The CRTC had a fundamental principle at the core of its review of wholesale billing practices: will independent internet service providers continue to be in a position to offer competitive and innovative alternatives compared to those offered by the larger facilities based ISPs?
Services provided by the independent service providers bring pricing discipline, innovation, and consumer choice to the retail Internet service market.
Its task was not easy. Some of the major carriers advocated a usage-based approach while others were comfortable preserving the status quo. Adding confusion, virtually all carriers sought to keep business services on a flat rate model, and the CRTC concurred.
So the real interest is on the residential pricing model. The Commission decided to approve two different wholesale structures. Bell Aliant (Atlantic Region), SaskTel, Shaw and TELUS will be able to preserve their flat rate structures for whatever traffic happens to be generated; the remaining companies are expected to go with plan B: a model that has a network capacity element – the retail ISP pre-arranges network throughput capacity in lumps of 100Mbps.
Carriers build networks with such capacity considerations. The capacity model is a form of usage based pricing, but it leaves management of the capacity in the hands of the retail ISP. The question of user impact is dependent on the rates set for the capacity. Those rates, in turn depend on a variety of assumptions which explains to an extent the variability in wholesale rates between the carrier ISPs.
Within North American fixed networks, Real-Time Entertainment applications are the primary drivers of network capacity requirements, accounting for 60% of peak downstream traffic, up from 50% in 2010. Furthermore, subscriber usage is becoming increasingly concentrated in a smaller band of the evening, driving up network costs despite relatively constant per-subscriber monthly data consumption.
To what extent will the increased concentration of traffic into a consistent busy period drive up the costs of independent ISPs? Will these ISPs seek to develop innovative pricing models that discourage coincident peak usage within their client base?
That in turn raises the question of whether the CRTC’s internet traffic management rules are flexible enough to permit users to choose a price plan that helps smooth out the ISP’s traffic profile.
Based on the experience of wholesale access for long distance services, the pricing models set out today could be with us for some time. Did the CRTC make the right adjustments to encourage independent ISPs to stay in the market? Are the right incentives in place for all ISPs to continue to invest in facilities to promote a healthy competitive market for the benefit of all consumers?