I’m so outraged at what the CRTC, the Harper government and the incumbents are doing to Canada’s Internet that I’m hereby offering my services pro bono to any legit organization that intends to challenge the CRTC’s latest UBB decision: the Canadian Network Operators Consortium, OpenMedia.ca, the Canadian Association of Internet Providers, PIAC … (some restrictions may apply).
The CRTC threw a bone to our small ISPs on Tuesday by mandating a 15% discount off the incumbents’ retail rates so resellers have a little room to make an operating margin (Telecom Decision CRTC 2011-44).
The Commission is caving on its prior decision to cave to the incumbents by eradicating the 25% discount it offered up in its May 2010 UBB decision (Telecom Decision CRTC 2010-255). Bell knows that when it appeals to Cabinet, it’s got a great chance of stomping the resellers into the ground – since the Harper government counldn’t care less about how distorted the market gets as long as market forces rule. And the Commission is so stuck in its ivory tower it has lost all touch with us end-users, who have to suffer indignities such as those I’ll now describe…
The Commission’s rationale for Tuesday’s decision:
“The Commission considers that, in the absence of a discount on carriers’ wholesale UBB rates relative to their comparable retail [UBB] rates, smaller competitors’ ability to continue to differentiate their retail Internet services would be unduly impaired.”
No shit, Sherlock. Why didn’t that occur to the Commission in their previous decision on the matter? Let’s remind the Commission what the Berkman study for the FCC’s National Broadband Plan said one year ago about wholesale rates for resellers and the state of “competition” in Canada (Next Generation Connectivity; my emphasis throughout):
“Canada [is] a country that appears to have made a half-hearted commitment to unbundling (p.166).
“In recent years both the residential and business markets for Internet access seem to have undergone consolidation, with incumbent telecommunication service providers and large cable companies picking up market share at the expense of both new entrants and early efforts reportedly made by incumbents to operate outside of their traditional geographic regions” (p.167).
“As of September 2008, the monthly price of an unbundled local loop in Canada, excluding prices for remote areas or the most dense downtown areas, in terms of PPP, was roughly 70% higher than in South Korea and Denmark, almost 50% higher than in Italy, 30% higher than in Japan, France, or Norway, and 25% higher than in Finland or the UK. Indeed, Canada has the highest monthly charge for access to an unbundled local loop of any OECD country” (p.168).
Yesterday Karen Fournier described the mess the Commission has created in a piece in the Wire Report (paid sub) entitled ISPs mull whether to challenge CRTC’s 15 per cent usage-based billing discount. Karen notes that the unstoppable Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, said in an email that a mandated discount is “simply unnecessary.” Bibic is a shrewd operator who knows that if he repeats the big lies often enough, our regulators and governing politicians will nod politely and go back to sleep.
“We completely disagree with the CRTC’s rationale, which clearly shows it is more interested in giving particular ISPs wholesale discounts rather than ensuring there is a vibrant competitive process, which there is,” Bibic said.
[Yeah, as opposed to giving other ISPs complete control of reseller speeds, caps, traffic-shaping and prices–Ed]
You call this competition?
A vibrant competitive process? Maybe I missed the backup detail at a public hearing or in a filing, but does Mr Bibic have any empirical evidence for this claim? How does this square with the fact that the competitive threat to Bell represents about 4% of Canada’s Internet subscribers? Has Bell – or for that matter the Commission – ever run a formal assessment of concentration and market power, like the Herfindahl–Hirschman Index, to demonstrate that all is well in the market?
One big hole in Mr Bibic’s “vibrant competitive process” theory is I can’t get access at speeds above 5 meg from my reseller, NCF. Within days of last May’s UBB giveaway to Bell, moreover, I got an email saying my rate was going up (NCF is a non-profit, volunteer-based organization, which must have Bell quaking in its hob-nailed boots).
And then there’s the caps. NCF offers a 200-gig cap – it’s a cap, but it’s enough, at 5 meg. Now it looks like we may be on the way to joining the poor bastards on Bell with a cap of something more like 25 gigs. And what happens if and when I can get, say, a 15 meg service with that kind of cap? My data cap burn rate will make my arrangements with a reseller untenable. Competition means meaningful choice. How exactly does the status quo offer meaningful choice, Mr Bibic?
No, I’m not trying to demean those greedy incumbents. I’m referring to the ISP version of the “pirates” who, ahem, ruined the music industry: the bandwidth hogs. (Btw the IFPI has just published their latest report on digital music in which they argue that sales are slowing because of… pirates! And who can help rescue the idiots who run the music business? Tax-payers!).
The demonization of the hogs (which I first wrote about in 2002) is another part of the Big Lie that not only flies in the face of the facts – like the actual cost of bandwidth – but also the most important social objective for the Internet: that it be used. All the research, and intelligent policy, speak to the crucial importance of not simply throwing more wire at the populace (that’s Canada’s supply-side strategy), but getting people online and helping them make the best of their Internet. The best predictor of comfort with online technologies and services isn’t income or age or education, but how many years you’ve been online. The experienced onliner buys stuff, helping businesses large and small. Given the Harper government’s record on broadband, they have no clue how things work – or maybe they just don’t care about e-commerce.
Countries that have thought this through realize their citizens need to be encouraged to use the greatest communications platform ever invented – not freaking discouraged. As Karen writes, “the incumbents argued that the purpose of usage-based billing is to alleviate network usage.” Translated into plain English, “UBB allows us keep on treating bandwidth as a scarce resource and keep prices high.” As I wrote recently in a series of posts (see here, here and here), the Commission’s economic ITMP framework isn’t just a flop, but a flop based on the ridiculous belief that ordinary end-users find economic ITMPs – like data caps – “transparent.”
Meanwhile, back at Bell, Mr Bibic isn’t the only executive who thinks people who want to spend lots of time on the Internet are piggish. (I note in passing that, despite all the efforts of the Commission and the incumbents to keep Canadians in their place, onliners in this country now spend more time online than they do watching TV: Ipsos-Reid data, March 2010 press release here).
That other executive is Jonathan Daniels, vice-president of regulatory law for Bell. As reported in the Wire Report on January 5, in an article by Allison Smith entitled Wholesale ISPs fear Bell tariff will end competitive marketplace, Mr Daniels said the following:
“[The new policy] is actually making it consistent with proper economic incentives. It’s the notion that people should pay for what they use … Ultimately the concern is that increased traffic drives additional capital requirements. Wholesale ISP customers tend to have higher usages than Bell’s retail customers.”
Here we have another not-too-subtle addition to the Big Lie – actually three additions: people should pay for what they use; incremental traffic drives capital spending; and reseller customers like me use more resources than Bell’s customers.
Pay for what you use: Our whole media landscape is full of packages, bundles, tiers and tie-ins whose main purpose is to have one set of consumers cross-subsidize the consumption of other consumers, or just line the pockets of the content provider. What does Mr Daniels think Bell is doing by selling TV packages to customers who will never consume all the channels they’re paying for?
Update (Jan 30): Oops, I overlooked one of the most egregious pieces of sophistry in Mr Daniels’ “people should pay for what they use” baloney… If Bell makes me pay $40 for 25 gigs a month, and I use 30 gigs, Bell makes me pay another $10 for that month (5 gigs x $2). So if I use, say, 15 gigs in a given month, then on Mr Daniels’ logic, I should get a 40% rebate. You can’t have it both ways. Either I pay for what I actually use – or Bell is simply collecting economic rents, i.e. an excess return facilitated by lack of competition.
Usage and capex: Smart telco analysts like Dave Burstein and others have shown that the cost of bandwidth has been dropping sharply for years; and that hiking access speeds even by double does not require capital spending, but merely some replacement equipment at the CO or headend (see Dave’s terrific, free newsletter, Fast Net News). The capacity is already in what costs the big bucks – all the wires in the ground.
Furthermore, the cost of delivering an additional gigabyte to a residential DSL customer costs a few pennies. After many mouse clicks on Bell’s site (it took me 7), you’ll learn that their 6-meg service gives you 25 gigs – my 5-meg service gives me 200 – and that you’ll owe Bell $2 for each gig over that. My estimate of the cost of that extra gig is 20 cents. Tell me all you like about debt-servicing, overheads, etc – I call that an operating markup of 1,000%. Of course I can’t demonstrate this numerically because the costs involved are confidential. You’ll have to trust the CRTC, which is mandated to see that the rates for Canadian telecomm services are just and reasonable.
Reseller customers, the real pigs: When Mr Daniels claims that “wholesale ISP customers tend to have higher usages than Bell’s retail customers,” the sub-text, as always, is people who are heavy users are pigs who are to be discouraged by over-pricing, because Bell, ahem, wants all their customers to have a good experience. Why do you suppose guys like me consume more than Mr Daniels’ customers? Might it have something to do with the fact I have a 200-gig ceiling and Bell’s customers (at my speed) have 25 gigs? That I’m not likely to get an ugly surprise when I open my bill and discover all the things I missed in the fine print? What’s next? Bell’s Law Dept sending out notices to reseller subs advising them to drop Netflix?
UBB around the world (actually, it’s not around the world)
In case you weren’t aware, Canada is the only country in the OECD besides Australia whose broadband offerings are 100% capped. And since Australia is going all fiber now, Canada will soon have the distinction of being the only country in the developed world with caps on everything. Out of the then 30 countries measured by the OECD effective October 2009, 17 countries have no caps at all. Eleven others range from 6% of offers surveyed (Hungary) to 93% in New Zealand. [Update: link to OECD Broadband Portal here. Last updated : 6 December 2010. See dataset 4g, under Pricing.]
Percentage of broadband offers in OECD countries with caps:
Canada – 100%
Australia – 100%
New Zealand – 93%
Iceland – 83%
Belgium – 82%
United Kingdom – 40%
Luxembourg – 38%
Turkey – 37%
Ireland – 22%
Portugal – 16%
Slovak Republic – 15%
Spain – 10%
Hungary – 6%
What do Austria, Czech Republic, Denmark, Finland, France, Germany, Greece, Italy, Japan, Korea, Mexico, Netherlands, Norway, Poland, Sweden, Switzerland and the United States all have in common? The number of broadband services with any data caps in those countries is ZERO.
And now for a little video
I’ve rated the video embedded below as NC-17, for language, adult themes and criticism of the incumbents. If you’re offended by 4-letter words, or longer words like bullshit, don’t watch it. Parents strongly cautioned! This one is more fun and a little more educational…