It was a stunning denouncement of a practice that has existed since 2006: The idea that users should pay for how much they download. Big telecom companies, mainly Bell, found their rational for pushing the change – that bandwidth was finite, that Canadians were simply using too much Internet – earned nothing but calls that this was more gouging.
Lawrence Surtees, the lead telecom analyst at research firm IDC Canada, points out that the cost to transport each byte is constantly falling – especially on fibre cables, buried in bundles of multiple strands. Of the CRTC’s average monthly download rate, which companies argue could strain their networks, Mr. Surtees says, “That’s nothing; one fibre strand can carry more than that per second.”
And this is where the question of Internet metering hits a logical brick wall that most people tend to forget. Internet service providers are for-profit, publicly traded companies with responsibilities to their shareholders. CEOs of the country’s phone and cable companies would be fired if they didn’t capitalize on exploding bandwidth usage. Not forcing metered use on their small rivals, something they already do on their own customers, would inevitably hemorrhage customers to their rivals.
Even as Mr. von Finckenstein said he would review their decision, he stood by the idea of a metered Internet. “Usage-based billing is a legitimate principle for pricing Internet services,” he told the MPs. “We are convinced that Internet services are no different than other public utilities.”
But unlike gas and electricity, which are consumed and disappear, the amount of bandwidth being used simply swells and contracts in the carriers’ pipes. The cost to transport a gigabyte can be lower than a penny, though Bell charges between $1.50 to $2.50 for each gigabyte you go over your plan – a fee that varies not by time of day, but whether you are in Ontario or Quebec.
In other words: It’s the market, stupid. Telecom companies in the U.S. and Japan manage to be profitable without strict monthly download limits such as the ones in Canada. One U.S. telecom executive said in a recent interview that his company would do it if they could, but that it would drive their consumers to competitors – in other words, the cost of at least some so-called bandwidth hogs was worth it in the end.
Metering the Internet, in other words, tends to come as a result of market forces rather than out of a regulatory order – in fact, the Conservatives ordered the telecom regulator to rely more on market forces back in 2006. But the idea that Internet pricing depends on the “market” is, it seems, offensive to consumers. That would be irrelevant, perhaps, if election fever wasn’t in the air. And if the government and the regulator didn’t frequently intervene in the telecom sector precisely to promote competition against the current phone-cable duopoly. Remember when long-distance was charged by “usage” without competitors to discipline the market?
As Mr. Surtees notes, the big cost is building the network. That’s done. But those networks are still evolving. Companies are now spending billions to rewire all the way into each home, replacing the so-called “last mile” of aging copper with ultra-fast fibre.
But without an incentive to profit from these networks, telecom companies may stop investing. That’s why Ronald Gruia, an analyst with Frost & Sullivan who thinks the usage-based billing decision was flawed, is hesitant to advocate a fully unlimited model. “Obviously, the consumer is concerned with being billed a lot, but you want to make it economically feasible to enhance that last mile,” Mr. Gruia said. “It’s a delicate balance.”
