been active on this issue, despite the potential for abuse as the dominant ISPs could use their position to favour their own content or create economic incentives that favour services such as their own video-on-demand over Internet based alternatives. The Bureau should aggressively investigate anti-competitive behaviour as well as questionable marketing tactics.
Where usage-based billing is implemented, there should be measures to ensure that it is not used for anti-competitive purposes, and the CRTC should be more aggressive in auditing service providers to know whether current throttling practices are used to harm competitors.
While there is great anger with the CRTC and the dominant service providers, we should recognize that the current market is a product of years of regulatory neglect, and policy choices that created a communications market with very few players. We are now paying the price — literally — for those choices and it will take a concerted policy effort to put us back on course.