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Editorial: CRTC Works for Big Telecom, Not for Canadian Consumers

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Raines Broadcasting CRTC Editorial 2-2-11.flv[/flv]

Chris Raines from Raines Broadcasting offered his take on Usage-based billing and Canada’s telecom regulator in this commentary.  Raines calls Bell, Rogers, and Shaw bad actors in Canada’s broadband marketplace, caught throttling and overcharging their customers. (3 minutes)

CRTC Chairman Raked Over the Coals by MP’s Over Internet Overcharging, But Remains Defiant

Phillip Dampier February 8, 2011 Bell (Canada), Canada, Competition, Consumer News, Data Caps, Online Video, Public Policy & Gov't, Video Comments Off on CRTC Chairman Raked Over the Coals by MP’s Over Internet Overcharging, But Remains Defiant

Finckenstein at Thursday's hearing. Turn me over when I'm done on one side.

Canadian Radio-television and Telecommunications Commission chairman Konrad von Finckenstein appeared before a Commons committee last Thursday to answer questions regarding the growing scandal of so-called “usage-based billing (UBB).”  The Commission’s decision to enforce this pricing scheme, ending unlimited broadband service in Canada, has created major headaches for the Conservative government of Prime Minister Stephen Harper.

Seasoned political observers were shocked when Industry Minister Tony Clement earlier tweeted his support for overturning the CRTC decision.  Thursday’s hearing at the Standing Committee on Industry, Science and Technology also suggested the decision was made without any prior consultation with von Finckenstein, who appeared to be learning most of the details of the Clement’s decision at the hearing itself or in the morning newspapers.

Facing a grilling from members from just about every major political party in Canada, from the Liberals to the Bloc Quebecois, von Finckenstein only managed to add fuel to the fire, blaming “heavy users” for forcing the end of unlimited usage plans, all to protect what he called “innocent users.”  He also blamed online video services like Netflix for forcing new pricing policies on Canadian consumers, who were increasingly using their broadband connections for more than just “e-mail and Facebook.”

At times exasperated, the chairman seemed to rely on industry talking points to address concerns with MP’s in attendance, occasionally without fully understanding their meaning.

At one point, he insisted Internet Protocol TV (IPTV), was never delivered over the Internet.  At another, he claimed that providers would certainly use all of the funds collected from new, higher-priced broadband plans to rebuild their networks, asking rhetorically, “how else would they use that money?”

The head of the agency that is tasked with protecting the interests of Canadian consumers regularly compared the Internet to a power, gas, or water utility, which he said justified usage pricing.  But von Finckenstein ignored landline telephone service, which is most related to broadband — a service moving towards flat rate pricing.  Instead, he relied on cell phone pricing, which caused several reporters to cringe, as they reflected on newly-introduced flat-rate calling plans among new wireless competitors.

At this point a reporter for the Globe & Mail bemused with all of the utility comparisons tweeted: “Main difference is I can’t watch movies on my furnace.”

Watch the entire 90-minute hearing by clicking here and choosing the English version, which provides simultaneous translation as the hearing moves back and forth from French to English.

The CRTC’s decision to ignore hundreds of thousands of petition signers across Canada while quickly acceding to Bell’s request for a 60-day temporary delay in implementing the pricing scheme brought an angry response from Openmedia.ca, a pro-consumer group highly critical of UBB.

“The CRTC’s stubbornness in the face of a mass public outcry demonstrates the strength of the Big Telecom lobby’s influence,” said founder and national coordinator Steve Anderson . “While government officials have recognized the need to protect citizens’ communications interests, the CRTC has made it clear that their priorities lie elsewhere. Now is the time for citizens to demonstrate that they, rather than incumbent ISPs, are the real stakeholders.”

Some media observers and consumer groups are also scoffing at the government’s suggestion the CRTC should be allowed to review its own, earlier decision, claiming it is a virtual certainty the regulator will find their original decision was the correct one.

In fact, von Finckenstein’s relentless defense of usage-based pricing, even in light of recent political realities, suggest the Commission’s authority could be swept aside to keep the matter from becoming an issue in future elections.

“I would like to reiterate the Commission’s view that usage-based billing is a legitimate principle for pricing Internet services,” the chairman told members attending the hearing. “We are convinced that Internet services are no different than other public utilities, and the vast majority of Internet users should not be asked to subsidize a small minority of heavy users. For us, it is a question of fundamental fairness. Let me restate: ordinary users should not be forced to subsidize heavy users.”

The CRTC also claims the UBB policy will only impact residential customers — business accounts are exempt.  But several MPs questioned that statement, suggesting home-based businesses, farmers and other entrepreneurs would face Internet Overcharging schemes.

Canada’s Liberal Party is using the occasion to embarrass the Tories’ handling of what they’ve called an Internet fiasco.  Liberal’s industry critic, Marc Garneau, used some of his seven minutes of question time to ask whether the CRTC first heard of the Harper government’s stance on UBB through social media network Twitter.

Quotes from the CRTC Chairman; Image by Vojtěch Sedlák & Openmedia.ca

Homeland Security Seizes Domain Names of Sports Online Video Sites That Return Within Hours

Phillip Dampier February 7, 2011 Online Video, Public Policy & Gov't 1 Comment

This message appears in place of the original websites that were formerly hosted under the domains seized by the U.S. government.

Just days before the Super Bowl, the U.S. Department of Homeland Security temporarily disrupted several popular online video websites that showed live streams of major sporting events.  Late last week, the agency launched “Operation In Our Sites,” which redirected site visitors to a notification claiming the “domain name has been seized.”

But critics charge the effort ultimately was a waste of U.S. taxpayer dollars and questions are being raised about the legality of interfering with one of the websites based in Spain, deemed legal by that country’s courts.

Rojadirecta, a Spanish website, does not actually host any live web streams itself, instead publishing links to other websites that do.  In operation since 2005, the enormously popular site today attracts more than one million visitors a day, most looking for live streams of game coverage.  After two Spanish courts found the website operating within Spanish law, the site’s profile and popularity only increased.

Since the domain names affected were registered through a U.S. registrar, it opened the door for the Department of Homeland Security to obtain a seizure warrant through the United States Attorney’s Office for the Southern District of New York.

An affidavit filed with the court stated that piracy threatens “the leagues’ ability to sell game tickets and secure local television and radio carriage, and the value of advertising revenue generated by broadcast, radio and new media partners.” The agency also blamed online video piracy for high prices charged for stadium admission and for cable networks showing sporting events. “Sports fans are also victims, as the costs expended by sports leagues in an effort to address online piracy are passed on to fans when they purchase tickets or subscribe to sports networks.”

Rojadirecta wasn’t alone.  Other web addresses seized included:

  • ATDHE.net
  • Firstrow.net
  • ChannelSurfing.net
  • HQ-streams.com
  • Ilemi.com

The agency’s actions commenced without any prior notification to the website owners.

“We have not been notified,” Rojadirecta’s Igor Seoane told TorrentFreak, a BitTorrent news site. “In our opinion the U.S. authorities are completely despising the Spanish justice system and sovereignty.”

Critics have attacked the agency for wasting taxpayer money chasing the video websites instead of finding Osama bin Laden.

Thanks to lobbying from Hollywood studios, language was inserted in the Patriot Act directing the agency to enforce U.S. copyright law at home and abroad.

U.S. Senator Ron Wyden (D-Oregon) called the web domain seizures “alarmingly unprecedented,” and could “stifle constitutionally protected speech.”  Wyden’s office has been in touch with the agency seeking clarification and justification for the domain seizures.

Questions about how worthwhile the effort ultimately was are also being raised, considering virtually all of the affected websites were restored and re-indexed by major search engines under new domain names within hours, sometimes minutes, after being seized.

  • Rojadirecta is now Rojadirecta.es
  • ATDHE.net is now atdhenet.tv
  • Firstrow.net is now p2p4u.net
  • ChannelSurfing.net is now Channelsurf.eu
  • Ilemi.com transferred over to Ilemi.tv

Several of our readers who shared this story with us suggest the move by the federal agency backfired, because it gave new prominence to these websites many never heard of before last week.  We sure didn’t.  There are no sports enthusiasts here at Stop the Cap! HQ, but we were intrigued to find several of these sites linking live-streaming news channels, including CNN, CNBC, MSNBC, BBC World, and Fox News.  In fact, a few are even streaming ABC, CBS, and NBC stations for free.  Quality varies considerably.  The MSNBC feed has audio sync problems and CNN stutters.

At least one angry fan of the websites compiled a guide recommending websites be removed from Hollywood’s copyright enforcement ‘overreach’ by registering domain names through overseas providers.  They do not answer to the Department of Homeland Security.

Frontier Attempts Damage Control By Not Informing Subs of FiOS Rate Hikes; Regulators Outraged

Phillip Dampier February 7, 2011 Competition, Consumer News, Frontier, Public Policy & Gov't Comments Off on Frontier Attempts Damage Control By Not Informing Subs of FiOS Rate Hikes; Regulators Outraged

"Too rich for my blood."

How do you cushion the blow of a 46-percent rate increase for your fiber-optic television service that will cause consumers to flee?  Don’t tell them about it.

Regulators in the Pacific Northwest are beside themselves over news that their new local phone company, Frontier Communications, is going to raise rates $30 or more for its FiOS cable television service.  The company earlier promised no rate increases as a result of its purchase of landlines from Verizon.

But the only way customers in Oregon know about the impending rate hike is from The Oregonian newspaper; Frontier has yet to formally notify subscribers of the dramatic price hike.

The newspaper reports the higher rates were supposed to take effect at the beginning of the year for new customers, and Feb. 18 for current customers with expiring contracts.

But Frontier has not yet notified its customers of the rate increases.  Spokeswoman Stephanie Beasly told the paper the company was working on “specific messaging.”  Namely, how does Frontier tell customers their bills are going up $30 and still have them as customers after that.

Until the deck chairs can be re-arranged, the rate increase will not take effect.  But Beasly emphasized it eventually will.

Washington County regulators (in Oregon state) are questioning Frontier’s justification for the rate hikes, namely “increased programming costs,” noting their competitors are charging far less for the same type of service:

Bend Broadband, an Oregon system providing a similar level of programming and services as Frontier, is able to manage its costs and keep subscriber rates at or below the range of large cable operators and significantly below those that Frontier has announced.

Some regulators are wondering if they were deceived by the company’s earlier promises to deliver “competitive prices” in the region.  Metropolitan Area Communications Commission administrator Bruce Crest wrote the company suggesting they are not living up to their end of the deal:

However, Frontier’s recent decision to place a significant and unjustified rate increase on its customers, along with the incongruity of Frontier’s justification for that increase against the statements made in 2009 and 2010, makes us question whether Frontier has, or ever had, a good faith commitment to fulfill the terms of the franchise.

Frontier responded to the Commission’s inquiry by essentially telling them to bug off — they have no authority to question Frontier’s prices. Company vice-president Steven Crosby waved-off MACC’s concerns:

While Frontier recognizes that the MACC is interested in any Frontier FiOS video price increases and alternative offerings Frontier provides to its customers, Frontier respectfully notes that the MACC does not have authority to regulate the rates Frontier may charge for FiOS video service, nor does the MACC have authority to regulate Frontier’s commercial relationships with content providers. Accordingly, Frontier reserves the right to decline to respond to inquiries directed to topics that are beyond the MACC’s jurisdiction and may be competitively sensitive. Furthermore, Frontier objects to the MACC’s letter of January 20th to the extent that it contains characterizations and questions that misstate facts and conclusions or are otherwise misleading.

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MACC Letter to Frontier FiOS

Making It Up As They Go Along: Internet Overchargers’ Justifications for Usage Pricing

Have we got a deal for you!

You’ve heard all the excuses:

  • Internet traffic has grown and unlimited pricing threatens to make broadband unprofitable;
  • We need these pricing schemes to help pay for improved infrastructure to handle traffic;
  • If we don’t adopt this pricing now, a great data tsunami — an exaflood — will wash broadband down the sink;
  • It’s not fair to make light users pay for heavier users.

Despite the fact provider financial reports show a trend towards reduced spending on infrastructure, data transport costs continue to drop, and debunking of exaflood horror tales, providers persist in demands for this so-called “fairer pricing” for broadband service.

But what is fair?

As Canada contends with an Internet Overcharging scheme that limits consumption to an average of 40-60GB per month, with $1-5 per gigabyte in overlimit fees, does this represent fair pricing?

The Toronto Globe & Mail decided to investigate, and the results will come as no surprise to readers here.

Fact: Usage is growing exponentially, especially among users streaming online video.  Canadians, just like Americans, are swarming towards multimedia-rich content from YouTube to Netflix.  Usage growth of 50 percent per year is not out of line.  But as the newspaper discovered, extraordinary growth alone does not deliver the whole story.  The capacity to handle that Internet traffic has not only kept up with growth, it has exceeded it, at levels of unprecedented efficiency.

The Globe & Mail notes:

[…] Processing power, hard disk densities and transmission rates grew at rates closer to 60 per cent per year over the same period. In addition, the servers and routers and other electrical equipment that are the backbone of the Internet are much more energy efficient than they were ten years ago, which has dramatically reduced the cost of operations.

In simple terms, the bandwidth explosion is real, but it’s been more than offset by more powerful and more energy-efficient machines. So, we can reject the notion that increased usage is the a significant rationale for huge Internet price increases and usage-based billing.

Costs down, but prices going up?

Among virtually every provider, the percentage of average revenue spent on broadband network expansion per customer has dropped.  Even Verizon, which suspended expansion of its fiber to the home network, has not faced an avalanche of new costs to deliver large amounts of data to FiOS customers.

But what about the “fairness” proposition.  Should light users pay less than heavy users?  Historically, even in countries where usage-based pricing is the norm, usage-limited customers still pay comparatively high prices for broadband service, particularly when measured on cost per megabit per second against the usual lower caps cheaper plans provide.  So-called “light usage” plans also have natural usage caps built-in — they come with far slower speeds that, at their worst, discourage use of high bandwidth services.

The Globe & Mail concluded: “Rather than ensuring consumers receive fair Internet pricing, the Canadian Radio-television and Telecommunications Commission seems content to line the pockets of cable and telecommunications companies by forcing Canadian consumers to pay Internet data rates that have no basis in reality.”

Here’s why:

Wholesale Data Costs

The “fairness” argument falls apart when the truth is revealed about the wholesale costs large providers pay for their Internet connections.  Assuming the providers’ arguments that pay-per-use pricing is fair, the prices they ask Canadians to pay for that use certainly are not.

The Globe & Mail again:

Approximately four years ago, the cost for a certain large Telco to transmit one gigabyte of data was around 12 cents. That’s after all of its operational and fixed costs were accounted for. Thanks to improved technology and more powerful machines, that number dropped to around 6 cents two years ago and is about 3 cents per gigabyte today.

Are these valid numbers? After the recent CRTC decision regarding UBB, it was announced that effective March 1st, Bell will be charging Third Party Internet Access (TPIA) providers $4.25 for a 40 GB block of additional data transfer.

The fact that Bell is able to sell 40 GB of data to wholesalers for $4.25 and still make a profit demonstrates that the true cost of data transfer is well below the 10.5 cents per gigabyte they are charging wholesalers. One TPIA provider agreed the 3 cents per gigabyte figure is probably close to the true cost.

So why are Internet service providers charging consumers $1 or more per gigabyte of data used beyond their respective data caps? That’s a good question.

The “good answer” is: profits.

With providers charging overlimit fees from $1 per gigabyte on Bell’s most generous plans to $5 per gigabyte for Rogers’ Ultra-Lite plan, this represents overcharging of at least 10-50 times what it actually costs the providers to deliver that data.

Broadband costs in the United States are dramatically lower than in Canada, in part because of a larger marketplace and because of greater capacity and more competition, yet proposals from some American providers sought similar limits and overage pricing.

But considering the true cost of the service, charging closer to 10 cents per gigabyte — not $1 or more — would represent a fair price.  So long as regulators like the CRTC cater to providers, consumers will pay considerably more.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/CTV Usage Based Billing 2-1-11.flv[/flv]

CTV News explores Usage-Based Billing, and why it will makes an expensive broadband experience even more costly in the days ahead.  (6 minutes)

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