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Rogers reintroduces a contentious pricing scheme

There must have been a recent change of management at Rogers. How else to explain the Internet service provider's change in its fee structure for its Hi-Speed customers?

Surely no executive who remembers the disastrous attempts in 2002 to set a fee structure based on how much bandwidth subscribers need would possibly want to steer into those contentious shoals again.

Rogers has just told its customers they will have to pay fee per gigabyte of “extra” bandwidth use. Customers who use more than 60 gigabytes per month will be charged anywhere from $1.25 to $5 per gigabyte for extra bandwidth.

This is precisely the same game played by numerous ISPs in 2002, only with different numbers.

Let's be generous for a moment and assume that high-bandwidth ISPs are not making enough profit from the rates they are charging their customers, and are therefore justified in demanding more. That means the ISPs are playing a game of Orwellian proportions, a game of their own making.

The major ISPs have been selling Internet connectivity as “unlimited” accounts. With the new fee structure, “unlimited” now means you can connect to the Internet any time, but not use it for unlimited downloads. (Rogers re-defined “unlimited” a few years ago; this new usage cap is the logical outcome.)

It will take a lot of selling on Rogers' part for its customers to accept this narrow definition of “unlimited,” and to forget what subscribers thought they were getting when they signed up. Judging by the fury unleashed when Rogers tried this six years ago, it will still be a tough sell.

At the heart of the matter is simple economics for Internet providers. They pay the Internet backbone (or trunk line) providers a fee for how much bandwidth they calculate their customers will need. They then set their fees to cover their costs for the “average” user. Telcos have been doing this for decades with the phone system, which is apportioned on the assumption that few people will want to use their phones all the time (you can see the limits of this system in times of crisis, when the phone networks become flooded with callers.)

But it's different with the Internet. So the “average customer” today will not likely have a problem with a 60 GB limit, surfing the Net, reading and writing e-mail, downloading software patches and buying music from on-line stores. Those who will have a problem with bandwidth caps will be the users of peer-to-peer download programs such as BitTorrent file-transfer systems, which flood the Internet with traffic, and make the ISPs pay their backbone suppliers more.

Thus P2P users are described implicitly as non-average, and will have to pay for what they want of the Internet. And since the lion's share of P2P traffic is in “illegal downloads” — not in Canada, where music downloads are still legal, although that is in a state of limbo — the ISPs must be thinking the P2P users will pay extra out of sheer guilt for the shameful thing they're doing. Or perhaps the ISPs expect a tough new intellectual-property bill  to pass into legislation soon, as the Conservative government has promised, and will be justified even more in putting caps on downloads.

Back in 2002, Rogers started a firestorm when one of its executives, now long departed, referred to those who used more bandwidth than the “average” users as “abusers,” which sought to transform those who were heavy Internet users into social pariahs, or into those who were to blame for high bandwidth costs.

This is all based on the notion that a broadband ISP doesn't want to buy more space on the backbone, but is trying to maximize its profit by putting the financial burden on its subscribers.

Or, to put it another way, the ISPs are trying to redefine the way they market their wares, a definition guaranteed to upset subscribers.

But I would accept that ISPs need to change to a more profitable model. Under one condition: That the Internet doesn't change at all from this moment forward.

Which is impossible, because we are on the cusp of a major revolution in bandwidth usage. Just this week the venerable CBC announced it would make its series Canada's Next Prime Minister available as a BitTorrent download. And the U.S. ISP Comcast today pledged it would practice a "Net neutrality" principle after the Associated Press revealed the company was discriminating against users of file-sharing software. And as more American subscribers adopt broadband, more services become available, almost all of them using high bandwidth: Music, TV and movies — by Rogers' own estimate, one high-definition movie is about 4 GB in size. And of course, Rogers is supplying all of these services, so it will benefit. Now of course subscribers will be charged less if they buy music, TV or movies from their own ISPs instead of, say, from iTunes, but that could run into legal problems if content providers start calling this practice discriminatory pricing.

Before we come in danger of  being swamped by bafflegab, marketing lingo and a bewildering array of pricing schemes, all designed to confuse customers into buying more than they need or can afford, we should consider what my colleague Sandy McMurray brought up in his blog: Bandwidth caps, based on number of gigabytes used, turn Internet usage into a commodity, not a service.

If so, how about those who do not use their allotted monthly bandwidth? Will they get a refund? They should, if they're now paying for a commodity. Of course, since the ISPs are all offering different pricing levels, they can argue that the customer can be “reimbursed” by choosing a lower bandwidth plan. But this is disingenuous — who can predict how much bandwidth they need, or will need when some bandwidth-hungry service becomes irresistible in the future? Or how much they will need when multimedia on the Internet approaches maturity?

It will require a calculator and a lot of patience to figure this out, using the bandwidth meter Rogers has installed on its website.

But perhaps that's what the ISPs are counting on.

And now they should brace themselves for the expected outcome.

  1. N. Harmon from Vancouver, Canada writes: Another issue is that they use the argument of "overuse" by some people to justify bandwidth throttling for everyone. At the same time they are capping the amount regular users can download but not changing the fee they charge.

    So, they are capping total download size plus a continuous lowering of the speed of the network for everyone using the network. There are two caps put in place, which drastically reduces the overall service provided.

    There is no protection of critical applications, such as 911 phone calls on VOIP phones unless you buy their (higher priced) VOIP system.

    They aren't upgrading anything ... they are downgrading everyone.
  2. Kevin Henning from Canada writes: Although I am not surprised this is happening, I am not sure why the issue surrounding heavy users is such a big deal. I remember hearing a number of years ago, about the idea that bandwidth-intensive applications such as streaming TV would be sent over the internet. In any case, the idea of "unlimited" was a red herring. The link has a speed, and therefore there is a hard cap on how much you could download in a month. OK, it is far higher than 60 GBytes...

    At least the price they are charging not too bad of a price for overages... Last time I looked, Rogers was charging $0.05 per Kilobyte for data over their cellular network ($52428.80 per GByte)
  3. N. Harmon from Vancouver, Canada writes: "the idea of "unlimited" was a red herring"

    No, it is what they market. They are selling you bandwidth and you get herring; that I would buy.

    "At least the price they are charging not too bad of a price for overages"

    No, their competition charges $10 per 100Gb. You are confusing cell phone data rates with land based broadband rates.

    The problem is they promise far, far more than they deliver. They place multiple caps on everyone.

    How about this: You get the promoted bandwidth speed up until your promoted bandwith transfer cap is reached, and then get capped, billed, or throttled?

    Why is it that EVERYONE must accept a massive reduction in speed and usage, long before the caps are reached?
  4. Chris M from Canada writes: I think the whole argument of people overusing their alloted amount misses the point - the usage of the internet is changing radically. When the internet became widely available 14-15 years ago, using the internet for email and simple web pages was all that dial-up could handle - I remember taking 2 - 3 minutes for a simple pages to download!

    Infrastructure for carrying internet and communication traffic has not been expanded greatly since the late nineties when all the telecom companies said that there was too much excess capacity! So really, these companies are not willing to make the investments to improve their services and would rather limit their customers!
  5. Delta J from Canada writes: Speaking on behalf of 99.9% of Generation Y: WE FEEL ABSOLUTELY NO GUILT ABOUT "ILLEGAL" DOWNLOADING! The internet will never stop growing, and eventually all ISP's will need to upgrade their infrastructure to accomodate all that data. If they don't, the bubble will burst and they will lose customers in droves because no type of business policy can tame the versatile nature of information exchange that is the internet. How about Rogers and all the other Canadian ISP greedy buggers give customers a choice between getting P2P apps throttled or having a download cap? Come to think of it, did Rogers mention an upload cap? If I were foolish enough to be a Rogers customer, I'd rather pay as much as an extra $10 per month for unthrottled, uncapped downloads. If, as they claim, only a small portion of users are heavy downloaders, they could rebuild their public image by catering to that niche of users by offering unrestricted premium accounts and let everyone else who only uses IM, email, and web browsing to pay much smaller fees. Let's face it, heavy downloaders tend to be young people getting connected through their parents' accounts. I doubt the parents would be willing to cough up any extra cash. But I'm sure a good public image would hurt Rogers' bottom line, and heaven forbid if Ted Rogers should ever not be able to afford to renew his country club membership.
  6. Simon Spivey from Lakefield, Canada writes: As somebody who manages an LAN-to-internet connection, I know that torrents are a problem if you have a finite capacity and many users. Internet contracts are either based on averages or guaranteed bandwidth. Ours provides a guaranteed 'pipe', but the cost per month would impress someone who has taken on a mortgage recently. Domestic accounts are sold at low costs because usage is assumed to be intermittent.

    Round-the-clock downloading through bittorrent changes your usage pattern to one of continuous high utilization. If it's not throttled somehow it will slow the whole network down to a crawl.

    Bottom line: Public networks aren't scaled to allow everyone to download large files all the time. Imagine highway 401 if all drivers were driving big-rig trucks all of a sudden.
  7. Brian Dunseith from North York, Canada writes: I would also like to add if "DeltaJ from Canada" IS speaking for Gen Y we are all in trouble.

    For a generation whose "Defining struggle" is supposed to be climate change (if any of the Earth Hour stuff is credible) I find it incredibly.. hypocritical that along with this incredibly noble sentiment is their inalienable belief that they should have free, unfettered or restricted usage of the internet (I don't know the numbers but I would wager that a pretty substantial % of the worlds power usage is wrapped up in computers and the net).

    It only illustrates the deep level of commitment they must feel for the environment.. you know.. until it stops being cool to care about it.
  8. Pat Bowie from Ottawa, Canada writes: Many people will not understand this new charge schedule, until the bills come for what the kids are downloading. It's ridiculous to abuse the use of "unlimited" for capped service, whether gigs, hours or both. And what about the frequent breakdowns or slowdowns in Rogers' service?? There's no customer rebate for those interruptions. Another issue is Rogers’ high overdue fees, along with interest charges... The federal government made country-wide access to internet services a goal. What is needed now is an end to the cable monopoly, the same way it was forced on the major telephone companies like Bell, and true COMPETITION. Only then will there be fair charges and full access to internet use.

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