CRTC internet ruling may boost prices

Internet users may pay more in the future as a result of the CRTC's latest ruling on internet billing, independent internet providers say.

"This will not result in lower costs for Canadian consumers," said Tom Copeland, chair of the Canadian Association of Internet Providers, said a day after Tuesday's release of the decision by the Canadian Radio-television and Telecommunications Commission.

Under the new pricing scheme, "ISPs will incur higher costs as consumers use more bandwidth," Copeland said.

 

"Average cost per customer goes up and therefore the retail price may also go up unless other economies of scale can be found or other add-on services allow ISPs to generate additional revenue and profit."

Copeland's group represents independent ISPs who rent network access wholesale from large providers such as Bell and Rogers. While small ISPs have their own networks and connections to the internet, only large providers have connections directly to customers' homes — a part of the network known as "the last mile."

Small ISPs buy wholesale access to that part of the network and the adjacent part of the wholesaler's network in order to create their own retail internet packages to sell to customers, including unlimited internet access.

Tuesday's CRTC decision allows large ISPs to charge their wholesale internet customers either a flat rate independent of usage, or a rate based on network capacity or speed per 100 megabits per second, as well as additional fees for network access and the transit of data through the wholesaler's network. The CRTC set rates for different large ISPs based on their preferred billing scheme and their claimed costs for running the network. It said large ISPs may file an application if they would like rates approved for the other billing scheme also.

Bell had previously argued that the customers of independent ISPs use a disproportionate amount of bandwidth, and should therefore be charged based on their usage.

Independent ISPs said that would force them to create packages identical to those of companies such as Bell, stifling competition. Advocates for internet users worried that usage-based billing would make internet use more expensive for everyone at a time when usage is growing quickly due to the popularity of bandwidth-hungry online video services such as Netflix.

Copeland said the overall framework for CRTC's decision, which rejects usage-based billing, was "solid" and provides a way for small ISPs to "take on some of the responsibility of network planning, some of the risks, some of the costs, and certainly the rewards if it's done correctly."

Huge pricing variation

However, he criticized the details of the pricing, including the huge variation among the rates set for different wholesale providers. For example, MTS Allstream's monthly capacity rate for 100 Mbps is $281, compared to $1,251 for Rogers and $2,213 for Bell.

"It's difficult to believe that Bell Canada actually has a higher per-subscriber cost than smaller networks like Sasktel or MTS Allstream or even Telus," Copeland said.

Independent ISPs may only have the option of buying wholesale network services from one or two large ISPs, depending on the part of Canada in which they operate.

George Burger, a spokesman for the Chatham, Ont.-based independent ISP TekSavvy Solutions Inc. told CBC's Lang and O'Leary Exchange Tuesday that "the economics" of the CRTC's latest decision "is going to make video viewing on the web much, much more expensive," suggesting that customers could see their bills increase, even though the new pricing is quite different from the usage-based billing proposed by Bell.

"I think that the big headline here is that the consumers' tastes and the consumers' interests are being artificially constrained by this decision," he said. "Right now, I don't think anybody should be very happy about this on the consumer front."

Unlimited internet plans remain available

Montreal-based independent ISP Distributel said the CRTC decision is positive in that it allows independent ISPs to continue to provide unlimited use internet plans. It too said it is concerned about the rates that were approved, but has no plans to change its pricing at the moment.

Meanwhile, many large ISPs also gave the decision mixed reviews.

Mirko Bibic, Bell's senior vice-president of regulatory and government affairs, said while the company would have preferred that the CRTC accept his company's proposal, which was based on usage, "its decision does at least ensure that we can now charge our ISP customers for the network capacity they consume."

However, he said the decision means independent ISPs have received "significant discounts to the monthly rates they pay us for access to our network."

Previously, independent ISPs paid a monthly access fee, but did not pay an additional rate per 100 megabits per second of capacity. Bibic did not comment on the new capacity rate.

Rogers said in an email to CBC News that it was "surprised and disappointed" with the new rates set by the CRTC.

"We don’t understand how they have set these rates and why our rates are lower than the other service providers," it said. "We’re still reviewing this decision to figure and determining what it means."

Industry Minister Christian Paradis said the government is also studying the decision carefully "to ensure that it meets our objectives of encouraging competition and network investment and enabling consumer choice."

Liberal industry critic Geoff Regan said while the decision is a "big improvement" on the CRTC's earlier decision to allow usage-based billing, he still has concerns about how consumers will be affected. A spokesman clarified that he is worried the new pricing could lead to an increase in costs for consumers and wonders what will happen to customers if independent ISPs buy a certain amount of capacity and it proves not to be enough.

Consumer advocates such as Open Media and the Public Interest Advocacy Centre largely responded positively to the ruling, saying it should allow independent ISPs to survive and continue to provide alternatives to services offered by large telecommunications companies, including unlimited internet packages.

However, Open Media, NDP digital affairs critic Charlie Angus and Michael Geist, a law professor at the University of Ottawa and a prominent blogger on internet regulation, expressed concerns that the decision only affects the six per cent of Canadian internet users who subscribe to services with independent ISPs. They noted that the rest, who buy internet services from large telecommunications companies such as Bell and Rogers, will not be affected.