The federal government has Twittered itself into a dilemma. By announcing support for unmetered broadband, it has driven Canada into an unfortunate corner. Telecom investment will be constrained because of the inability of suppliers, who own the cables and airwaves, to charge adequately the 20 per cent of Internet customers who use up 80 per cent of total bandwidth capacity. And the 80 per cent of us who seldom download movies will subsidize the 20 per cent who have the heaviest use of Internet traffic.
Consider analogies to energy, or highways. What if electricity use was unmetered? Would anyone consider it "fair" that heavy users of electricity could take as much of it as they wanted? Could the electricity system survive? How would large electricity transmission companies earn revenues sufficient to invest in the additional wires needed as demand for electricity surged?
Why does Singapore have usage-based pricing on highways leading into the city in rush hour? Singaporean politicians understand that it is cheaper for society to meter use than to build miles of concrete necessary for highways.
In short, among many goods and services, only Internet traffic is supposed to be unmetered. But why? Surely the same core principles, namely fairness and efficiency, govern the Internet as govern the pricing of highways, electricity, and increasingly, water.
It is simply unfair to have the heaviest users of anything not pay their share of the costs. These costs are incurred not only on the day the service is used; they include the capital to construct networks.
And it is inefficient. Why should Netflix and its customers, which have suddenly become responsible for 20 per cent of all Internet traffic in North America, not be responsible for the strains they put on the system? They decrease the speed for other online Canadians because of their pressure on capacity.
And how will bandwidth providers pay for this increased traffic and the new capacity required? That capacity is costly. The federal government wants us all to pay for it - everyone's average monthly Internet bill will go up - whether we are responsible for the increase in traffic or not. This is bad economics, and bad politics.
So UBB makes sense. The federal government should be reviewing not the basic principle of UBB, but the methods the CRTC uses to implement it. Is the wholesale price schedule reasonable? Does it allow wholesalers to compete effectively and manage their aggregate demand on the system? Are prices for excess use reasonable - in other words, are they consistent with capacity costs?
The CRTC should not be used as a political football. If Canada wants to have a digital strategy, it will never emerge with this kind of reactive decision-making.
Leonard Waverman is the Dean of the Haskayne School of Business, University of Calgary.Report Typo/Error
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