Friday, 11 March 2011

Anger over usage-based bills and small ISP caps in Canada

A ruling by the Canadian Radio Telecommunications Commission (CRTC), the country’s telecoms and internet regulator, has outraged many Canadians and turned usage-based internet billing (UBB) - bills based on internet usage per month - into a national issue.

The CRTC decided on 25 January that internet service providers (ISPs) could continue charging customers for exceeding their monthly broadband allowance. However, following the negative response from the public, the independent regulator released a statement on 3 February stating that the ‘decisions were set to take effect on 1 March, but in light of the evident concerns expressed by Canadians, [the CRTC] has decided to delay the implementation by 60 days’ and ‘launch a review’. Industry Minister Tony Clement said it will “not [be] acceptable for the government” if the decision remains unchanged. Clement said earlier that UBB would ultimately lead to “more competition and lower prices”. Most bills, however, have risen sharply since September 2010, when the CRTC allowed large ISP Bell to start billing its customers for exceeding their monthly broadband allowance.

The ruling has reignited the  debate about UBB in Canada. The Vancouver Sun wrote that ‘[UBB] will artificially inflate the costs of online access’, while Michael Hinka, commentator for CBC, said UBB would be “fairer for light users. Pay for what you use.”

“Customers who don’t use much may prefer a pay-per-use model. However, that does not appear to be the view of the majority”, said Chris Bennett, Partner at Davis LLP. “The public backlash against the decision has been significant. As a result, there appears to be strong political support for reconsidering the decision.”

Another issue is the position of smaller ISPs. Although the CRTC ruled that Bell has to offer its wholesale customers - smaller ISPs who ‘rent’ space on Bell’s network - a 15% discount when exceeding their limits, it can impose a cap on these limits, limiting smaller ISPs’ use of networks. “[The ruling] will make it difficult for smaller ISPs to differentiate their services and stifle competition”, said Bennett. “That is an issue because there is already very little competition in Canada.”

“The industry in Canada is essentially an oligopoly”, explains Bernice Karn, Partner at Cassels Brock, while Martin Kratz, Partner at Bennett Jones, wonders “whether a discount is sufficient to permit wholesale operators to survive and differentiate themselves.”

Published previously in E-Commerce L&P, February 2011. Copyrights apply.