A way out for UBB

As I mentioned yesterday afternoon, it is unlikely that we will see the elimination of usage sensitive pricing for the aggregated wholesale services that many internet services providers use to reach their customers. Usage is an efficient and fair cost allocation system for shared resources, as suggested in the National Post.

However, the currently mandated approach of applying charges on a per-user basis may need to give way to some form of aggregation in order to provide ISPs with sufficient flexibility to offer consumer increased choice among price plans.

A number of times, I have referred to the all-you-can-eat buffet metaphor. The local restaurant tolerates the football team because there are enough other customers that don’t eat quite as much. The challenge is that the current user-based pricing mechanism charges excess fees to the heavy eaters, even if there are lighter users who don’t consume their maximum.

So under the current regime, we could have a situation where an ISP has two customers, one who uses 30 GB in a month and another who uses 5 GB. Under the current plan, the ISP will pay excess usage for the customer who exceeded the 25 GB threshold. Another ISP may have two customers who each use 20 GB, putting a total load of 40 GB on the wholesale access network, but there are no excess usage charges. If UBB is supposed to help manage traffic loads, it is difficult to reconcile this anomaly.

This is where we could see a directive from the government that allows a resolution to the problem, but continues to preserve the economic efficiency of usage based cost allocation. My long time colleague, lawyer and friend, Ed Antecol, who heads up regulatory affairs at Globalive, believes the key to resolving this could be found in the third paragraph of the dissent to Decision 2010-255 by Commissioner Molnar.

I would note that I am not convinced that the Bell companies’ proposal to apply UBB charges based upon end-customer usage is the most effective Internet traffic management practice (ITMP) approach. Nor am I persuaded at this time that an aggregated usage model, if properly structured, would nullify the potential effectiveness of UBB as a means of managing network usage. Certainly, an aggregated usage model would have provided ISPs that subscribe to the Bell companies’ GAS (GAS ISPs) with greater flexibility to manage end-user pricing/service solutions.

Usage based billing across an ISP’s entire base of customers makes sense. The non-facilities based ISPs will be able to offer flexible service plans, including unlimited service, by balancing their customer base with innovative pricing models and services.

Along these lines, an aggregated model will help drive the alternate ISPs to possibly develop innovative solutions to attract people who are not yet internet users, because such users may start with lighter loads to help balance the overall traffic levels. This will contribute to increasing broadband adoption rates, and dovetails nicely with my drive to increase digital connectivity among lower income earners.

An aggregated usage regime enables the smaller ISPs to continue to be a source of competition, driving the entire industry to provide creative products and improved service, while preserving the incentives for continued capital investments by all industry participants. 

It is a solution worth careful examination by the Industry Minister.

16 thoughts on “A way out for UBB”

  1. So a slight restructure of the existing tarrif in place would be the most logical to you as the decision ?

    To my understanding wouldn’t an ISP already have to buy specific transport capacity to serve their customers already from the last mile of Bell’s to their Internet connection point(s)?

  2. No network reconfiguration is required. ISPs provision a speed component. This is a volume pricing component. Think of your plumbing – having half-inch versus 3/4 inch or 1 inch pipes determine the speed that water flows. Volume charges apply based on how you use the flow.

  3. Again, a critical flaw in your reasoning: Measuring network strain by GB transmitted by billing cycle.

    It doesn’t hold up. I can transmit 60GB over a month and barely strain the network. But if I attempt to transmit 60GB over 5 horus, they have to ramp up the bandwidth (defined correctly) to accomplish that. You can use google to calculate the details rather quickly if you understand the units behind it all.

    The only metric you can use to regulate “how much internet” someone uses is their amount of data transmitted per second, or the rate of flow. This would be accomplished by selling much lower bandwidth (still correctly defined) connections to light users (for a fraction of the price) and the higher bandwidth (did you look that up?) connections to heavier users.

    The system would sort itself out organically when the heavier users go “Hm, my internet is choking up, time to pay more.” until the problem is resolved. We’d probably see some people with 1mbit connections at $30 – $40 a month with unlimited data transmission and then a larger number of people with perhaps 200-300kbit connections paying perhaps $15 – $20.

    This pricing scheme is largely already in place, it just has to be fine tuned a bit. UBB is unnecessary and is a solution to a problem that doesn’t exist and can’t exist. Data transmitted per billing cycle is a red herring figure and must be abandoned.

    Canadians are asking for this now, so it’s time to recognize that we will not be deceived any longer.

  4. I'll play along...

    I’ll play along, but carry this analogy further. It is currently irrelevant what size of pipe (water) I have coming into my home.

    I do not pay a monthly cost for the pipe. I pay a fixed unit price for incoming water and outgoing sewer. I do not get any “free” cubic metres per month. The unit price does not change depending on how much or little I use. No usage, no charge.

    I have a hard time understanding why the cost per GB of electronic data would even come close to the cost of a cubic metre of water (a natural resource).

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  6. Isn’t this more or less how the current GAS structure is supposed to be working? The ISPs are supposed to be buying bulk bandwidth from Bell anyways based on what they think their customers usage will be.

    The issue for me is the fact that Bell is able to dictate the usage limit, and at a substantially lower limit. How is it fair that I’m paying the same per month for 25GB of usage that I was paying for 200GB of usage? I have no issue with caps, but make them reasonable and fair and align it with the cost of the service.

  7. The size of the pipe isn’t really based on the usage, but rather the anticipated aggregated simultaneous speed requirements. If all the customers stream HD video for the same half hour each month, then the ISP might need a wider pipe, but only for a short period (Streaming video of live events isn’t happy with latency).

    Alternatively, another ISP might need a smaller pipe that is kept busy longer, if their customer traffic characteristics are skewed more toward traffic that can wait for available capacity.

    Hence the volume component, different from the bandwidth component.

  8. I'll play along...

    I think you are raising an important point with volume vs bandwidth.

    If you tend to consume media that is downloaded and viewed locally (video podcasts, iTunes video, etc) it is often more about volume than bandwidth. If you are streaming everything (Netflix, On Demand) bandwidth is often more important.

    The reality is that you could consume the same volume at two different rates. Maybe the GB is not the right unit of measure by which to set the limits.

  9. Great idea. So great in fact that it already exists within the GAS tariff. ASSSHPI costs are paid to Bell to cover the aggregated usage of all the wholesale ISPs customers. Wholesalers are ALREADY PAYING FOR THEIR USAGE.

    UBB is about Bell forcing wholesalers to adopt the same pricing model as them, thereby minimizing competition.

    This isn’t about usage or congestion. It’s about Bell abusing it’s market power.

  10. Interesting that Mark Goldberg is now engaged in silencing any dissenting facts with a sudden new policy to only have real names and email addresses. Tell me, what effort did you make to confirm this? Are you only going to let people who stroke your ego on here?

    Just one more attempt to try and ignore the truth I suppose. Anticipating your cheap move to undercut someone uncovering you for what you really are, I’ve saved copies of my postings. Expect to see them so people can finally understand who you really are.

    Very low Mark, very low.

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  12. I like the following idea. Would be completely fair and create a level playing field.

    Bell, Rogers can apply whatever caps and overage fees they want to their own or wholesale customers for internet usage.

    Whatever UBB fees they set, the CRTC will then apply a levy or tax in the exact same amount of caps and overages against all of the equivalent physical bandwidth consumed by Bell & Rogers own analog, digital, & voice services.

    Problem solved. Because the real problem is not UBB. The problem was never UBB. In principle UBB is not a bad idea at all for the public good. The problem is the clear conflict of interest between the current administrators of the last-mile internet pipe and their own legacy video and voice business lines.

    It’s standard oil and the robber barons all over again. Own the rails or pipes to let your own vertically integrated goods ride for free then gouge the price of transport on competitor’s goods until you run your competitors out of business.

  13. Mark,
    I just listened to you interview at the FP Tech Podcast and I found you suggestions & comments interesting.

    A system that is pay-for-what-you-use is simple to understand. Most Canadians pay for electricity & water this way and haven’t had to petition the government for better rates in recent memory.

    Part of the issue, that has caused such public out-cry, are the mark-ups that the Telecomms are allowed to put on their service. Unlike Hydro & water, whose mark-ups are regulated, the Telcomms are not. Canadians are tired of paying a premium for a service where the sales price is 10x to 50x as much as the cost of production.

    The CTRC should regulate the markup that the Telecommunications Industry in Canada can charge clients. Weather they are locally, privately, or Internationally owner – this would be a big step forward towards fair pricing for Canadian consumers!

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