The Canadian Radio-television Telecommunications Commission is investigating Canadian ISP practices all week in a series of public hearings.

The Canadian Radio-television and Telecommunications Commission (CRTC) opened the first day of hearings on the practice of usage-based billing for Internet usage, advocated by the country’s largest wholesale provider of Internet bandwidth, Bell Canada.

These hearings are a follow-up to earlier ones that ultimately allowed Bell to mandate usage billing not only for its own customers, but for all independent ISPs that purchase bandwidth from the company.  Since the vast majority of independent providers purchase bandwidth from Bell, the CRTC ruling would have mandated the end of “unlimited use” Internet plans across the country.

Nearly a half-million Canadians disagreed with the CRTC ruling and created a political firestorm earlier this year, demanding that the government step in and overturn the CRTC ruling.  Bell temporarily withdrew the usage based billing mandate pending the outcome of hearings expected to run from today until early next week.

Appearing at today’s hearing, executives from Bell continued to defend usage-based pricing and plan pricing that forces consumers to guess at how much Internet usage they will need each month.

In more aggressive questioning than earlier hearings, CRTC chairman Konrad von Finckenstein questioned Internet pricing plans that do not “rollover” or rebate consumers for unused usage, but still penalizes customers for going over their plan limits.

von Finckenstein also questioned Bell’s pricing for independent ISPs, particularly penalty rates ISPs who underestimate their wholesale usage needs would face under Bell’s advocated pricing model.  The chairman seemed suspicious of the fact Bell does not charge its own ISP unit penalty rates, only independent providers.

The hearing will also explore why companies like Bell can deliver “unlimited viewing” on their Fibe TV IPTV service, but cannot deliver unlimited Internet access to end users.

Interested in following the hearings live? Visit the CRTC live stream hearing page.

[Updated 10:20am ET: Bell Canada executives just admitted in this morning’s hearings its Internet Overcharging scheme involving usage pricing many times higher than the actual cost of provisioning the service was driven by “competition” and not by “congestion” issues.  In other words, Canadian consumers are paying very high Internet pricing and overlimit fees because of the pervasive lack of competition, not because companies need the extra money to “upgrade their networks.”]

Toronto

Except for South Korea, nobody uses the Internet more than Canadians.  That’s an important finding in a new report produced for Canada’s telecommunications regulator to better understand the current state of the broadband market in the country.

According to recent reports from the Organization for Economic Cooperation and Development, the country generates 2,288 terabytes of data traffic per month per 100,000 residents.  That’s among the highest in the world and comes from avid web browsing, watching online video, and a love affair with smartphones.

But like many relationships, this one is also expensive.  You pay all of the money you have to spare, and your provider delivers you just enough of a usage fix to keep you from running to Ottawa to demand change.

Canadian broadband pricing is in the top third of all OECD-measured nations, with the average price for High Speed Internet running $55.18.  The average median price across all OECD members runs a lot less — $39.23 per month.  If you want to pay less, you have to bundle your landline, cell phone, television, and Internet service with the same provider, or make due with a slow speed “lite user” plan, where average pricing had been running lower until this year.

The average monthly price of the Level 1 basket increased to roughly $35 in 2011, up considerably from $31 the previous year.

Similarly, average monthly price of the Level 2 basket increased this year as well to roughly $50, up from $48 last year.  The average advertized download speed of the services included in the Level 2 basket is close to 6.5 Mbps, which is similar to the average speed in last year’s study.

The average monthly price of the Level 3 basket also increased slightly to $63, but still remains well below the 2008 price of $69 per month.  The average advertized download speed of the services included in the Level 3 basket is roughly 14 Mbps, which is slightly higher than in last year’s study (where the average speed was 12.5 Mbps).

Lastly, the average price of the new Level 4 broadband service basket is roughly $78 per month.  The advertized download speeds for the Level 4 broadband services included in the study range from 25 to 50 Mbps – the average is close to 30 Mbps.

Roughly half of the Canadian broadband service plans surveyed for this study included monthly usage caps.  For those that do, they range from 1 to 13 GB on the Level 1 service basket – the average is 7 GB per month.  The range for the Level 2 service basket is from 25 to 75 GB – the average is 55 GB per month.  The range for the Level 3 service basket is from 75 to 125 GB – the average is just over 90 GB per month.  There has been little change in these monthly usage caps, on average, compared to last year.

In the case of the new Level 4 broadband service basket, for those service providers applying data usage caps, the caps range from 75 to 250 GB per month – the average was close to 140 GB per month.

The Canadian pricing and usage study was developed by Wall Communications for the Canadian Radio-television and Telecommunications Commission.  The best news for Canada?  Your broadband pricing remains relatively stable, with some package pricing reducing the cost of the broadband component.  Standalone service appears to have increased in price only slightly in many markets.  Increased foreign investment in the wireless marketplace is shaking up wireless pricing, as the hegemony of Bell, Telus, Rogers, and Quebecor are under increasing competitive pressure.  It’s a much sunnier outlook than what is taking place in the country to your south.

For Americans, pricing is headed in only one direction: up.

All charts courtesy of Wall Communications, Inc.

Unless Canada deregulates the media industry further, a “technological storm” by “audiovisual Wal-Marts” will harm or destroy Canada’s media companies.  No doubt looking directly at Netflix, those were the views of Quebecor CEO Pierre Karl Peladeau at the outset of hearings held this week by the Canadian Radio-television and Telecommunications Commission on media ownership and vertical integration issues.

Canada’s media landscape is rapidly consolidating at a rate that will allow even ordinary Canadians with a passing interest in the issue to recognize the handful of remaining media moguls and identify them by name.  Phone companies that own major Canadian television networks, cable operators that own cell phone companies, and mergers among the dwindling pack have left consumers soaking in Shaw, Rogers, Bell, and Quebecor — whether they flip on their televisions, make a cell phone call, read a newspaper, or download something from the Internet.  Talk about vertical integration!  Now the supersized are back for more deregulation so they can trade programming rights between themselves, fend off the devil — Netflix, and of course continue to buy each other out.

There is one exception, of course.  Allowing party crashers.  While all of the incumbent players want the rules loosened up on their respective media and telecommunications operations, they are hellbent on keeping foreign competition out of Canada — the only real deep pockets sufficient to break up a convenient cartel of phone and cable companies.  Rogers and Shaw stay on their respective sides of a line dividing eastern Canada’s turf for Rogers and western Canada’s territory for Shaw.  Bell and Telus do much the same.  Quebecor provides cable for Quebec, and a handful of much smaller players fight for any remaining crumbs.

For Americans, it would be the equivalent of turning over your telephone, broadband, cable, television, newspapers, magazines, and radio stations to Rupert Murdoch or ex-media baron Ted Turner.

For Canadians, these hearings come just a tad too late.  Shaw Communications is absorbing their latest buyout — Canwest Media’s TV assets, which are hardly meager.  Shaw will run more than two dozen local broadcast TV outlets, 30 cable and satellite networks, and Global — a major broadcast network.  Bell is still popping Rolaids over its digestion of the enormous CTV and smaller upstart A-Channel network.  When it’s finished, “A” will become “CTV Two.”

The Globe and Mail notes between them, Bell, Shaw, Rogers and Quebecor control:

• 86 per cent of cable and satellite distribution;
• 70 per cent of wireless revenues;
• 63 per cent of the wired telephone market;
• 49 per cent of Internet Service Provider revenues;
• 42 per cent of radio;
• 40 per cent of the television universe;
• 19 per cent of the newspaper and magazine markets;
• 60 per cent of total revenues from all of the above media sectors combined.

As far as growth goes, as Alan Keyes used to proclaim, “that’s geometric!”

But it’s still not enough now that Netflix has arrived in Canada.  Despite the fact the operation has been challenged by punitive usage caps restricting viewing (or lowering its video quality), Netflix and new technology companies like it are the 21st century boogeymen for these multi-billion dollar media corporations.  The only way to defend against it?  Deregulate to allow them to trade viewing rights, grow larger, and charge whatever they like.  Somehow that seems to miss the point: Netflix is popular because it costs less, allows people to stream the shows they actually want to watch at a time of their choosing, and let’s families drop some overpriced premium channels and video rental fees along the way.

Bell’s dollar-a-holler researcher expanded on why large media conglomerates miss the point, even if he did so unintentionally.

According to University of Alberta economics professor, Jeffrey Church, “vertical integration is beneficial for consumers.” Sit down as you read why:

• it reflects efficiencies, spurs competitive innovation and is a global trend;
• telecom, media and Internet markets in Canada are “highly competitive;”
• our ‘small media economy’ needs a few deep-pocketed national champions to compete globally and invest heavily in innovation at home;
• instances of harm are mostly imaginary and few and far between;
• it helps keep “consumers . . . within the regulated system” (Shaw’s submission, p. 4).

Like cattle.

Prime Minister Stephen Harper

Canada went to the polls last week and managed to deliver a predictable majority for incumbent Prime Minister Stephen Harper and his Conservative Party.  Even Americans ignorant of Canadian politics knew as much, but more than a few with an interest in the country’s telecommunications future were stunned to watch some long-standing parties get handed their hats and ushered out the door into the political wilderness (for at least a few years anyway).

The former mighty Liberal Party — the one that always saw themselves as Canada’s Natural Governing Party, succumbed to an embarrassing election failure.  Leader Michael Ignatieff not only oversaw the loss of more than 40 Liberal seats in the House of Commons, he couldn’t even manage to hold his own, losing his Toronto-area seat in Etobicoke-Lakeshore.  The centrist party won just short of 19 percent of the popular vote.  That’s a long fall for the party of former Prime Minister Jean Chrétien, who won three successive majority governments in 1993, 1997 and 2000.  Much of the party’s strong support in Ontario collapsed, with seats swiped by Conservative and NDP candidates.  The centrist era is evidently over for now.

The Liberals take on telecommunications issues seemed mostly to rely on bashing whatever the Conservatives were doing.  Much of their criticism seemed to delight in Tory missteps and disorganization, particularly over what the party felt was incoherent policy direction for telecom issues.  Unfortunately, presenting a credible digital strategy alternative was not a high priority for the Liberals, and voters fretting about Internet Overcharging saw as much.  The Liberals have also taken flak for being too “establishment” and business friendly in recent years.  As a result, many former Liberal voters took their votes elsewhere.  At least Liberal Industry critic Marc Garneau survived.  He was successful at crystallizing the usage based billing (UBB) issue (and the CRTC’s failure by adopting it) in a way that consumers could easily understand.

The biggest catastrophe befell the Bloc Québécois, the separatist-motivated party in Quebec.  Outside of wins on the Gaspé Peninsula riding that covers the rural regional county municipalities of La Haute-Gaspésie, La Matapédia, Matane and La Mitis, and a few victories around Trois-Rivières, the Bloc was effectively obliterated — left with just four seats.  They had 47. That means the BQ is now too small to even count as an official party in Canada.  Observers say it was Quebec’s version of “throw the bums out,” with a very strong voter sentiment against “the establishment,” which in Quebec means the BQ.  Which Canadian party is the least establishment?  The NDP — and votes flowed in that direction.

On telecom issues, BQ members didn’t seem to appreciate Bell and Videotron’s usage-based-billing policies any more than the rest of Canada, and Bell in particular endured harsh questioning from BQ members at earlier hearings.

But the big news from the election was the sweeping realignment of Opposition to the Tories into the hands of the NDP – Canada’s social-democratic, left-wing New Democratic Party.  The NDP has championed opposition to UBB like no other party in Canada. Digital affairs critic Charlie Angus, who is a brash firebrand against corporate telecom abuse and their lackeys on the CRTC, will get an even larger platform to blast away at anti-consumer policies on offer from the telecom regulator.  Both Angus and the NDP champion Net Neutrality as well.  Two MPs from Toronto, Peggy Nash and Andrew Cash, will also bring strength to the NDP’s policy platform on copyright issues.

The NDP won most of the seats lost by the BQ in Quebec, and also won strongholds in western Ontario, northern British Columbia, Manitoba, and the Western Arctic.  In fact, NDP wins in Quebec were so frenzied, Leader Jack Layton found himself presiding over a dramatically younger caucus, including three McGill University students and a bartender in the heavily francophone riding of Berthier-Maskinonge.  That presents a problem for newly elected Ruth Ellen Brosseau, who so disbelieved she was a serious candidate, she spent the last week of the campaign running around Las Vegas.  She also doesn’t speak French.  A local station that finally reached her in Las Vegas to discuss her win had to abandon the interview when she was unable to offer coherent answers to questions in Quebec’s majority language.  Rosetta Stone is in her near future.  So is a trip to her district — Brosseau told the Trois-Rivières newspaper Le Nouvelliste she has never stepped foot in the riding before.  But she offered the people there seemed nice.

While the NDP doesn’t have a majority, they are sure to call out any Conservative telecommunications policies that appear to be anti-consumer, and turn them into media events — good news for a country whose television media often ignores telecommunications stories.  A five minute interview with Charlie Angus will surely deliver plenty of amusing soundbites for the evening news.

With the strengthened majority of the Conservative Party, it’s a safe bet Canadian telecommunications policies will no longer be stuck in neutral.  There are open questions if Tony Clement, Industry Minister will retain his portfolio or make a move elsewhere in government.  Clement has steadfastly insisted UBB is unacceptable to him and the government.  The upcoming review by the CRTC of their earlier decision is likely to give the government some time to sort things out.  The Conservatives ignored Openmedia.ca’s request for a formal position against UBB, something that does give us pause.

It will remain important for Canadian consumers to keep the pressure on the Tories to act when regulatory bodies like the CRTC fail.  The natural view of the Conservatives in to let the marketplace sort things out, but even they recognize that is an impossibility in a duopoly.  When 500,000 Canadians sign a petition against UBB, standing with big cable and phone companies would be political suicide.

What Conservatives are likely to promote is increased competition.  So far, that has not meant much, especially as consolidation continues in the broadcasting and telecommunications sector.  The Tories best answer for now is throwing doors open to foreign investment in telecommunications, especially in wireless.  That will mean relaxing foreign ownership rules which could help new cell phone entrants — Wind Mobile, Mobilicity and Public Mobile expand their competitive reach.  If the Tories adopt the new rules, even AT&T could move north of the border — but that will bring no relief to Canadians seeking an escape from Internet Overcharging schemes.  Other issues likely to come up — copyright reform legislation, royalty taxes imposed on digital devices, and piracy.

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.”