Internet cables connect to a switch on a home network in Chelsea, Que., Monday July 11, 2011.Adrian Wyld/The Canadian Press
The country's telecom regulator has cast doubt on BCE Inc.'s argument that fast-growing Web traffic requires new usage-based pricing measures, setting the tone for regulatory hearings that will help shape the future of Internet pricing in Canada.
At the same time, critics say the entire regulatory exercise misses the essential point: That Canada's strict Internet download limits are the real problem for consumers and threaten innovation in an increasingly digital economy.
The Canadian Radio-television and Telecommunications Commission ordered the hearings after intense public outrage greeted the agency's approval of a previous proposal from BCE Inc. That would have allowed the company to tack on additional charges for smaller Internet providers that lease space on Bell's massive network to offer Internet plans with much larger download limits than their larger rival.
Bell argued Monday that as Internet traffic increases in an era of online video services such as Netflix, the company needs to charge its wholesale clients in a manner similar to its own retail customers – on a per-byte model that encourages consumers to think about what they choose to download or watch online.
Commissioners on Monday greeted Bell's new proposal with skepticism and hammered back at the company's assembled executives. Len Katz, the CRTC's vice-chair for telecommunications, said Bell frequently talks about how explosive Internet traffic is leading to congestion on the company's network. "Yet, when I took a look at your forecast over the next five years, (Internet traffic) growth seems to have curtailed," he said. "Am I missing something here?"
Bill Sandiford, who runs an Internet provider in Oshawa, Ont., and acts as president of the Canadian Network Operators Consortium that is opposing Bell's new proposal, said he was pleased with the first day of hearings.
"We were very happy with the line of questioning that they put forward to Bell," Mr. Sandiford said in an interview. "They want to 'incentivize' people not to use [the Internet] It's ludicrous. We should be doing everything in our power to get people to use it more."
But some critics say the hearings are unlikely to address the issue that irks many Internet customers of major telecom companies: bandwidth usage limits that trigger surcharges when caps are reached. Industry observers and online activist groups such as OpenMedia.ca have been questioning Canada's Internet pricing plans, where download limits are much stricter than elsewhere.
"Since the CRTC refused to extend the hearing to retail usage-based billing issues, I suspect the outcome will be anti-climatic," University of Ottawa professor Michael Geist wrote on his blog on Monday. "There may be some new rules for wholesale UBB (which will only serve to demonstrate how badly the CRTC has bungled this issue), but the broader data cap issues will remain unchanged for now."
Bell responded to the regulator's questions on network traffic forecasts, saying it is difficult to predict the future. But Mr. Katz came right back, warning the company that a regulated outcome could be much worse for Bell than if the company had simply negotiated a reasonable solution with the wholesale ISPs.
Bell's executives responded that they did negotiate with smaller ISPs, and that the company did everything possible to meet their needs. But CRTC chairman Konrad von Finckenstein cut in, noting that when those ISPs asked for access to Bell's newer, high-speed Internet networks, the company balked.
"Don't tell me you are the great benefactor of ISPs you tried to resist," Mr. von Finckenstein said. "We had to have two hearings."
Bell has been arguing for a compromise to its original proposal, suggesting a usage charge that would be charged in aggregate to smaller ISPs, instead of one that would have applied in a more costly fashion to each of the smaller ISPs' customers. Bell says this will help them reap a return on investment for the billions of dollars the company is spending on its Internet infrastructure.
Bell's current argument – which Telus Corp. agreed with in theory at the hearing on Monday – earned a cool reception from regulators. Commissioners pointed out that Bell is trying to raise fees for transporting data at the same time as the cost for transporting data is falling dramatically.
Mr. Sandiford's group is proposing an alternative, whereby small ISPs would pay for the maximum capacity they need during peak hours, as opposed to a fee for each byte that they transfer during off-hours when it doesn't put a strain on the network.