I think a segment of the Canadian population would be happy if the whole UBB issue went quietly away. People who watch Bell and the CRTC, however, know that this is not the case.
For those who haven’t read or heard the news today, Industry Minister Tony Clament has confirmed that he will overturn the CRTC ruling if the CRTC doesn’t do it itself. This is obviously a reaction to the 250,000 strong online petition and to the ire of the opposition parties — remember that the government is a minority with no coalition partner.
This failure of UBB is the third time for Bell and they show no sign of acquiescing. Bell has consistently failed to upgrade its network over the last 15 years and is now looking for additional sources of revenue to support the network upgrades needed for the rollout of television (competing with cable) and other media services.
The issue that won today was choice… choice for the consumer and choice of business model. The traditional telecom business model is to identify everything that can be measured and bill for it. The traditional internet business model is that you pay for your pipe and use it however suits you. Some would argue that people who use the internet more should pay more — but this model isn’t entirely supported by the economics of how the internet works.
Telephone companies heavily oversell their network with the assumption that people will rarely use it. Cable companies heavily oversell their networks with the assumption that one master transmission can serve thousands of users — with everyone consuming exactly the same thing. Neither model is relevant to the internet.
When some talking head says that this usage based billing was reasonable, consider that Bell’s proposed usage cap would only represent several evenings of watching HDTV.
As an internet service provider myself, I understand the desire for usage based billing. Networks aren’t free — they cost money to operate and the people that use them do not do so evenly. At a certain level, it’s not worth my time to bill people 1 cent or 2 cents per gigabyte — a large amount of included bandwidth makes sense to me. Bandwidth at the wholesale level has never been cheaper and shows no sign of increasing in price.
Equally, I think it’s important for businesses to be able to carve their own model out of the real costs. A Gigabyte doesn’t cost — it’s a synthetic statistic. Each network has a certain speed. To reflect the cost of network at the wholesale level, the 95-th percentile of transfer speed is used — you can roughly equate this to mean that you will have all the bandwidth you request 95 percent of the time. In reality, it’s much better than that.
But the fact remains: ISPs buy bandwidth based on the speed of the pipe that they use, not by the volume. While this billing is somewhat more complex, it addresses the true cost of the network and every network operator understands how it works.
So if UBB were to return, yet again (and we have not doubt that it will), it should be represented as an amount billed on the 95th percentile traffic rate on the Gateway Access Service (GAS) link between Bell and it’s reseller. This would allow each wholesale ISP to establish it’s own billing practices and achieve its own efficiencies of scale while respecting the cost of Bell’s network.