Mark Goldberg


www.mhgoldberg.com





Fox Group Dispatch

Value based billing

Michael Geist endorsedYouTube propaganda piece by François Caron in his tweet, saying:

The UBB Deception – new YT video explains #UBB and some of the real reasons behind it.

The endorsement isn’t justified. Much of the video, appropriately named The UBB Deception, is filled with deceptive statements. For example, at close to the one minute mark, there is the false statement that says:

In fact, the equipment used to relay these signals doesn’t really care how much data is actually passing through the system.

Whenever a statement starts with “In fact,” my antennae get raised.

That “pseudo-fact” is news to any of us who have networks as simple as a home router, let alone managing a regional or national network. Think about your home WiFi router. If you are home alone, the whole home network is yours, including the internet access pipe. When someone else is home with you, both of you may be able to use the equipment without noticing each other, unless both of you are using a data intensive service such as simultaneously streaming HD video. But, if one of you is just casually looking at web pages while the other is into a heavier use application, the local congestion is not noticeable, despite both computers being connected at WiFi speeds of say, 11 Mbps or more, sharing a 10 Mbps internet access line. Clearly, your home network really does care about how much data passes through the system, not just the connection speeds.

Now multiply the number of users by millions and consider the network not being a local area, but instead, a regional access network and you can see how the “In fact” from video is just plain wrong.

The video continues saying:

which is why corporate internet service providers bill their customers based on the speed of their connections.

The real reason that corporate network connections are often not usage sensitive is because the monthly rates assume a heavier usage load than residential connections. The kinds of connections that are used by most corporate networks are presumed to be engaged nearly all the time. The vast majority of residential customers don’t use their internet access service that way today and so the networks haven’t been engineered for that kind of usage. Most residential users don’t want to pay the kind of rates that are paid by corporate networks.

Around the 0:45 mark on the video, it says that data is not a manufactured product and it’s not a consumable product. Come on now. This is a clever semantical word game. ISPs don’t charge for the data; the charges are for transporting the data the same way Canada Post charges to deliver the package, but not the goods inside.

The video continues to promote a scheme where the only pricing options for customers are based on speed. Low speed connections would cost less and high speed connections would cost more with no options for low volume customers to opt for a higher speed connection with a price break that considers their reduced traffic. As I have written before [such as here and here], this is hardly consumer friendly and serves to banish customers with lower internet access budgets from ever tasting higher speed applications.

The video continues to promote the false statement at the 2:10 mark that the CRTC “is staffed by former and future employees of the corporations”. It is not true, it is a cheap shot and it is an unfair slur against the integrity of the staff and commissioners at the CRTC. I trust the endorsement of the video with a statement that it provides “the real reasons behind” the UBB decisions, was meant to exclude the statement about the CRTC’s people.

I had to wonder what was considered to be the “real reason” behind UBB when I watched the video a few times. And then I saw it. At around the 1:33 mark, the video almost inadvertently provides exactly the motivation behind the fairness principle at the heart of usage sensitive pricing:

It is one of the few services in the world which increases in value the more you use it.

Actually, most flat rate priced services increase in value the more you use the service: local phone service, cable TV, health insurance, extended warranties, maintenance contracts, health clubs. In fact, it is hard to think of a service that doesn’t increase in value the more you use it, whether you pay on a flat rate basis or pay based on usage. You are willing to pay more because you are deriving more value. Would people be happier if the billing principle was called Value Based Billing?

17 comments to Value based billing

  • Maynard Krebs

    Mr. Goldberg,

    It’s time to stop being a shill for the incumbents.

    ——————

    Shaw being candid with investors and liars to the CRTC.

    »www.shaw.ca/uploadedFiles/Corpor···inal.pdf

    Slide #5 (numbers at lower left)
    In the future, we believe our usage based billing plan will enable the further monetization of our Internet business as data usage becomes more prevalent and common amongst our customer base (ie. streaming of video)

    Slide 19
    Over-the-top applications (i.e. Global TV website, Hulu etc.) relating to the viewing of traditional broadcasting will become more common in the future and management of content will help mitigate this risk to our core business

    ——————–

    Bell being candid with investors and lying to the CRTC…

    http://www.bce.ca/data/documents/report···3_10.pdf

    Cope said: “….we see a growth in video usage on the internet, making sure we’re monetizing that for our shareholders through the bandwidth usage charges, is a second contributor to that growth. So, those two things. Then, I think, earlier in the year there was a small price increase on the base, but that’s been flowing through over the entire year. Those are really the three keys and, obviously, to a lesser extent, 22,000 net adds adds overall revenue, but you’re real question is about, I think, ARPU. So, those are the mixes. We would anticipate going forward each of those elements to move in our favour, because we would anticipate over time all of our clients will move to our Fibe network, and we would expect, obviously, as our FTTN footprint grows, that adds to that, and we, obviously, do not expect less usage on the internet going forward, we would anticipate people using the internet more and more over the years. So, we think the revenue per customer opportunity, through our significant investments, we think could be quite positive for our shareholders over time.”

    Let’s be clear in all this:
    Monetizing / monetization are code words for “profit centre”, and not “cost recovery” or “behaviour modification” as sold to the CRTC.

  • A rebuttal will be posted at http://theubbdeception.ca/blog in a few hours.

  • MM

    “You are willing to pay more because you are deriving more value. ”

    Man you are pretty stupid if you think internet is a utility that should charged with no respect to actual costs. Maybe you should educate your self before you spout bullshit.

    UBB has nothing to do with congestion or other people subsidizing others usage.

    Bell CEO George Cope:
    “..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.”

    It has nothing to do with how the internet works merely a income stream derived out of artificial scarcity to keep people away from free online content unless they want to pay more for free content then bells fail/overpriced IPTV or satellite services.

    If the last mile and aggregation servers can run IPTV which uses up far more bandwidth then anyone internet usage it becomes impossible to justify things under the myth of congestion or supposed cost losses.

    How anyone even pays your clueless spouting about a subject you are clearly uninformed on is beyond my understanding. Unless of course your checks come directly from bell(erm i mean screwed over eastern Canadians)

  • Anushan R

    “Clearly, your home network really does care about how much data passes through the system, not just the connection speeds.”

    Since when does computer/network equipment have feelings, was I away when electronic equipment developed feelings and emotions? “CLEARLY” I understand your argument.

  • Randy Whitton

    If you look on Bell Canada’s web page for the UBB and their explanation of it, you will see where they say that its just like a Tim Hortons coffee, the more you drink their coffee the more you pay. Makes sense, until you realize the following.

    1) you could only buy Tim Hortons with gift cards valued at $ 20.00 – $30.00 pr $ 40.00. They are only valid for a month, at the end of the month, no matter how much you have drank, the balance is forfeited to Tim Hortons, without any refund.

    2) If you go over your gift card amount you will be charged 5 times the cost of that cup of coffee for the rest of the month.

    3) Tim Hortons does not have to accuratly keep track of how much you have left on your card, if they say you have gone over you limit, tough, they don’t have to prove that you did.

    ISPs don’t charge for the data; the charges are for transporting the data the same way Canada Post charges to deliver the package, but not the goods inside.

    I agree with this statement, but using this anology Canada psot would charge you a certain amount each month, and same as Tim Hortons, you wouldn’t get a refund if you didn’t use them often, even tho you paid for more.

    ISP’S like Bell Canada have proven that they cannot accurately measure the amount of Data used, with both Bell and Northwestel admitting they had over billed customers. So, they “ship” the Data, A Gigabyte of data is a measurement of Data. They should be placed under the Weights and Measurements act of Canada, and have to be tested regularly that their equipment to “ship” the data is accurate.

    Now I have also heard that this is like your gas, your electrical, the more you use the more you pay. Great, I wish it was, because when I use less electricity than my neighbour, I pay less. I don’t have to guess how much I am going to consume each month, and if I under guess I am not going to be “punished” for using more power, I pay the same amount for that first bit Kilowatt of power as I do the for last kilowatt. The meters are tested to prove their accuracy, not so with the internet.

    Thank you
    Randy

  • Like Randy said,
    Why are they arguing it’s a utility like water? My water doesnt expire at the end of the month. With Bhell, I pay extra $5 for 40GB. Those 40GB are gone at the end of the month. If I pay $5 for 40L of water or gas they last until I use them up. They dont go poof on the 30th/31st.
    QED: They just want to gouge the customers.

    You missed the point regarding the price/GB.
    That part of the video is to point out that it costs more per GB at a slower speed than at higher speed. Check out TekSavvy. Compare the price/GB and Bell/Rogers. TekSavvy is at $0.123/GB, while Bell/Rogers range from $0.50 to $5.00. That’s 12cents worth of profit for TWO companies. And Bell has the guts to ask is it FAIR that low-users pay for high-users when it’s THEIR UBB pricing that screws the customers.
    QED: They just want to gouge the customers.

    I believe the main point of the video is to show the average Canadian that Bell/Rogers are spouting lies regarding UBB. And that all Bell/Rogers/Telus/Shaw wants to do is protect their dying business model for TV, movies, land line, on-demand, etc. That’s why it’s called The UBB Deception.
    QED: They just want to gouge the customers.

    PS. Congestion doesnt exist. Congestion is caused by everyone going online 5pm-12am (after school/work) AT THE SAME TIME.
    More lies by the ISPs….

    PPS. All these videos, blogs, petitions, letters to MPs can all be avoided if the ISPs allow an independent third-party auditor to confirm the actual costs.

  • Charles B.

    “This is a clever semantical word game.”

    This is an accurate description of the incumbents’ handling of this issue. “Fairness”, “subsidizing heavy users”, and a number of erroneous (or arguably deceptive) analogies have been the only public defenses for UBB.

    For example, your own:

    “ISPs don’t charge for the data; the charges are for transporting the data the same way Canada Post charges to deliver the package, but not the goods inside.”

    – Canada Post does not charge a flat fee for a fixed number of mailings per month, and then >$100 per domestic stamp afterwards.

    – Canada Post does indeed charge by weight/dimension for a parcel vs. a simple letter. This is sensible because a delivery truck has finite space. However, Canada Post does not cut up your mailing into smaller pieces delivered at a rate they prefer (ie traffic shaping to deal with “congestion”) and charge you again for each missing piece you need to resend (packet loss, which is counted by the meter).

    – Canada Post does not allow unsolicited parties to attach items to your parcel, then bill you for the added weight.

    – Canada Post does not have ownership of the path from the sidewalk to your mailbox. If they did, should they be entitled to 85% of the revenue when Fed Ex or UPS delivers to your home? Canada Post has suffered through the widespread adoption of email. Remember the rumour that they wanted to receive a 5 cent tax imposed on each email? Luckily, that absurd notion was a hoax. The telcos’ similiar sense of entitlement is not.

    As with the comparisons to water, gas, electricity, and even Tim Horton’s coffee, this analogy is just another exploitation of a basic principle (use more, pay more). Despite the spinning, it does not apply.

    Here’s some more suitable analogies. Would they fly, you think?

    – Public Transit. Customers buy a monthly pass, some use it more than others. Faced with having to add buses during rush hour, the transit company decides that after 10 rides with your monthly pass, you will pay a substantially marked up fare for each ride thereafter.

    – City Hall sends you a letter explaining that due to pollution and the high population, each citizen will be entitled to 7000 breaths per day, with a nominal charge for each breath beyond that. Which you will let them meter for you, of course. *Inhales and exhales are counted as a separate breaths.

    – Your university accepts your tuition, and informs you that due to high demand for classroom space, you are now entitled to attend 1/3 of each class you signed up for. You may stay the full class is you wish, they will bill your learning afterwards on a “per-word” basis.

    The absurdity of these is evident. UBB fits right in. No user can exceed their tiered bandwidth speed. Congestion is a myth. The telco’s want to tax information, because they think they’re entitled. Whether it’s education, commerce, or entertainment, they’re staking a claim. Thus far, the only supporters I’ve seen of this despicable attempt at gouging Canadians are those who will profit from it.

    In the words of BCE CEO George Cope:

    “The second piece of driving ARPU is, obviously, 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, is a second contributor to that growth.”

    And:

    “We would anticipate going forward each of those elements to move in our favour, because we would anticipate over time all of our clients will move to our Fibe network, and we would expect, obviously, as our FTTN footprint grows, that adds to that, and we, obviously, do not expect less usage on the internet going forward, we would anticipate people using the internet more and more over the years.”

  • Trevor B

    “the CRTC “is staffed by former and future employees of the corporations”. It is not true”

    Len Katz didn’t work for Bell & Rogers?

  • […] Posted on March 23, 2011 by François Caron Tweet On March 23 2011, Mark Goldberg posted a response on his blog to my video “The UBB Deception” where he objected to many of the items presented in the […]

  • Alkapwn

    local phone service:
    The service I am paying for is the phone line connection itself and for the service it provides, which is connecting me to local numbers. Last time I checked it was unlimited. I do not get charged extra for making more local calls, nor do i get a rebate if I make less..

    cable tv:
    The service I pay for is to have access to certain channels. Last time I checked, also unlimited. I do not get charged for watching more hours of tv, nor a rebate for watching less.

    health clubs:
    The service I pay for is access to the health club facilities. Also unlimited. Really starting to see a pattern here. I can go to the gym whenever I want, for however long I want, or not even go at all if my new years resolution falls through.

    toll roads:
    The service I pay for is access to that road. I do not get charged based on the time that I spend on the road. If I zoom through at a super fast speed I don’t get a discount for it, and if I’m stuck in traffic and it takes hours, I don’t get charged extra. I am paying for access from point A to point B.

    internet service:
    The service I am paying for is the connection of my computer to the internet. This connection is set at a certain speed. If my bandwidth is 5mbs, then I can transfer 5mb of data per second. So regardless if I’m downloading 2GB per month or 2GB per HOUR, I’m only ever using 5mb of the “band width”. If there REALLY is congestion on the networks, how could Bell possibly offer 25mbs connections? Wouldn’t offering a connection that uses FIVE times the amount of bandwidth then NOT be a good idea for a “congested” network? Picture the network as a highway with millions of lanes. Even if I download 300GB per month, downloading non-stop 24/7, I’m only ever using one lane of the highway. However, ANYTIME a user uses a 25mbs connection, they’re potentially using up 5 lanes, even if they are not “heavy users” they’re using 5 times the lanes to do it. So if they only log on at peak hours, those lanes should get filled up FAST and cause heavy network congestion. How could the people using one lane then be called “bandwidth hogs”? Either there is NO congestion at ALL, or Bell’s network is not broad enough to support the amount of “lanes” they’re offering.

  • Matt

    You make the connection to Cable TV, but you didn’t seem to really comprehend what you were saying. If I turn my TV on and leave it on a certain channel, for the sake of argument lets say CTV, am I going to get a bill from Bell stating that I was maxing out their Fibe TV pipelines watching that channel? Of course not, if anything they will use that statistic to sell as ratings for advertisement and make further money for themselves.

    But if I were to turn my media device on and connect to a live streaming feed of CTV, Bell would then start limiting it, because they can’t specifically tell what it is that I am viewing, and thus my viewership isn’t counted in their ratings, and they then classify it as overusing the network.

    Conflict of interest is about the best terminology to use here.

  • DOUG

    Interesting. Your first comment says that if I stream HDTV and do other things on my home network I will see a problem? Well let me call you on that one. My main computer is downloading off the internet at full speed as well as serving HDTV to my PS3 for me to watch and transferring a file to my laptop. Any speed problem? Not that I can see. Why? Because my internet connection is only 5 mb/s, HDTV is only 4 mb/s and my laptop is using WIFI at 150 mb/s. My router is1 gb/s. That leaves me so much bandwidth to use that someone can still connect to my router via WIFI to download off the main computer.

    Now, if Bell is complaining about the network speed being hogged by a bunch of people using 5 mb/s connections then why are they offering IPTV? Get with it. IPTV serves the subscriber through a second connection to their network at 25 mb/s! They are the ones congesting the network. If their network could not handle all the connections that they had and IPTV then why did they offer it?

    Let’s remove the ability of big business to put a lobiest into the governments face so that they can work for the people that voted them in. All a lobiest does it legally bribe the official so that the company can get what they want (even if it is not what the people want).

  • Horrible, misleading and biased article. Telecom shill. SHAME!!!

  • Rui

    I wonder why I can’t get what I pay for hmmm?

    Bell wants to limit our usage to 25 gigs per month in Ontario (60 in Quebec which points to something other than a technical limitation but let’s leave that alone why don’t we).

    My profile is 5mb which means I get about 610 kps
    There are 86400 seconds in a day so 610*86400= 52704000kb or about 51.5 gigs per day (and yes admittedly is this under optimal conditions but again let’s leave that alone).

    Why can’t I get this? I paid for it no?

  • You mention people with limited internet budgets here and in another post which is a nice thought at least. But is Bell’s version of UBB actually fair to people who choose the slowest packages with the lowest monthly fees? By definition these connections contribute minimally to momentary congestion, but for unexplained reasons the overage fees are actually much higher per GB than connections an order of magnitude faster. Where’s the fairness in that? Rather than offering an incentive to choose a slow connection that causes little congestion, the billing structure actually punishes these users for not choosing a faster plan. Sure, pre-purchased “insurance” packages can be a better deal, assuming you are very good at guessing your exact usage ahead of time. But why would there be substantial rewards for being a good guesser, but substantial disincentives for choosing a non-congesting connection in the first place? It’s almost as if prevention of congestion and fairness to light users are not very high on the priority list at all.

  • Alasdair

    I think maybe you have a little bit of willful blindness on the line about increasing “value” the more you use it – they are very clearly talking about what you pay, not what it’s worth to you.

    You say “The vast majority of residential customers don’t use their internet access service that way today and so the networks haven’t been engineered for that kind of usage.” Isn’t that kind of the whole point of the retail-UBB backlash? They sell a service and then count on you not actually using it to its full potential. They are not the only business to operate this way, but unlike those other businesses, if you come anywhere near using what they’ve sold you to its full potential, they either throttle your traffic or ding you for the imaginary cost of data-over-time – or, more likely, both.

    It’s interesting that you pick on the “ISP’s don’t generate content” argument – yes of course the ISPs are only transporting the data, not generating it. That’s actually the point – their costs are bound to the cost of transport, not generation, but UBB is structured as if the content itself is what drives their cost.

    When people use the internet more, the costs to ISPs only rise if the *transport* costs rise. There may well be congestion and therefore rising transport costs – most people aren’t just going to take Bell’s word for it but let’s say for argument’s sake that it’s true – but retail UBB as we see it today isn’t correlated to any of the factors that actually dictate transport costs. So it’s not solving that problem in a sensible way at all.

    Finally, I am still waiting for someone to come up with a (non-telecom!) business model that is truly analogous to the principles of retail UBB the way we have it in Canada right now. The natural gas analogy, the electricity analogy, the cup of coffee analogy, the hockey analogy and (sorry) the Canada Post analogy are all deeply flawed.

    There must be another business sector that works the same way: non-refundable consumption charges levied by a service provider whose service is actually transport, not generation, and whose per-unit rates go up instead of down with greater consumption. I’m sure there has to be one out there, I just marvel at the fact that no one arguing in favour of UBB has been able to find it. It must exist! If you find it, it’ll be worth its weight in gold to the big telcos. 😉