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How much is that data plan going to cost you? Add to ...

Unlimited Internet plans will likely soon be a thing of a past. For a while now, major Internet service providers such as Bell and Rogers have put hard caps on customers’ data usage. Pass that cap and you pay more for the extra bandwidth you’ve used to download from iTunes, watch YouTube, stream movies, upload a million photos to Flickr, whatever. But some small ISPs have lured customers with unlimited data plans. No longer. Now, the CRTC has ruled that Bell will soon be allowed to charge wholesale Internet service providers – such as Primus and TekSavvy – on a usage-based billing model too.

Yet with the growing trend of watching streaming TV shows and movies through your Internet connection instead of through your conventional TV service, we’re going to be gobbling up more and more data. So how much is the future going to cost?

Many people believe it is just a matter of time before TV service and Internet service is one and the same. Both are essentially delivering multimedia to your home, and while the Internet is adding more and more video, TV is adding more and more interactivity. Some day, we will have one bill instead of two, but between now and “some day,” there is a lot of infrastructure that needs to be built and developed. And someone has to pay for that.

In the meantime, let’s see how much it would cost us to make that transition today.

According to Netflix Canada, one hour of high-definition streaming requires about two gigabytes of data, while standard-definition streaming requires one gigabyte an hour. Earlier this year, an Ipsos Reid report indicated that Canadians are watching about 16.9 hours of TV each week. If we multiply 16.9 by 52 weeks and then divide by 12, we get a monthly viewing average of just over 73 hours a month. I’ll further assume that half of that is standard-definition viewing and the other half is high-definition. That means we would need roughly 110 GB of data a month to watch online what we currently watch on TV.

Now, there are a few variables to consider when it comes to home Internet price plans, namely the speed and bandwidth usage. Bell offers a service in Ontario that allows for download speeds of 16 megabits a second and monthly bandwidth of 75 GB. Bell also charges an extra $1 for each GB over 75 GB, up to a maximum of $30 a month. That would bring us up to 105 GB – close enough that we could watch all of our TV through this Internet package.

Now, the rate on the website indicates this is available for $46.95 a month, but that figure is making use of a 12-month promotional discount, assumes you have other Bell services and does not include the modem rental of $3.95 a month. If we back out all of the discounts and add in the modem rental fee and the $30 extra charge for bandwidth above the 75 GB, we wind up with a pretax monthly price of $95.90. We also have to factor in any costs associated with services that offer video on demand, such as Netflix, which is currently $7.99 a month. This brings our total to $103.89 before tax.

That’s pretty close to, or more than, what many people pay for basic packages combining Internet and TV service. You wouldn’t need such a beefed up Internet package if the TV service is doing a lot of the heavy lifting (watching video). And while you wouldn’t have as interactive an experience watching that video through the TV service, you don’t really need that interactivity … yet.

But down the road, if and when the services truly combine and new technology and infrastructure is deployed, we would hope to see some cost savings. The price of a gigabyte should fall. If not, then the cries of a telecommunications oligopoly in Canada will get even louder.

Preet Banerjee is the W Network's Money Expert and a senior vice-president with Pro-Financial Asset Management. His website is wheredoesallmymoneygo.com

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Follow on Twitter: @preetbanerjee


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