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(David Vernon)
(David Vernon)

The Explainer

Bits, bytes, bills and Bell (and Rogers and Shaw and Telus …) Add to ...

1. What is usage-based billing?

Usage-based billing refers to the practice of charging consumers according to how heavily they use the Internet.

The largest Internet service providers (ISPs), such as Shaw, Rogers and Bell, have been doing this for years: Customers pay a flat-rate charge that allows them to download a certain amount of information per month (similar to the way many cellphone plans give customers a specific number of minutes per month). If a customer exceeds the monthly limit, she is charged extra.

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2. If this type of billing has existed for years, why is it becoming a political issue now?

The CRTC, Canada's telecom regulator, issued its decision last week to give large ISPs a financial means to manage increasing amounts of Internet traffic.

Usage-based billing allows them to charge smaller competitors who lease space on their networks on a per-byte basis. Those small ISPs often offer "unlimited" plans to both consumers and small businesses.

Companies like Bell complain that increasing broadband traffic, fuelled in large part by the growing popularity of online video, is clogging up their networks and making them more expensive to maintain.

3. The big carriers say that very few of their existing customers ever exceed the caps. So what's the big deal?

There has been an explosion in online video usage among Canadians over the past two years as more consumers use their computers to watch television and music videos and download movies. Experts predict that broadband usage will only increase over the coming years. The recent arrival of the video-streaming service Netflix signifies the strength of that trend.

A report from Scotia Capital last month noted Canadians have "the highest consumption rate of online video content in the world."

4. What does the CRTC decision mean for consumers?

The CRTC's ruling would effectively eliminate the ability of smaller ISPs, such as Globalive's Yak brand, to provide unlimited Internet plans. As a result, both consumers and small businesses would face rising costs for Internet access.

Without that competition, critics say larger ISPs would be tempted to raise their prices across the board and/or lower their existing monthly data caps. That could prompt consumers to spend less time online, drop out of certain services, such as online video, or simply take the hit and pay more.

5. What does it mean for consumers if the CRTC rescinds the decision or if the government overturns it?

Smaller ISPs may be able to keep offering their unlimited plans, differentiating both their prices and services from those of larger competitors. That competition could eventually force large ISPs such as Bell and Rogers to either raise their own monthly download caps or possibly lower their prices.

6. What is a gigabyte?

A gigabyte is a measure of digital information. One gigabyte is 1,024 megabytes.

7. So how does my Internet usage translate to gigabytes?

According to Rogers Communications, downloading about 1½ standard-definition movies, or about ⅔ of a high-definition movie, represents one gigabyte of usage, as do each of the following:

- Downloading about 200 songs.

- Playing online games for 240 hours.

- Viewing 26,000 Web pages.

- Sending 105,000 e-mails

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