UBB Canada: CRTC, Bell still demonizing the Hogs

We noted in the previous post that, back in January, Bell’s VP Regulatory Law expressed annoyance with the resellers for what he saw as a perverse attempt to delay the UBB proceeding. Fast forward to von Finckenstein’s appearance before the Standing Committee on February 3 and this revelation from his prepared remarks:

“Our decisions [on UBB] were set to take effect on March 1, 2011. We have since received from Bell Canada a request that we delay the implementation date by 60 days. A party from our last proceeding, Vaxination Informatique, has also filed a request for a delay. In light of these requests and the evident concerns expressed by Canadians…”

One minute Bell is chafing at the cash register, the next it’s first in line to persuade the Commission to put everything on ice. The question is: why?

One answer is basic PR. In the week following release of the decision, Bell got kicked in the teeth by a lot of journalists, pundits, citizens, politicians, ISPs, SMEs and others. I imagine sometimes even Bell would rather not be perceived as a greedy duopolist making a cash grab. Senior management may have seen a pre-emptive request to the Commission as a way to regain the high ground.

In and out of the regulatory tent

But Bell has a much more compelling reason to be rushing back into the waiting arms of the CRTC. Big firms like Bell complain endlessly about being regulated, for the good reason that the purpose of regulation is to make powerful firms do things they don’t want to do. But there’s a great upside to being told how to behave. It puts Bell and its ilk inside the regulatory tent, as part of a small, elite club whose members have a special talent for gaming the system.

Having a great deal of market power means Bell knows how to ask for concessions that will grow their market power even further. Not to mention 120 years of experience at stomping competitors into the ground. Incumbent carriers have access to highly skilled, expensive resources, especially lawyers, who have the time, training and disposition to drag out proceedings, file appeals, grill witnesses, and curry favor with regulators and their staff.

Those who have to set up shop outside the tent are at a double disadvantage. Public interest advocacy groups, new entrants, academic critics and others who care about consumer welfare can’t muster anything like the same resources as the big dogs. And even if they could, they never speak with one voice on the issues. Regulatory capture – of the regulator by the regulated – owes a lot to this huge imbalance in social power.

Bell has been operating from a position of strength for so long it’s easy to forget the two key ingredients in their secret sauce. One is keeping brawls inside the regulatory tent, where the little guy doesn’t stand a chance. The other is keeping customers in a state of false consciousness about the services they buy from their broadband ISPs. They know nothing about bandwidth, how speeds are measured and priced, data caps, DPI, traffic-shaping, unbundling, etc. – and most importantly, they don’t know that they don’t know.

Evidence abounds that what consumers don’t know about their communications services can and does hurt them in the pocketbook. Tim Wu sees a pattern here:

“If bandwidth were actually billed like electricity or water, that might be fine. But what the CRTC approved is something different. Claiming that its profit and consumer welfare are exactly the same thing, Bell wants to remake Internet billing. It wants to make use of the most lucrative tricks from the mobile and credit-card industries by preying on consumer error to make money. And this ought not be tolerated.

“Any rule that asks the consumer to guess at usage, and punishes you if you’re wrong, is abusive. Imagine being asked to guess how much electric power you need every month, with a penalty for mistakes. Yes, that’s what cellphone companies do – or get away with – but that hardly makes it a model. It’s a system of profit premised on human error, and this begins to explain Bell’s deeper interest in usage-based billing. Bell wants to make the horrors of mobile billing part of the life of Internet users. And that’s a problem.”

From the tribunal to the court of public opinion

It’s tempting to imagine that greed, arrogance and complacency were responsible for derailing Bell’s latest plan to freeze out competitors and extract more money from its hapless customers. Those qualities are certainly consistent with a market structure within which neither other firms nor the regulator act to discipline Bell’s behavior. On the contrary, Chairman von Finckenstein has been falling all over himself to make Bell’s win on January 25 appear rational.

The absurdity of his position was evident when he was responding to questions from Liberal MP Siobhan Coady during his appearance at the Industry Committee. Why impose such low caps on resellers, she asked, especially when other countries set them so much higher? Well, because it was important that the reseller caps match the caps Bell applies to its own customers. And who decided that? Bell did. Yes, Bell made us do it, so we could maintain “fairness within the market.” We know it’s fair, since the February 8 PN tells us that small ISPs “offer competitive alternatives to the incumbent carriers.”

Remember that the use of caps is a fully sanctioned part of the economic ITMP framework issued in October 2009 (Telecom Regulatory Policy CRTC 2009-657). This decision is further evidence that the Commission has no idea what consumers must contend with in the real world. Perhaps its single most ill-conceived provision is the one headlined Transparency:

“Economic practices are the most transparent ITMPs. They match consumer usage with willingness to pay, thus putting users in control and allowing market forces to work.”

Back in the fall of 2009, it was perfectly evident that users weren’t willing to pay, since few had any choice in the matter and, in any case, few had any idea what they were paying for. It was also evident that users have never been “in control” in any sense of that expression – one that used to be a favorite with the cable industry back in the days when it still operated in territorial monopolies. And our old friend market forces, well, that’s become a hollow promise devoid of meaning.

Consider all this wishful thinking in light of the events of the last few weeks. A regulator that premises a major decision on the fanciful assumption that users are willing to pay – in an unregulated market no less – is asking for trouble. As was Bell when it pushed us to the wall and told us we’d just have to live with what got decided inside the old tent by the regulatory priesthood. Cue OpenMedia.ca – which this week has turned up the pressure again with initiatives like their Day of Action on February 26 (check out the video below for details).