Watching two governments — one in Ottawa, the other Washington — debate important broadband issues has been an illuminating experience for this American.  As Canada continues to deal with a firestorm of protests against broadband pricing ripoffs from usage-based billing, the debate over Net Neutrality achieved new levels of absurdity in Washington yesterday as a largely Republican crowd fought to overturn the FCC’s watered-down open Internet protection policies.

Watching and listening to a combined eight hours of hearings both north and south of the border this month has cast a striking contrast between our two governments.  After it was all over, I can forgive anyone who decides Congress is filled with a bunch of uninformed meat-heads who fight for the talking points attached to their fat contribution checks from the telecommunications industry.

It is unseemly watching Republicans fall all over themselves to impress AT&T, Verizon, and Comcast with their grasp of these companies’ arguments against an open and free Internet.  There are also some bad Democrats on AT&T and Verizon’s virtual payroll, but the hearings this week in the House of Representatives were over the top — a Republican Valentine’s Day present for Big Telecom, replete with clueless representatives who clearly don’t understand the concept of Net Neutrality beyond the 3×5 index cards handed to them by one of their respective staffers.  For the most reactionary members, handing out photoshopped-pictures of Leon Trotsky hugging Barack Obama in front of a spool of fiber optic cable would have been just as effective.

The deservedly-undercovered Judiciary Committee hearings featured a single wireless ISP (WISP) owner who appears to spend most of his free time writing in the Comment sections of major American newspapers and social media sites.  His concern?  A technicality in the current Net Neutrality rules about customers running web servers.  ServerGate.  There’s a hot button issue if there ever was one.  Brett Glass’ customers are much more interested in watching online video, a concept that frightens a lot of WISP owners into placing usage caps on their service to discourage them from doing that.

Chairman Walden

Another witness at that hearing came straight from a telecom industry funded think tank.  Inviting AT&T to appear themselves would have effectively cut out the middleman and saved everyone a whole lot of time.

Gigi Sohn from Public Knowledge was left alone to stick up for Julius Genachowski’s cowardly-lion Net Neutrality rules, which in this author’s opinion are barely better than nothing, fatally flawed and one court decision away from oblivion.

Yesterday’s hearing featured FCC Commissioners on a partisan griddle as members of Congress asked softball questions of those they favored, and strafed the ones they don’t with long-winded lectures.

Republican members had no time for stories of Providers Gone Wild, particularly Comcast’s secret squeeze of its customers’ broadband speeds when running peer-to-peer software.  Such stories conflict with their talking point world view that broadband from the private sector should be run any damn way they please.  When some go to far, “they are isolated incidents” claimed Republican members, to the nodding affirmation of the two Republican commissioners.

Julius Genachowski was reduced to defending his homeopathic net regulations as a regulatory “light touch” — like a dew kissed raspberry on a summer morning.  But representing regulation as harmless didn’t do him any favors, because he forgot his audience.

Drive-by Hearing: For much of the hearing, C-SPAN cameras caught most of the seats empty as members came and went.

No argument about moderated government regulation is ever going to fly in a room with members like Rep. Marsha Blackburn (R-Tenn.) who spent her five minutes of talk time scorching the FCC for holding up the Comcast-NBC merger with questions.  How. dare. they.

Congressional hearings used to be about fact finding and allowing members to educate themselves on the issues before casting their votes.  No more.  These days, hearings are an exchange of preconceived talking points as members switch between grilling or ignoring the witnesses they don’t like while fawning over those they do.

GigaOm called the entire affair “nauseating” and helpfully condensed the only three things you need to take from the hearings:

• FCC Chairman Genachowski said the Level 3 and Comcast debate over access to Comcast’s last mile subscribers is a business issue and not a net neutrality issue.
• FCC Commissioner Robert McDowell resurrected the ghost of unlicensed white spaces and set it up as a competitive threat to existing ISPs. He then used that threat of eventual competition to argue we no longer need net neutrality rules. I tend to agree that if we had robust broadband competition, we wouldn’t need network neutrality, but according to McDowell, white spaces aren’t dead. If they aren’t dead, that’s important.
• The FCC will keep the docket open on its effort to reclassify broadband, which would give the FCC the legal authority under existing laws regulate broadband as a transportation service (the so-called Title II authority). This is a good thing for network neutrality fans, as the existing net neutrality rules will likely be challenged in court, and keeping that docket open leaves a back door for the FCC to implement rules. However, the industry hates the idea of reclassification and will fight it tooth and nail. It also means more hearings, comments and arguments over the entire issue.

Contrast this with more than a week of hearings in Canada on usage-based billing.  The differences are nothing less than striking.  Members attending those hearings were well-informed about most of the issues surrounding the usage-based billing debate and aside from the occasional minor grandstanding and long-winded questions, got to the bottom of the issues at hand and were prepared to challenge assertions made in all sides of the debate.  They even pronounced everything correctly.  A 10 minute exchange over the pricing formulas for Bell’s wholesale Gateway Access Service (GAS) probably won’t get you a soundbite on the evening news, but it will enlighten a member of Parliament about just how unjustified these pricing schemes are.

Not so in Washington, where net policy nuance is a French word meaning “weakness” or “socialist takeover.”

Bell Canada must surely wish they lived in a country where the hired help in Congress can reflexively support whatever is on the company’s agenda… for the right price.  For the moment, they are stuck exchanging Valentines with their close friends at the Canadian Radio-television and Telecommunications Commission, most of whom came from the industry they now regulate.

Minutes after Washington’s hearings ended, several Republicans, with their minds already made up, introduced a Joint Resolution to override the FCC’s authority on Net Neutrality and sweep the free and open Internet into a dustbin.  There are new owners of the Internet in town and it’s past time you got used to it — they are AT&T, Verizon, and Comcast.  Your bill is in the mail.  You can thank us now or later.

Congress' Joint Resolution requires a simple majority -and- the President's signature to pass. Ironically, the Republicans touted the measure as "filibuster-proof," but considering the president is likely to veto it, a filibuster is the least of their problems.

Canada’s House of Commons Standing Committee on Industry Science and Technology has taken an in-depth look at Internet Overcharging in an ongoing series of hearings to explore Bell’s petition to charge usage-based billing.  The request, earlier approved by the Canadian Radio-television and Telecommunications Commission (CRTC), would end flat rate, unlimited usage plans across the country, and mandate Bell’s proscribed usage cap regime on every ISP in Canada.

Remarkably, even Canada’s Conservative Party, which laid the deregulatory framework that allowed Canada’s barely-competitive market to stick it to consumers and small businesses, refuses to defend the overcharging schemes.

So far, the three hearings deliver everything Stop the Cap! has warned about since we began this fight in the summer of 2008:

1. Proof that usage caps, and consumption-based billing have nothing to do with cost recovery or fairness.  They are, at their root, economically engineered to discourage use of the Internet and protect revenue from the provider’s other businesses, especially video.
2. There is no evidence of a data tsunami, exaflood, or whatever other term providers and their financially-connected allies in the equipment business cook up to warn about an explosion of data usage mandating control measures.  Data usage is increasing at a slower rate than the development of new equipment and fiber pipelines to manage it.
3. Nobody ever saves a thing with Internet Overcharging schemes.  While Bell and other providers make up scary stories about “heavy users” picking “innocent” users’ pockets, it’s the providers themselves making all the money.  In fact, bytes of data have no intrinsic value.  The pipelines that deliver data at varying speeds do, which is why providers are well-compensated for use of them.  Levying additional charges for data consumption is nothing more than extra profit — a broadband usage tax.  Providers make plenty selling users increasingly profitable connections based on speed.  They do not need to be paid twice.
4. For all the talk about the need to invest in network expansion, Bell has reduced infrastructure spending on its core broadband networks the last three years’ running.  They are spending more on deploying Internet Protocol TV (IPTV), a service the company swears has nothing to do with the Internet or their broadband service (despite the fact it travels down the exact same pipeline).
5. Caps and usage billing never bring about innovation, except from providers looking for new ways to charge their customers more for less service.

I strongly encourage readers to spend an evening watching and listening to these hearings.  At least download the audio and let Canada’s broadband story penetrate.  You will laugh, cringe, and sometimes want to throw things at your multimedia player.

In the end, the hearings illustrate the points we’ve raised here repeatedly over the past three years, and it only strengthens our resolve to battle these Internet pricing ripoffs wherever they appear.  If you are a Canadian citizen,write your MP and demand an end to “usage-based billing” and make it clear this issue is paramount for your vote at the next election.  Don’t debate the numbers or waste time “compromising” on how much you want to be ripped off.  There is no middle ground for usage-based pricing.  It should be rejected at every turn, everywhere, with no compromises.  After all, aren’t you paying enough for your Internet connection already?

The Standing Committee on Industry, Science and Technology

Meeting # 54 – Usage-based Billing Practices

February 3, 2011

This video is encoded in the Windows Media format which presents some technical challenges.  Full screen or 200% zoom-viewing mode is recommended.

[For Windows users, right click the video and select ‘Zoom->Full Screen’ or ‘Zoom->200%’.]

This hearing was televised and had the most media attention.  Testimony from the CRTC was decidedly defensive, and almost entirely in support of usage-based billing and Bell’s petition.  The Commission found no friends in this hearing.

Appearing from the Canadian Radio-television and Telecommunications Commission: Konrad W. von Finckenstein, Chairman; Len Katz, Vice-Chairman, Telecommunications; Lynne Fancy, Acting Executive Director, Telecommunications.  (1 hour, 29 minutes)

If you want to take the hearing audio along for a ride, you can download the MP3 version.

The Standing Committee on Industry, Science and Technology

Meeting # 55 – Usage-based Billing Practices

February 8, 2011

The second in a series of hearings exploring Usage-based billing included witnesses from independent Internet Service Providers who could face extinction if they are forced to pay higher prices for wholesale broadband access.

Appearing: Rocky Gaudrault, CEO of TekSavvy Solutions Inc., Matt Stein, vice-president of network services for Primus Telecommunications Canada, and Jean-François Mezei, a Montreal-based telecommunications consultant who most recently petitioned the CRTC to repeal its decision. (120 minutes)

You must remain on this page to hear the clip, or you can download the clip and listen later.

The Standing Committee on Industry, Science and Technology

Meeting # 56 – Usage-based Billing Practices

February 10, 2011

The third in a series of hearings exploring Usage-based billing included witnesses from Bell Canada, which originally proposed the idea, and additional testimony from independent Internet Service Providers and their trade association, and consumer advocates who oppose the pricing scheme.

Appearing: OpenMedia.ca: Steve Anderson, Founder and National Coordinator. Bell Canada: Jonathan Daniels, Vice-President, Law and Regulatory Affairs; Mirko Bibic, Senior Vice-President, Regulatory and Government Affairs. Shaw Communications Inc.: Jean Brazeau, Senior Vice-President, Regulatory Affairs; Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs. Canadian Association of Internet Providers: Monica Song, Counsel, Fraser Milner Casgrain LLP. MTS Allstream Inc.: Teresa Griffin-Muir, Vice-President, Regulatory Affairs. Union des consommateurs: Anthony Hémond, Lawyer, Analyst, policy and regulations in telecommunications, broadcasting, information highway and privacy. Canadian Network Operators Consortium Inc.: Bill Sandiford, President; Christian S. Tacit, Barrister and Solicitor, Counsel. (128 minutes)

You must remain on this page to hear the clip, or you can download the clip and listen later.

During the third day of hearings on usage-based billing, Mirko Bibic from Bell admitted that usage-based billing “prevents [other ISPs] from differentiating their offers from our own.”

That remarkable admission is exactly what independent Internet Service Providers have been arguing since the issue of wholesale usage-based billing was first proposed by Canada’s largest broadband supplier.

Independent providers have managed to carve out a niche supplying primarily residential DSL customers with flat rate usage plans, made possible because of wholesale access provisions assured under Canada’s telecommunications regulations.  As Bell, Rogers, Shaw, and Videotron have systematically imposed usage limits on their residential customers (and occasionally lowered them), consumers seeking better value have found it from smaller ISPs that still offer unlimited access.

As Bell frets over its inability to reap retail revenue from customers departing for other providers, the idea of imposing usage-based billing on wholesale accounts ends that revenue erosion once and for all.  As Bell admits, it forces every provider in Canada to charge the same high prices they do for Internet access.

Canada’s telecom regulator, the CRTC, still cannot define what a “heavy user” is, and neither could Bibic.  But with these pricing schemes, now they don’t have to.  Imposing higher prices with vague promises that the resulting revenue will expand Canada’s broadband networks is eerily familiar to what Time Warner promised residents in several major cities, and then didn’t deliver.

In western New York, the cable company promised a new generation of blazing fast speeds on a world class broadband network, as long as customers agreed to pay up to $150 for unlimited residential service per month.  The old price was $50.  But the cable company provided those upgrades in other cities instead — without usage based pricing.  No wonder residents were furious.  After two weeks of protest, Time Warner threw in the towel.

Two years later, the promised upgrades are finally slated to arrive, long after being made available in most large cities in New York State.

Provider-promised bait and switch broadband upgrades merely represent sucker bets, and no one except the provider wins.

If Bell gets its way, there will be no reason for anyone to do business with an independent service provider.  They’ll be forced to charge increased prices, sometimes even higher than Bell itself.

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)