The Canadian Radio-television and Telecommunications Commission (CRTC) recently issued a decision that could introduce usage-based billing to the broadband market.
The decision, which the commission now says it will review in the wake of complaints from consumers and the Harper government, was thrust into the spotlight because it would mean that consumers and business owners will not only have to pay for broadband access but also any data they use beyond a certain limit.
Right now, bandwidth caps quietly exist but Rogers, Bell, Telus, Shaw and other broadband service providers don't make a big deal of them. Instead, their marketing efforts are focused on speed. The faster the connection to the Web, the more you pay.
While the large Internet Service Providers (ISPs), who control more than 95 per cent of the market, have introduced bandwidth caps, some small ISPs have carved out a foothold by offering consumers significantly more bandwidth. Chatham, Ont.-based TekSavvy's packages, for example, include as much as 300 GB of bandwidth. This has made TekSavvy attractive to people who use a lot of bandwidth for online applications, to watch videos and television shows, and to play video games.
The CRTC decision, however, would allow Bell, which provides wholesale access to TekSavvy and other ISPs, to implement usage-based billing (UBB), thereby eliminating the competitive advantage that smaller ISPs have been using to attract customers.
So why should small businesses be concerned about UBB? The biggest reason is that the Internet has made it possible and easier for small businesses to operate and compete. It has provided access to an enormous variety of resources for them to communicate, market and sell their products and services.
The Web's importance is painfully obvious whenever a connection goes down for whatever reason. Business grinds to a halt, which is particularly disconcerting if you don't have a lot of feet on the street.
One of the reasons small businesses have been able to increasingly rely on the Web is the cost-effectiveness of broadband service, which lets companies deliver and consume about as much bandwidth as possible. This means being able to create high-quality websites that feature videos, high-resolution photos and an array of online services. Having a cost-effective broadband connection also means being able consume a lot of bandwidth-intensive content and services.
If, however, UBB is allowed to gain a market foothold, it could see the cost of broadband climb significantly. It could see ISPs increase their prices for services that include a lot of bandwidth, or see businesses forced to pay additional fees if the amount of bandwidth they consume exceeds a certain level.
This would be great news for the major ISPs, which would see their profit margins become even larger, but it would be bad news for small companies that would see the cost of doing business increase.
Canada already has some of the highest broadband prices in the world. This has a lot to do with the lack of competition since, at most, there are two options within a market. The major ISPs have tremendous pricing power - something that could become even more powerful if UBB becomes a reality.
Special to The Globe and Mail
Mark Evans is a principal with ME Consulting , a content and social media strategic and tactical consultancy that creates and delivers 'stories' for companies looking to capture the attention of customers, bloggers, the media, business partners, employees and investors. Mark has worked with three start-ups - Blanketware, b5Media and PlanetEye - so he understands how they operate and what they need to do to be successful. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshUniversity and meshmarketing conferences.