Bell's Broadband Shell Game (image: Dave Blume)

The digital equivalent of a Trojan Horse was laid at the feet of Canadian telecom regulators Monday when officials from Bell, Canada’s largest phone company, announced they were withdrawing their controversial proposal to mandate usage-based billing on all wholesale broadband accounts.

The original proposal would have mandated that independent Internet Service Providers bill each of their individual customers a monthly fee based on their Internet usage in addition to the wholesale access rates paid to Bell all along.  The pricing proposal would have forced every ISP in Canada to abandon flat rate Internet service, raise prices, reduce usage allowances, and increase overlimit penalties.

Now Bell has told the Globe & Mail newspaper it wants to introduce something called “Aggregated Volume Pricing” instead — a plan Bell claims will shift financial penalties for “high usage” away from individual customers and onto the ISPs themselves. Bell also slashed the proposed overlimit fee from a heavily-defended-as-fair $2.50 per gigabyte to a more modest $0.30/GB, perhaps echoing AT&T’s forthcoming overlimit fee.

In fact, Bell’s revised plan is the same Internet Overcharging scheme under a new name.

The radical reduction in overlimit fees only further illustrates the “phoney-baloney” of providers attempting to monetize broadband usage under the guise of “fairness” and “congestion relief.”  Last week’s ’eminently fair’ $2.50 is this week’s ‘more than reasonable’ $0.30.

Bell exposed their hand — showing they have been bluffing about congestion all along.  An analysis of the proposed rates shows the company is still trying to target “heavy users.”  But instead of penalizing them into reducing their consumption, Bell is now seeking to monetize that usage, not control it.  By shifting aggregate usage costs to the wholesale market, Bell hopes individual customers will blame independent ISP’s for higher bills, not them.  Independent providers have to pass along their wholesale costs as part of the retail price of their service.  It’s a high tech shell game, one that consumers will always lose.

Despite this, Bell assumes the revised plan will take the bipartisan heat off its backside since it first proposed doing away with flat rate Internet service in Canada.

“With our filing today, we are officially withdrawing our UBB proposal,” said Mirko Bibic, Bell’s head of regulatory affairs. “Let’s move on, in my view, and use the CRTC hearing as an opportunity to approve those principles and get the implementation details right.”

"We don't like (Bell's proposal)."

Several Canadian officials were not impressed and one — Industry Minister Tony Clement — said exactly that.

Canada’s consumer groups and politicians have the giant telecom company on the run after using Bell CEO George Cope’s own words against him.  Cope openly admitted in conference calls with investors UBB had everything to do with monetizing broadband usage for profit.

Bell’s attempt to serve warmed-over Internet Overcharging from a new recipe isn’t flying among consumer groups either, who recognize it as more of the same leftovers, just under a new name.

Bill Sandiford, who heads a coalition of wholesale ISPs called the Canadian Network Operators Consortium, told the Globe & Mail Bell was simply presenting its usage-based pricing model in a more acceptable guise.

“We don’t think this is an about-face. It’s the same thing, just dressed up differently,” Mr. Sandiford said. “We don’t like it. It’s still wholesale UBB.”

Openmedia.ca, an online activist group, said Bell’s new proposal shows consumers are having an impact, but the fight is by no means over.

“We’re pleased that Canadians will now have the option to use indie ISPs like Teksavvy and Acanac to access the unlimited Internet,” said OpenMedia.ca’s Executive Director Steve Anderson. “This is a giant step forward for the Stop The Meter campaign, and a victory for those who support competition and choice in Canada’s Internet service market.”

“While this is a positive move, it is only a Band-Aid solution to a much larger problem. We at OpenMedia.ca hope the CRTC takes Bell’s submission as a sign that widespread usage-based billing is not an acceptable model for Internet pricing, and that it creates policy to support the affordable Internet.”

Prime Minister Stephen Harper

The Conservative government of Stephen Harper technically fell Friday after a no-confidence motion organized by opposition parties forced Canada’s leader to dissolve Parliament Sunday.  Harper announced new elections will be held May 2nd.

While broadband was certainly not a key issue in the take-down of the government, the forthcoming preoccupation with elections comes at the same time the Canadian Radio-television and Telecommunications Commission is revisiting its earlier decision about usage-based billing, dealing with conflicts over increased competition in the wireless market, and fielding controversy over the agency’s newest commissioner and vice-chair.

The government’s latest pick for the CRTC, the eminently unqualified (but well-connected) former politician/talk show host-turned regulator Tom Pentefountas, is scheduled to take his seat at the Commission this April.  The “Pentefountas Matter” threatens to become a political sideshow here in Ottawa as opposition parties feast on a host of missteps from the former president of Action Démocratique du Québec, a Quebec political party that some have called a Francophone ‘mini-me’ version of the Tories inside Quebec.

“Here is a man who comes to a broadband and telecommunications regulatory body with just one telecom qualification on his resume — he was a radio talk show host,” shares François Dumont, a Stop the Cap! reader in Montreal.  “UBB (usage based billing) to this man could be a brand of suntan lotion.  In America, it would be like naming Rush Limbaugh to the FCC.”

NDP MP Charlie Angus, one of Canada’s most vocal, pro-consumer critics of the Conservative Party’s ‘corporate agenda-meets-federal policies’ dismissed Pentefountas as an unqualified mess who lacks credentials for the post and won it only through his friendship with Conservative Senator Leo Housakos and Dimitri Soudas, Prime Minister Harper’s spokesman.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Charlie Angus Pentefountas Affair.flv[/flv]

Charlie Angus on the attack during Question Time in Parliament over the appointment of Tom Pentefountas.  (4 minutes)

Pentefountas made matters worse for himself this week when he declared he deserved to be vice-chair of the CRTC because he “earned it.”

Charlie Angus (NDP)

That reasoning has not impressed Angus, or some members of Canada’s Liberal party, who accuse the government of cronyism for appointing an unqualified candidate to the CRTC as the agency is mired in controversy and generates headlines in the media with every policy decision.  Angus isn’t even sure if Pentefountas even formally applied for the job.  When asked, Pentefountas would only say he “expressed an interest.”

Now, members of several opposition parties are calling on the Conservatives to fire Pentefountas before he gets the keys to his office.

Meanwhile, the CRTC continues to dig in its heels about the parameters of the review of its earlier decisions about usage-based billing.

With the applause of telecom business interests in Canada, the Commission has already fixed the future review around its own preconception of the “facts” about UBB:

The two guiding principles for the review are that “ordinary consumers served by small Internet service providers should not have to fund the bandwidth used by the heaviest retail Internet service consumers”; and that “it is in the best interest of consumers that Small ISPs, which offer competitive alternatives to the incumbent carriers, should continue to do so.”

The agency plans hearings for July, but few broadband observers expect the Commission will depart much from its original conclusion Canadians need to pay significantly higher broadband bills for the good of the providers delivering the service.  Industry Minister Tony Clement continues his efforts to soothe angry Canadian consumers with a promise to overturn the agency’s decision if it continues to give a thumbs-up to UBB.  But government critics say the mandate given to the CRTC is the real problem — so long as the Conservatives insist the CRTC take a deregulatory approach to telecommunications, the longer the green light on higher prices and less competition will continue to shine.

With most observers predicting the Conservatives are on track to win the spring elections, it is unlikely any major changes in telecom policy are forthcoming.  Technology columnist Michael Geist suggests voters across Canada can upset conventional wisdom by making telecom issues a major focus of the forthcoming campaign, urging candidates to “vote for the Internet,” supporting consumer-friendly positions like a rejection of UBB and embracing forward-looking broadband policies.

Paul-Andre Dechêne is Stop the Cap!’s correspondent based in Ottawa, Ontario.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Charlie Angus on UBB.flv[/flv]

Charlie Angus in another exchange in Parliament with Industry Minister Tony Clement over the issue of usage-based billing.  (2 minutes)

Cope

In another example of providers telling the public (and lawmakers) one thing, while saying something very different to their own shareholders, Bell Canada’s CEO made a remarkable admission about why the company imposes Internet Overcharging schemes on its customers:

“As we see a growth in video usage on the Internet, making sure we’re monetizing that for our shareholders through the bandwidth usage charges,” CEO George Cope told listeners in a financial conference call last autumn.

That is a far cry from the story Mirko Bibic, Bell’s government affairs representative tells to anyone who will listen. Michael Geist, a Canadian syndicated columnist on technology law issues notes Bibic has told a different tale while appearing before Parliament’s Standing Committee on Industry to answer questions on usage based billing held in February.

For Bibic, usage-based billing is about “fairness” and solving alleged congestion issues.

“As for small businesses, which are generally on the same network as residential users, what you have is really a case where the congestion during peak periods is largely a residential phenomenon. It’s in that area that we’ve addressed the usage-based billing issue, and all we’re asking the CRTC for is to follow a fundamental principle of fairness,” Bibic told MPs. “If we asked 97% or 98% of Canadians if they would be prepared to pay more so that the 2% of heaviest users pay less, I’m pretty sure of what the answer would be.”

Bibic

Bibic’s argument has been repeatedly undercut by his own bosses, Geist notes.

In August, Cope told shareholders “our data revenue growth was 3.8% for our Residential Services business, particularly driven through an increase in Internet ARPU of 3.3%. And interesting, almost all that increase now coming from usage based billing as the demand for Internet use explodes through the use of video services, and we’re continuing to see an increase in the revenue per customer.”

By November, Cope was turning Bibic’s bandwidth “fairness and congestion” lemons into lemonade, celebrating data revenue growth of 5 percent, “driven principally by the bandwidth usage revenue being up 83% year-over-year.”

Cope not only decapitates his company’s arguments for usage-based billing, he also shines the light on who they will impact: if providers are to be believed that usage caps will only affect a tiny percentage of customers, how can data revenue be up a whopping 83 percent year-over-year. Are a handful of Canada’s “heavy” broadband users responsible for this growth, or are an increasing number of Canadian consumers finding themselves over the “generous” limits Bell has established because they used their broadband connections to stream movies and television shows.

As Geist notes, “no one should be under the illusion that UBB is anything other than a revenue maximization strategy in a market with limited competition, not one premised on fairness or network congestion.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/UBB is Nonsense.flv[/flv]

François Caron produced this video succinctly smashing the myth that “usage-based billing” and “usage caps” are about fairness or fight congestion.  In this case, Caron refers to Canadian providers, but the story is much the same south of the border.  These Internet Overcharging schemes are nothing more than an effort to control what you can do with your broadband connection.  AT&T wants a 150-250GB usage cap on broadband, but has limitless capacity for television and telephone service.  They also have $39 billion to buy T-Mobile, but need to overcharge you for broadband service.  Bell in Canada wants -every- broadband user in Canada to pay this ripoff pricing.  Share with anyone who thinks paying for usage is anything like paying for water, gas, or electricity.  It’s not!  (6 minutes)