The Canadian Radio-television and Telecommunications Commission late Tuesday ruled against a revised proposal from Bell that could have effectively ended flat rate Internet service across the country, but also allows the phone company to raise wholesale prices for independent Internet Service Providers (ISPs).

The Commission ruled Bell and cable companies like Rogers must sell access to third party providers at a flat rate or priced on speed and the number of users sharing the connection.  The CRTC rejected a Bell-proposed usage-based pricing scheme that would have charged independent ISPs $0.178/GB.

Ultimately, the CRTC came down closest to adopting a proposal from Manitoba-based MTS Allstream, which suggested a variant on speed-based pricing, steering clear of charging based on usage.  Under the CRTC ruling, independent ISPs can purchase unlimited wholesale access based on different speed tiers.  The new pricing formula requires independent providers to carefully gauge their usage when choosing an appropriate amount of bandwidth.  If an independent ISP misjudges how much usage their collective customer base consumes during the month, they could overpay for unused capacity or underestimate usage, leaving customers with congested-related slowdowns.  ISPs will be able to purchase regular capacity upgrades in 100Mbps increments to keep up with demand.  They can also implement network management techniques which may discourage heavy use during peak usage.

The CRTC decision underscores that Internet pricing should be based on speed, not on the volume of data consumed by customers.  That’s a model Stop the Cap! strongly approves because it does not allow providers to monetize broadband usage.

Finkenstein

But that is where the good news ends.  Nothing in the CRTC ruling changes the Internet Overcharging regime already in place at the country’s leading service providers.  Companies like Bell and Rogers are free to continue setting arbitrary limits on usage and charging overlimit fees for those who exceed them.

Konrad von Finckenstein, chair of the CRTC, says the regulator made a mistake in deciding last year to allow Bell to raise its prices for independent service providers.

“Our original decision was clearly not the best one. It was wrong and it was pointed out by a lot of people, including Minister Clement. He was right. We have today fixed it, we have made this new decision,” von Finckenstein said. “The bottom line is that you as a consumer will not face a cap or limitation of use because of anything mandated by the CRTC. Any kind of cap or limit, payment per use, that you will have to pay is because your ISP decides to charge you, not because we mandate it.”

But many independent providers are unhappy with the CRTC ruling because it also allows wholesale providers like Bell to raise prices, sometimes substantially, on the bandwidth they sell.

One independent ISP — TekSavvy, said it faced increased connectivity costs in eastern Canada.

“The CRTC decision is a step back for consumers. The rates approved by the Commission today will make it much harder for independent ISPs to compete”, said TekSavvy CEO Marc Gaudrault. “This is an unfortunate development for telecommunications competition in Canada,” he added.

“Rates are going up,” added Bill Sandiford, president of Telnet Communications and of the Canadian Network Operators Consortium, an independent ISP association.

In addition to whatever rate increases eventually make their way to consumers, some independent providers may end up adopting network management and usage cap policies that attempt to slow down the rate at which they are forced to commit to bandwidth upgrades.  That’s because providers purchase capacity based on what they believe their peak usage rate is likely to be.  Providers will be free to upgrade service in 100Mbps increments.  But with the new, higher prices, providers could overspend on capacity that goes unused or find themselves underestimating usage, creating congestion-related slowdowns for all of their customers.

Angus

Some network management techniques that could reduce peak usage — and the need for upgrades — include speed throttles for heavy users during peak usage times or usage caps that fall away during off-peak hours when network traffic is lower.

Yesterday’s decision will provide some small relief to wholesale buyers of bandwidth in Quebec, where’s Videotron’s sky-high wholesale prices are set to be reduced.  But the unusual divide in Internet pricing between eastern and western Canada will remain.  Western Canadians will continue to enjoy much larger usage allowances, and lower wholesale pricing, than their eastern neighbors in Ontario and Quebec.

The CRTC’s ruling did not go far enough for NDP Digital Issues critic Charlie Angus. Angus notes only 6 percent of Canadians purchase Internet service from independent providers.  The rest will still be stuck with what he calls “unfair billing practices and bandwidth caps.”

Angus is convinced the CRTC just gave the green light to force rate hikes for the minority of consumers who found a way around companies like Bell, Shaw, Videotron, and Rogers.

“Allowing big telecom companies to reach into the pockets of struggling families and ask for even more money is just plain wrong,” Angus said.

Bell’s senior vice-president for regulatory and government affairs, Mirko Bibic, still believes the company’s proposal to charge just under 20c per gigabyte to wholesale users was appropriate, but the CRTC’s permission to allow Bell to increase wholesale rates was a nice consolation prize.  Bibic tried to frame the decision as forcing ‘independent ISPs to pay their fair share.’

Independent ISPs “are going to have to lease more traffic lanes,” he told CTV News. “I think the philosophy is [to] put the independent ISP in a position of responsibility. If usage goes up, you’re going to have to buy more lanes – it’s the same decision that we have to make.”

Konrad Von Finckenstein

Konrad von Finckenstein, the head of Canada’s telecommunications regulator who initially rubber-stamped a Bell proposal to force Internet providers in Canada to charge usage-based pricing will not be back for a second term.

Von Finckenstein broke the news himself in a memo sent to staff at the Canadian Radio-television and Telecommunications Commission, stating he would end his leadership of the CRTC when his five-year term concludes in January.

The CRTC has made uncomfortable headlines for Canada’s Conservative government, primarily by approving an Internet pricing plan submitted by Bell that would require virtually every Internet provider in Canada to end unlimited, flat rate pricing for broadband service.

The CRTC is hardly a hotbed of headline news for most Canadians.  The sleepy agency regulates telephone, broadband, television, and radio in the country with an increasingly light touch.  Ten years ago, the CRTC was regularly accused by some broadcasters of meddling in their private business.  These days the Commission, packed with members who formerly worked for the companies they now oversee, has gotten considerably more friendly with those they regulate.

That policy blew up in their faces when Bell got most of what it wanted in a wholesale pricing change that was so wide-reaching, it would potentially impact every Canadian Internet user.  Nearly a half-million of them registered their displeasure in a petition sponsored by Openmedia.ca.

Von Finckenstein’s resolute attitude towards the correctness of that decision was soon tempered when Industry Minister Tony Clement found himself overruling the CRTC in a Twitter message, telling Canadians the decision to impose usage-based billing “would not be allowed to stand.”

Opposition members in Parliament had a field day over Clement’s repeated distancing of the government from CRTC policies, particularly the one involving Internet pricing.

Liberal MP Marc Garneau seized on the fact Clement tweeted his intentions to the public at large before sharing them with von Finckenstein himself.  That, Garneau claimed, was the latest example of the government’s lack of clear policy on issues such as usage-based billing that has left the CRTC in what he called a “giant policy vacuum.”

The announcement by the CRTC chairman comes at the same time the Commission is finalizing a re-evaluation of its earlier decision on usage-based billing.

While hundreds of thousands of Canadians upset with the CRTC may be glad to see the back of von Finckenstein, his colleagues were considerably more generous with their praise:

Former CRTC executive Richard French credits Von Finckenstein, saying he sped up the commission’s decisions, improved the atmosphere around the offices and rarely left anyone guessing what he thought, “which I think is a virtue in a regulator.”

“He balanced the desire for more market forces with a recognition that for most of the industries in question, the Canadian market is sub-economic, it’s just not big enough to sustain enough players in this capital intensive business to create real competition so regulation is required,” French said Monday.

“He’s done an excellent job and he deserves the respect and appreciation of the industry and of the population,” French said.

Heritage Minister James Moore’s office issued a statement thanking von Finckenstein for his service as CRTC chair and said a process to select a new chair would be announced in the coming weeks.

Better days: AT&T's BlackBerry Curve, circa 2007

The prevalence of unlimited wireless data plans may have been an important factor in the American consumer’s move away from Research in Motion’s (RIM) former superstar BlackBerry, according to a company official.

Responding to questions about its falling market share in the U.S., Patrick Spence, the managing director of regional marketing at RIM pointed to unlimited usage plans as one potential way the competition got a leg up on their devices.

“In the United States, they’ve had flat rate data pricing for a long time, which has meant users haven’t had to worry about how they are using their smartphones,” Spence said.

He noted Americans love for wireless data has forced carriers to launch 4G upgrades in advance of other markets where 3G remains the fastest available standard.

The Guardian’s Charles Arthur gave RIM’s Patrick Spence a challenging series of questions about RIM’s ongoing loss of market share, and why the company is forcing BlackBerry owners to cope through two major platform upgrades in the coming months. (11 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Spence said the dynamics of unlimited data have inspired a change in the types of devices used in the United States, namely not necessarily those carrying the BlackBerry brand.

As carriers end unlimited data, Spence predicts users will likely change their behavior in concert with new data plan limits as low as 200MB per month.

Where data limits prevail, BlackBerry devices seem to do better.  Spence touted the fact BlackBerry phones have now achieved number one status in Africa and countries in the Middle East like Saudi Arabia, displacing troubled Nokia.

Spence warned tech reporters not to extrapolate American marketplace trends as foreshadowing developments in the rest of the world.  One reason for that, according to Spence, has been the unlimited data plan, now being replaced with usage based billing or usage-capped plans.

BlackBerry phones have had a difficult time competing with the iconic Apple iPhone, as well as Android-based smartphones on offer from virtually every wireless carrier.  BlackBerry devices, once deemed the most advanced phones in the market, have lost quite a bit of luster in the last four years, particularly after the arrival of iPhone.

As a result, RIM has been engaged in serious cost-cutting, announcing job cuts of some 2,000 employees recently.  The company hopes to spring back with a series of platform upgrades and new phones, dubbed “superphones” by RIM, to regain market share.

It cannot come soon enough, as RIM lost another four percent of market share in just the past four months.  comScore suggests RIM phones now have just 21.7 percent of the smartphone market.  Only Microsoft and Nokia are doing worse.  Most of the BlackBerry fan base are moving to Android-based smartphones instead as their contracts come up for renewal, particularly those made by Samsung.  The Korean manufacturer now manufactures one of every four smartphones Americans own.

As of July 2011, RIM has 7.6 percent of the market share in the United States.

BlackBerry phones have fewer challenges overseas, and the devices remain very popular among younger users in the United Kingdom, parts of western Europe, Africa, and the Middle East.  That has been a mixed blessing for RIM in England, where the phone has been  implicated as the device of choice for looters during riots earlier this month.

New Zealand is one of a handful of countries stuck with pervasive Internet Overcharging schemes that limit usage or throttle broadband speeds because of international connectivity limitations.  But as international underseas fiber cables ease traffic congestion, Internet Service Providers are increasingly relaxing usage caps and reducing the level of speed throttling during prime time usage hours.

Now one ISP, Slingshot, has gone all-out, reintroducing an unlimited, flat rate broadband option for New Zealanders who don’t want to worry about how much usage they’ve racked up over the past month.

For roughly $32.50US for the first six months, $65 after that, customers don’t have to watch a usage meter or “gas gauge” or face a wholesale heavy speed throttle when deemed to be using “too much” Internet service.

Phillip "No Data Tsunami Over Here" Dampier

As the Canadian Radio-television and Telecommunications Commission enters into the second week of hearings on Internet Overcharging, there have really only been a few minor surprises.

First, and most importantly, when voting consumers pay attention, regulators start asking questions and get aggressive.  This is the same commission that only a year ago gave the green light to wholesale usage-based billing (UBB) — a practice that would guarantee every ISP in Canada dropped flat rate Internet service.  After a half-million Canadians signed Openmedia.ca’s petition opposing UBB, the Harper government (and the opposition parties) got interested, and the Commission got an earful from Industry Minister Tony Clement, who was simply appalled at this kind of Internet pricing.

Second, this round of CRTC hearings has found Bell — UBB’s biggest proponent — largely unrepentant.  It still supports charging people for their usage, even as the company’s foundation for that premise — bandwidth congestion — erodes away.  Providers can claim anything they like, but they cannot invent facts.  By Friday, most of the commissioners realized what consumer advocates had been saying all along — there is no great bandwidth crisis in Canada.  No data tsunami. No exaflood in the zettabyte era.  Growth is exponential to be sure, and Canadians have a passionate affair with their Internet connectivity, but one that remains easily managed when providers make regular, affordable investments in upgrading their networks.

Bell’s week-long contention that congestion pricing was paramount to managing Canada’s bandwidth finally fell apart when CRTC Chair Konrad von Finckenstein noted Bell’s trinity of regional entities managed Internet usage completely differently, even though the traffic passed through the exact same network:

• 1) Bell Aliant, which provides service in the Atlantic provinces, has no usage caps at all.
• 2) Bell Quebec provides service with a considerably more generous usage allowance than given to those customers in Ontario, even those just on the other side of the border.
• 3) Bell Ontario’s usage cap is downright stingy compared with Quebec, most likely because it competes in Ontario with an equally stingy provider — Rogers Cable.

With these facts in evidence, Bell was finally forced to concede it was “competition” not “congestion” that brought three different treatments of Internet usage.  So much for “network congestion.”

Bell’s competitors also hung the telecom giant out to dry when it was their turn to testify.  Each in turn would claim that congestion presented no problems for their respective networks.  Telus, Rogers and Shaw all denied they shared Bell’s usage problems.  That is not to say any of them were in favor of restoring flat-rate Internet access.

Instead, they argued, UBB represented a combination of “stimulating investment” in broadband networks (already insanely profitable for all-comers) and “peak usage pricing,” a hybridized argument about congestion during peak usage periods.  Since some wholesale broadband services are priced at peak capacity requirements, some argue UBB helps keep that peak usage manageable during prime time.

Unfortunately, the peak usage pricing argument undermines itself because Canadian providers enforce usage limits 24/7, not only during peak usage periods.  This means there is no incentive for users to offload their heaviest usage to times when the network experiences low demand.  Independent providers continue to argue “peak usage pricing” may be defensible in certain circumstances, but it’s not even a possibility under Bell’s proposed wholesale UBB scheme.

The record being constructed from Canada’s hearings have direct implications for Americans, as the basic business models for cable and phone providers are similar in both countries.  The death rattle of the “congestion” myth is good news for North American broadband users who have long rolled their eyes at hysterical arguments about data floods and capacity crises.

The CRTC still needs to hear from some additional speakers, and we are under no illusion they will completely reverse themselves on Internet Overcharging schemes, but this represents a clear-cut case that consumers need not simply sit back and take abusive pricing.  Consumer activism can make a real difference in the broadband policies of both the United States and Canada.  It takes a concerted effort, but once a critical mass of consumers is achieved, the ability for providers to simply do as they please becomes a virtual impossibility.

That’s good news for all of us.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/CBC UBB 7-11-11.flv[/flv]

CBC News covers the start of the CRTC hearings and what UBB pricing is doing to Canada’s Internet experience.  (2 minutes)