Bell is pulling out all the stops trying to defend its justification for Internet Overcharging through so-called usage-based billing.  In a published debate between the telecom giant and TekSavvy — a small independent ISP trying to preserve flat rate broadband service in Canada, Bell claims Canadian broadband is the third best in the world, ahead of the United States, all of Europe, and just barely trailing Japan and Korea:

At the same time, Canada has increasingly become a world leader when it comes to broadband. When it comes to actual download speeds, Canada ranks third in the G20, behind only densely populated Korea and Japan. And prices are low — in fact, for higher-speed services, lower than in both the U.S. and Japan.

Michael Geist, a popular columnist fighting against Canadian Internet Overcharging, scoffs at the notion:

I’m not sure where these claims come from – Canada does not appear in the top 10 on Akamai’s latest State of the Internet report for Internet speed and no Canadian city makes Akamai’s top 100 for peak speed. The OECD report ranks Canada well back in terms of speed and price as does the Berkman report.  The NetIndex report ranks Canada 36th in the world for residential speed. Moreover, the shift away from the OECD to the G20 has the effect of excluding many developed countries with faster and cheaper broadband than Canada (while bringing in large, developing world economies that unsurprisingly rank below Canada on these issues). While there is probably a report somewhere that validates the claim, the consensus is that Canada is not a leader.

Bell’s Magic Pony-stories are at best exaggerated and at worst, phoney-baloney from the telco’s government relations department.

Stop the Cap! compared prices across several providers and found no value for money in broadband plans from all of the country’s major phone and cable companies.  Without fail, all were heavily usage limited, most throttled broadband speeds for peer-to-peer applications, engaged in overlimit fees the credit card industry would be proud to charge, and simply were almost always behind their counterparts to the south — in the United States.  In fact, some consumers are importing their broadband from the USA when they can manage it.

“Bell can’t win the argument on the merits, so it is making things up,” writes London, Ontario resident Hugh MacDonald.  “I have had Bell DSL for years now, and there isn’t anything fast or cheap about it.”

MacDonald’s broadband service from Bell tops out at around 4Mbps.

Mirko Bibic, senior vice-president for regulatory and government affairs at Bell claims consumers have to pay more to fund infrastructure expansion, and even challenges our long-standing assertion that telephone network comparisons don’t apply:

Bell provides all our customers with the best possible Internet experience available — the result of heavy and ongoing investment to expand our network capacity both to meet fast-growing demand and to manage the congestion that threatens everyone’s Internet experience.

Internet congestion is a fact and it cannot be wished away. Network providers like Bell must, like hydro utilities, build our networks to handle the heaviest usage times, not just an average of usage over time. At 8:30 in the evening, demand is at its absolute peak. And we have to deliver based on the volume at that time.

Keeping up with growing volume obviously means these network investments are not one-time costs. Between 2006 and 2009, Internet usage more than doubled, and Bell has invested more than $8-billion in the last five years in network growth and enhancement to keep pace. Yet at the same time, the CRTC has found that the average price per gigabyte downloaded has actually declined by 20%.

That’s why the long distance analogy, so often used by those with an interest in confusing the issue, is fundamentally misleading. In the case of long distance, it’s the simple transmission of voice over long-established legacy networks.

But Bibic ignores several important facts and doesn’t disclose others:

What broadband network does not have to make regular investments to expand to meet demand?  Cable and telephone company DSL business models, in place for at least a decade, priced network expansion, infrastructure return on investment, and data transmission into pricing formulas.  While data demands are increasing, the costs to meet those demands are, as Bell openly admits, declining.

What amount of revenue and profit has been earned from selling broadband service to Canadian consumers and the wholesale market and how does that compare to the dollar amount invested?  Bell Canada’s financial report for the third quarter of 2010 shows the company will earn an estimated $3.5 billion in revenue from its broadband Internet division alone.  Bell’s capital spending numbers also include network investments for its fiber to the neighborhood service, Fibe.  Bell’s revenue from selling the video side of that service were on track to deliver an additional $1.5 billion in revenue in 2010.  Not including the enormous wholesale broadband market, Bell will earn at least $5 billion a year from its broadband division.

In fact, Bell’s financial report also openly admits much of its capital spending increases have been spent on deploying its IPTV network Fibe in Ontario and Quebec, not on Internet backbone traffic management.

What are some of Bell’s biggest risks to a happy-clappy shareholder report for investors next quarter?  To quote:

• “Our ability to implement our strategies and plans in order to produce the expected benefits;
• Our ability to continue to implement our cost reduction initiatives and contain capital intensity;
• The potential adverse effects on our Internet and wireless businesses of the significant increase in broadband demand;
• Our ability to discontinue certain traditional services as necessary to improve capital and operating efficiencies;
• Regulatory initiatives or proceedings, litigation and changes in laws or regulations.”

Bibic

As for Bell’s claims about the “long distance analogy,” it’s only slightly ironic that a telecommunications company considers today’s voice networks radically different from data networks.  Analog transmission of voice calls went the way of the telegraph around a decade ago, with the last analog, step-by-step telephone switch in North America in Nantes, Quebec switched off in late 2001.  Today, telephone traffic is digital data, no different than any other kind of data transported across the country.

Bell cannot afford to have comparisons made between the telephone company’s move towards flat rate billing for phone calls and their broadband service moving away from it, because it torpedoes their entire argument.

Bibic then argues UBB is the right way to go because… major providers already charge it:

UBB has been the established framework for Internet services in Canada for years. Bell, for example, offers standard Internet service packages ranging from 25 gigabytes up to 75 gigabytes per month. As well, customers can sign up for 40 GB more for $5 per month, 80 GB for $10 or a whopping 120 GB more for $15. Keep in mind that 120 GB will get you 600 hours of standard definition video streaming or 100 hours of HD video streaming.

Not a bad deal when you consider average usage on our network is 16 GB per month and half of our customer base uses just five GB a month.

Most Canadians don’t see the “good deal” Bell says they will get from dramatically increased broadband prices. In fact, polls reveal the only groups in Canada that support such pricing are Big Telecom executives and the CRTC.

A new Angus Reid/Toronto Star poll illustrates what we’ve found to be true wherever ripoff “usage-based” pricing appears: people despise it, no matter how much Internet they use:

In the online survey of a representative national sample of 1,024 Canadian adults, three-in-four respondents (76%) disagree with the recent decision from the Canada Radio-television Telecommunications Commission (CRTC), which set the stage to eliminate unlimited use plans.

Bibic can relax as long as the current panel of commissioners at the CRTC, largely drawn from telecommunications companies, remain in place.  They continue to agree with Bell’s point of view and ignore the citizens they are supposed to represent.

[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)

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

The Public Interest Advocacy Centre just released a report that found deregulation in Canada's telecommunications marketplace delivered most of the benefits to providers, leaving consumers holding the higher bill.

Four years after Canada deregulated its telecommunications industry with the promise it would bring competition, better service and lower prices, Canadian consumers are instead paying too much for broadband service that delivers too little.

That is the conclusion of a new report from the Public Interest Advocacy Centre, a non-profit consumer protection organization that compared provider promises with the bills ordinary Canadians ultimately pay for their Internet service.

Michael Janigan, the report’s author told CBC News that deregulation has brought “super-normal” profits for Bell, Telus and Rogers — among Canada’s largest telecom companies — while those same providers continue to increase prices and, in some cases, reduce the amount of broadband usage customers can access before overlimit fees kick in.

“We still have three big players with over 90 per cent of the market, and they’re pretty fat and happy,” Janigan said in an interview with CBC News. “We’re still seeing the incredible clout of the big telcos in relation to their ability to swing competition in their favor.”

Bell, Canada’s largest telecom company, stands to gain even more power over the broadband marketplace with a ruling from Canada’s telecommunications authority that has direct implications for Canada’s independent service provider market.  Most third party providers obtain their Internet connectivity from Bell at wholesale pricing.  Thanks to a now-approved-request from Bell to charge wholesale customers usage-based pricing, providers are now forced to pass along those artificially high prices to Canadian consumers.

“The days of unlimited Internet service are about to become extinct in Canada,” says Stop the Cap! reader Giles in Trois-Rivières, Quebec.  “How surprised can you be that the company that sells access to competitors has managed to find a way to price that competition out of business.”

For one such competitor, Primus, the effect of Bell’s usage-based pricing will have an immediate impact on their customers’ monthly bills.

The company is now notifying customers that effective Feb. 1, the unlimited service plans that appealed to those opposed to usage-limited broadband will be now limited to just 25GB of usage per month.  Primus directly implicated both Bell and the the Canadian Radio-television and Telecommunications Commission (CRTC) for the pricing changes.

Those who exceed the limit face overlimit fees of $2.00 per gigabyte, up to a maximum of $60 per month.

Here today, gone tomorrow: Primus is discontinuing its unlimited use services. Effective Feb. 1, overlimit fees of $2/GB kick in after just 25GB of usage.

Those limits could put Primus at a competitive disadvantage with larger providers delivering lower cost plans with higher usage allowances.

“Why would you still be a Primus customer after this,” asks Giles.

Primus will not be alone among third party DSL service providers — almost all will be forced to adopt similar pricing.  The result? More expensive service for Canadian broadband customers, and major troubles for third party competitors whose new pricing could turn customers away.

The price increase is a direct result of a recent decision by the Canadian Radio-television and Telecommunications Commission (CRTC) to approve Bell Canada’s request to introduce Usage Based Billing on wholesale Internet services. Over the last four years, critics charge the CRTC with abandoning its watchdog role to protect Canadian consumers from unfair and uncompetitive practices and kowtowing to the interests of large telecom companies.

“In 2006 and 2007, the government stepped in to tell the CRTC to deregulate as a priority and to deregulate local telephone service faster promising better deals for consumers. As a our report notes, this did not happen despite all the hype”, said Janigan, author of the report, Waiting for the Dream, The Consumer Brief for Telecom Reform 2010.

In fact, the report concludes that Canada’s performance in telecommunications services such as broadband and wireless has been less than impressive, and the results for customers of cable and satellite services from deregulation of basic service has been the opposite of what should be expected in competitive markets.

“It is one thing to try a course of action that doesn’t work out: it is another to ignore the results and simply try more of the same,” said Janigan. “It doesn’t now make sense to have a government Policy Direction in place that hampers both competition and consumer protection”:

This report concludes that the failure of the regulatory reform of the last two decades to deliver the goods for ordinary residential consumers is not one that has its roots in theory, but in practice. Here, the interests of powerful stakeholders have affected the service landscape. In the same way that incumbent players used their political and economic influence and regulatory capture to get their way in the monopoly era of regulation, the winners have used the market- based system to their advantage. Neither regulation nor deregulation will engineer a thriving telecommunications industry producing innovative and efficient products and services with resultant economic growth for Canada if the decision making processes for each are skewed by conditions and assumptions that favour some stakeholders over others.

Most importantly, the governance and regulation of the telecommunications industry in Canada must respond to results. For the most part, the restructuring of telecommunications has been guided by untested economic theories, largely provided by experts engaged by the largest stakeholders. The relatively poor performance of telecommunications service for ordinary consumers should have long ago engendered a review of the  regulatory framework and market structure that is producing the same. In the last five years, the only acknowledged measure of success has been how fast telecommunications services have been deregulated with predictable market results.

The solution is not a return to old regulation but new models. First of all, there are a variety of consumer issues associated with basic rights for information, quality of service, security of service, disconnections, privacy etc. that should be met by all carriers whether they are incumbent or not. Basic service, obligations to serve, complaints resolution, and burdens of service in uneconomic areas have to be in place for all across the board. The best way to ensure that this occurs is for mandatory licensing for all carriers, with appropriate codes of conduct and enforcement with meaningful force in the form of administrative monetary penalties. The Telecommunications Act should be amended to reflect these improvements.

Interconnection with essential telecommunications facilities should be available for competitors at rates that are fair to users and suppliers. We cannot let abstruse theories supposing innovation and duplication in the absence of access to govern this important issue.

Ontario residents enjoy less than half a serving of broadband their neighbors in Quebec enjoy from Bell, for less money

Residents of Quebec enjoy more than double the broadband usage allowance Bell provides its Ontario customers, showing once again h0w arbitrary Internet Overcharging schemes are for consumers in North America.

Broadband Reports reader Ironsight200 ponders why customers in Quebec enjoy substantially less abuse from the skimpy usage allowances Bell imposes on its customers.

The prices charged differ as well, with Quebec residents also getting an out-the-door lower monthly price because Bell does not impose charges on the modem Ontario customers rent for $3.95/month — $6.95 a month with the Fibe 25 service.

Let’s take a look (and don’t worry Ontario readers, Bell promises you can still look at least 624,999 additional web pages this month without incurring overlimit fees):

Quebec users get more than double the usage allowance of...

...their neighbors in Ontario.

Pricing for Bell broadband service at the bundled price:

*- includes $3.95 modem rental fee. ^- includes $6.95 modem rental fee.