For those who tried to watch the live stream from this past Monday’s Internet Town Hall from Toronto, it was a process that demonstrated the limitations of broadband service in Canada.  Evidently the hotel broadband connection was inadequate for the task, and the stream suffered ongoing video and audio problems for the duration.

An audio podcast version has now become available and is included below.  Because the event runs nearly two hours, you may wish to download the audio and listen on the go.  If you want to listen here, remember that the audio player will only work as long as you remain on this page.

Internet Town Hall On Canadian Broadband/Net Neutrality Issues – Toronto, June 8, 2009 (1 Hour 50 minutes)
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Gazing into our future, unless Internet Overcharging stops before it gets started (Photo: Sean McGrath)

Americans have a lot to learn.  Our neighbors to the north have been living our broadband future, and it’s time to start paying attention.

Broadband providers that want to implement their Internet Overcharging schemes often claim that this isn’t unprecedented.  People in Canada, Australia, New Zealand, and a few other countries already face a broadband service hobbled by arbitrary limits, and ‘you don’t hear them complaining.’

Except you do.

The Canadian broadband market is remarkably similar to our own.  A very comfortable duopoly of providers – one cable operator and one telephone company provide the vast majority of Canadians with their Internet service.  Several smaller independent providers, typically reselling access to Bell Canada’s network they’ve contracted to obtain at wholesale pricing, make up most of the rest.

Five years ago, those two providers clawed each other fighting for market share, and independent providers were popping up to provide more flexible broadband accounts for those looking for lower pricing or different speeds.  Canada rose to second place in broadband among the 30 nations that belong to the Organization for Economic Cooperation and Development (OECD).

Evidently, the price and service war ended with a truce in the last 24 months.  Then came the classic signs of Internet Overcharging: new restrictions and limits on usage, overlimit and penalty fees for exceeding those limits, a slowdown in competition to build better infrastructure offering higher speeds, and even “traffic shaping,” which in reality means artificially restricting selected services moving across a broadband network.

Rogers Internet Overcharging limbo dance reduces usage allowances on new customers. (click to enlarge)

Even more irritating for customers, rate increases accompanied all of these new restrictions.  Rogers Cable, which helped get the ball rolling on Internet Overcharging schemes, raised broadband rates March 1st and then announced a “free speed upgrade” this past month, bringing their broadband speed in Toronto to 10Mbps for $45.26US per month, before taxes, with a 60GB limit and “traffic shaping.”

Customers looking for cheaper broadband from Rogers have been subjected to a reduction in the usage allowance since the Internet Overcharging schemes began.  Now, customers looking for the least expensive plan pay $26.23US per month for 500kbps “broadband” with a usage limit of 2GB per month.  Exceed that, and your overlimit penalty fee is an enormous $5.00CAD per gigabyte.  When the first Internet Overcharging scheme was introduced, “lite” customers could use up to 60GB per month.  It’s just more evidence that when broadband companies are allowed to implement Internet Overcharging schemes like this, the broadband limbo dance begins, with customers facing smaller and smaller “allowances” at the whim of the provider.

Rogers competition, primarily from Bell Canada, did what can be expected in a lightly competitive marketplace — they announced Internet Overcharging schemes of their own, trapping many Canadians into restrictive broadband service from every provider around.

Canadians hate the schemes, despite broadband industry propaganda that suggests customers didn’t mind paying more for less.

“Broadband in this country has completely stalled,” Stop the Cap! reader Brent, living near Ottawa wrote to us.

For several years, everything was heading in the right direction in Canada.  Broadband service was extending from cities into smaller towns and communities, even in the Prairies, BC and Alberta, which have much more empty space between developed communities.  Here in Ontario, Rogers and Bell are the dominant companies.  It was bad enough when Rogers starting using traffic shaping to slow down things like peer to peer services, so you often find your speeds slowing down by half or more.  Internet video is not as common in Canada because services like Hulu see the usage allowances and don’t bother to come here, because people can’t afford to watch them.  But some independent producers do have online video, that they freely distribute using peer to peer.  It’s throttled by Rogers, though, so it takes forever to load.

Then their cap came.  We get 60GB per month on our service.  I have a wife and two teenage daughters.  Everyone is online here.  Between all of us, 60GB is never enough, and we have to constantly watch them because they like to have friends over to do things on the computer together.  We have to keep track of everything they do, and there are fights all of the time about who used what.  You can never relax when you are online anymore, because you have to always be worried about what something might cost you.

Even worse, Rogers interferes with your service when you reach 75% of your allowance by injecting a warning banner on your web browser to tell you that you are approaching your limit for the month.  That process forces their announcement onto web page after web page, and you’ll know it because half the time those pages with a warning banner take much longer to load, if they load properly at all.  It doesn’t matter what page you are looking at, or who runs it.  Rogers feels they can put their banner on it.

I spent two weeks in the States at a friend’s home who had Verizon FiOS and I couldn’t believe the difference.  Using Canadian broadband and comparing it to Verizon FiOS is like the difference between dial-up service and the broadband service we used to have in this country.

Bell is now going to force limits on wholesale accounts as well. All of the independent companies that don’t currently have caps and allowances will now have to impose them, cutting off the last competitive choices we had.  It’s a nice racket.

Reading the American papers, it’s all familiar to me.  It’s the same things we were told.

• There are “Internet hogs” using “too much service” so we have to charge them more.
• We have to use the extra money to build better networks.
• We need to traffic shape to make sure everyone can use our service.
• It’s about fairness for everyone.

No. It’s about getting more money from you and pocketing it.  The people they stereotype as “Internet hogs” turn out be ordinary families.  Just because we may not know about some of the Internet cutting edge services becoming available, our kids do.

Canada’s providers aren’t using the all the extra money to build better networks, they are just treating them as profits.  Our speeds are still slower than Americans get. They reduced the usage allowances on many people even further. They still traffic shape even on the networks they claim they were “improving.”  Everyone’s Internet bill went up.  Nobody is saving anything.  There is nothing fair about duopoly pricing.

Dr. Michael Geist

Brent’s point about Bell Canada imposing Internet Overcharging schemes on their wholesale business accounts rings familiar.  Earthlink wanted to sell its broadband Internet service that travels across Time Warner Cable’s lines at the current unlimited pricing they charge today.  Whether they would be allowed to do so under TWC’s original Internet Overcharging proposal was highly doubtful.

Independent providers in Canada are upset about Bell Canada’s attempt to impose new limitations on their wholesale accounts, because it threatens their existence.

Two weeks ago, Dr. Michael Geist appeared before the Standing Committee on Transport and Communications to discuss the state of telecommunications in Canada.

Geist, a law professor at the University of Ottawa and noted expert on the state of Canadian broadband, called the developing situation in Canada “a crisis.”

Limiting competition and throwing your duopoly weight around has been a hallmark of insufficient oversight and regulatory control in under-competitive markets and Geist brought examples of providers engaged in mischief:

• Telus blocked access to a union supporting website during a labour dispute, blocking more than 600 other sites in the process
• Shaw advertised a $10 premium surcharge for customers using Internet telephony services opening the door to creating a competitive advantage over third party services
• Rogers currently degrades the performance of certain applications such as BitTorrent, widely used by software developers and independent film makers to distribute their work
• Bell openly throttles BitTorrent traffic, a practice that has been challenged before the CRTC

Bill St. Arnaud

Competition can provide some answers, but not all.  It’s obvious new laws are required to put a stop to Internet Overcharging while real competition can develop.

As Stop the Cap! has documented, when fed-up municipalities reject their status as a “broadband backwater” and seek to deploy the advanced fiber networks that they need to spur economic growth and development, incumbent providers engage in lawsuits and delay tactics.  But in many communities, in the end, the threat of municipal competition finally forces those networks to commit to the upgrades they refused to provide earlier.

Bill St. Arnaud, Chief Research Officer for CANARIE, ponders Canada’s future as the country slips further and further behind in OECD rankings because of the broadband duopoly in the country.  Speaking with CBC Radio’s Nora Young, who hosts Spark, a twice-weekly radio program about technology and culture, he contemplates a solution to this problem that builds on the Obama Administration’s broadband stimulus program in the United States — by publicly funding an advanced “fiber to the home network” and then open it up to all providers to compete for customers.

Audio Clip: Bill St. Arnaud Appears on CBC Radio’s Spark – June 3, 2009 (11 minutes)
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Live Coverage of SaveOurNet.ca‘s National Open Internet Town Hall, netcasting from Toronto has now concluded.  Unfortunately, connectivity issues at the hotel plagued the live streaming event, and a good deal of it was not available on the live stream.  A recording of the presentation should be forthcoming shortly, and will be embedded in this space, when available.

Fact vs. Fiction: Five Myths About Net Neutrality (click to read document)

A coalition of consumer groups, educators, and online activists have called on Canadian public utilities and municipalities to explore the construction and implementation of fiber optic networks to combat Canada’s deteriorating position in broadband service.

Steve Anderson, writing for The Tyee, opined in a Mediawatch column that “big telecom’s monopolistic control over the net is threatening to leave Canada with a last generation Internet.”

In the 2009 Federal budget, the Conservative government pledged to commit $225 million over the next three years for broadband to unserved communities.  By contrast, Australia, which has a similar geographic breakdown to Canada, is reportedly committing AU$4.7 billion to a similar initiative. Not only is the Conservative’s commitment relatively weak, it also does little to get Canadians hooked up to next generation networks.

Anderson complains the current competitive lock on broadband is unlikely to be broken by commercial providers, unwilling to compete for access.  Instead, Anderson suggests municipalities, community-non profits, and public utilities should fill the gap and provoke competition.

University of Toronto professor of Information Studies Andrew Clement points out that municipalities “have many critical assets, including significant financial resources, control over rights of way, as well as experience in developing and operating other complex, capital-intensive infrastructures, such as roads, waterworks, and transportation systems.” In fact, many municipalities own high-speed fiber networks that they can utilize relatively easily for Internet service provision.

There are successful public, municipal owned broadband networks now providing service in some cities in Canada.  Fredericton, New Brunswick’s award winning fiber and wi-fi network is a partnership co-op with the city government.  Wi-fi service is provided free of charge to all citizens, one of the reasons the city was congratulated for being one of the “communities or regions with a documented strategy for creating a local prosperity and inclusion using broadband and information technology to attract leading-edge businesses, stimulate job creation, build skills, generate economic growth, and improve the delivery of government services.”

Anderson criticizes Canadian broadband for being usage capped and throttled, a victim of lack of Net Neutrality protections.

A public interest organization SaveOurNet.ca is sponsoring a series of Open Internet Town Halls in Toronto, Ottawa, and Vancouver to engage citizens in discussions about the future of the Internet. Through live video streaming, the town halls will be available to a national audience on theREALnews.com, rabble.ca, TheTyee, Beyond Robson, SaveOurNet.ca, and other participating websites.

People from across Canada are encouraged to watch and engage with the first Open Internet Town Hall meeting at 7:30pm on Monday June 8th. The Canadian equivalent of the FCC, the CRTC, will be holding hearings on Net Neutrality issues on July 6th.

StoptheCap! will provide additional coverage of the SaveOurNet event Monday.  Americans can and should pay attention.  Canada’s abusive provider practices may very well be forthcoming in the States soon enough.

Marcel Boyer

Marcel Boyer penned an opinion piece for Canada’s Financial Post this week attacking the virtues of Net Neutrality as short-sighted and potentially devastating to the Internet if codified into law.

Boyer, in a piece called “Don’t Throttle the Net,” advocates precisely that, applauding broadband providers for traffic shaping, which artificially slows non-preferred Internet traffic delivered over broadband networks.

There are many facets to the net-neutrality issue, including pricing and broadband allocation, which are central. Proponents of net-neutrality call for government intervention and regulation to prevent broadband providers from prioritizing or interfering with the data that flows in their networks. On the other hand, broadband providers are arguing that even though they continue to invest in their networks, their customers would still be affected by congestion during peak periods in the absence of traffic management measures. Other large networks face the same type of issues. New applications (video streaming and VoIP, among others) require a high quality of service assurance, making a more reliable network necessary.

Boyer delivers the usual talking points about bandwidth pricing and competition that Stop the Cap! readers are all too familiar with:

Making it illegal for broadband companies to offer a diversity of choices would destroy incentives to invest continually in improved Internet bandwidth, quality and security. Net-neutrality legislation would unnecessarily regulate a free and competitive market when there is no real evidence of consumer harm.

Let network owners and operators as well as service providers differentiate their offerings and price them the way they choose. Customers would benefit from more diversified offers by selecting the ones best suited to their needs. In such a competitive context, network operators and service providers would routinely aim to satisfy demand for Internet services most effectively while simultaneously aiming to manage the growth in peak demand.

It is to the advantage of consumers to allow competing vendors to experiment with various price and service combinations. From this discovery process, a portfolio of winning offerings will emerge. As long as competition is present and sufficiently intense, and assuming the level of information available and provided to consumers enables them to make informed choices between the various offerings, regulation of price schemes is neither necessary nor desirable as it would stifle innovation and obscure the best offerings and pricing schemes.

From an economic point of view, policies that would restrict the ability of broadband providers to manage their networks are likely to do more harm than good. Regulation of prices and offerings, products and services, has generally resulted in higher costs and lower benefits, especially when competition is present. The complexity of market dynamics poses particular problems in emerging industries. Instead of adopting regulations that could induce unwanted harmful effects, it is preferable to mandate the Canadian Competition Bureau to investigate when there is evidence of abuse or unlawful actions from broadband providers.

The impetus for the opinion piece was this week’s news highlighting Canada’s rapid decline in standing among top industrial nations’ broadband services.  The original report specifically called out the impact of draconian usage caps and throttles which reduce usage, limit innovative high bandwidth services’ entry into the Canadian market or bypass it entirely, and the potential economic and competitive impact on Canada’s economy as a whole.

Boyer’s premise presupposes there is a healthy competitive marketplace for broadband in Canada, a conclusion ridiculed by many.  Most Canadian cities have two primary choices for broadband, a usage capping phone company or a usage capping cable company.  Smaller independent providers typically resell bandwidth obtained from Bell or other similar entities at wholesale rates.

Despite pricing more than $15 a month higher in Canada than in the United States, and healthy financial returns among most of Canada’s providers for their broadband divisions, the “continual investments” in bandwidth Boyer claims are hardly eye popping.  Incremental speed increases, usually accompanied by rate hikes, and the imposition of often paltry usage caps has artificially reduced consumption, which also reduces the need to improve infrastructure.  Indeed, while fiber optics deployment is becoming increasingly common in the United States, it is not nearly as common in Canada.

Canadians find little diversity in pricing and service levels in a marketplace that nearly always imposes limits on consumption, doesn’t provide robust access in rural communities, and typically delivers slower speeds than their counterparts in the United States are providing customers today.  East York (near Toronto) residents, for example, can obtain “blistering fast” 10Mbps service from Rogers for about $60US per month, limited to 95GB of consumption.  Overlimit fees are $1.50/additional GB.  Bell offers “speed of light” Internet access at “up to 16Mbps” for $82.95 a month (100GB usage cap – $1.00/additional GB, billed in increments of 100MB, $30 monthly maximum applies.)

Head across Lake Ontario south to Rochester, NY and Time Warner Cable provides “Turbo” service offering 15Mbps, currently without any usage cap, for $50.00 a month.  Verizon FiOS pricing provides 20Mbps service with no cap for $54.99 a month.

In the absence of significant competition, duopoly-style pricing usually results, and that’s precisely what has happened in Canada.  Allowing the “wild west — hands off” approach Boyer advocates merely guarantees more of the same.  Providers in the United States, already enjoying phenomenal returns, would love to adopt the Canadian approach.  They’ve already been increasing rates, decreasing investment in their network infrastructure as a percentage of revenue, and enjoying the benefits of reduced bandwidth expenses.  The only components left are usage caps and throttling broadband applications they don’t own, control, or partner with.  Experiments are being attempted on some of these fronts now.

The end result: even higher profits and locking broadband into a rationed, expensive, and slow backwater.

Boyer should know that wired broadband competition beyond the aforementioned duopolies in most Canadian markets comes only from independent ISPs typically reselling wholesale bandwidth (which is now also being capped) and a few independent providers who may wire limited areas in large cities.  There will never be a free market paradise in cable television – the traditional one company per city approach is well rooted throughout North America.  Wireless is even more heavily capped and expensive than wired service.  And telephone companies, outside of Verizon in the United States, are loathe to aggressively deploy fiber optics unless required by local market conditions.

Broadband throttling and capping, particularly to discourage online video consumption, comes aggressively when companies have a vested interest in preventing erosion of their traditional video programming business model.  Both Rogers and Bell are in the business of delivering television entertainment to Canadians.  Should a sufficient amount of that entertainment be available online, some consumers may dispense with the video package and rely exclusively on the Internet.

Speaking of vested interests,  the Financial Press had plenty of space to print Boyer’s article, and even concluded it by noting his title:

Marcel Boyer is vice-president and chief economist of the Montreal Economic Institute.

Apparently things got throttled at that point, because they forgot to include one additional affiliation Boyer holds: Bell Canada Professor of industrial economics at the Université de Montréal.  How ironic.