Friday’s mail had final submissions for the CRTC’s review of usage based billing.
I had a chance to glance through some of them over the course of the past few days.
At the essence, the challenge for the CRTC is to strike the correct rates, as Primus states right up front. Regardless of the model chosen, if the rates are set appropriately, independent ISPs will be able to develop differentiated services to help provide consumers with competitive options. It appears that there is no longer an issue about whether there will be a form of usage sensitive wholesale pricing, but rather what form of usage based billing will be adopted. As Bell stated:
Investments continue to be the first and preferred approach to managing network capacity but it cannot realistically be the sole approach. Without some form of pricing model that ensures that those who “use the most, pay the most”, revenues necessary to cover the costs and make investments in the network have to be absorbed by all users. Under the current wholesale model, those who use the least must subsidize those who use the most, and that is not the fairest approach to billing for Internet use.
We have two models under consideration, each with slight variants being advocated by various proponents: Capacity based; and, Volume based.
While Primus suggests that the capacity based model is attractive because
- Capacity billing models rely on industry standard practices.
- Capacity billing models correctly link billing amounts to the impact that competitors have on the network. This correctly ensures that the competitor that has the most impact on the network pays the most. This also provides a direct incentive for competitors to manage the impact that they have on the network.
- Capacity billing models are transparent as both the competitor and the wholesale access service provider are able to measure capacity usage at the same time and place. This significantly lowers the likelihood of disputes and streamlines the process to resolve any disputes that do occur.
- Capacity billing models completely sever any relationship between wholesale and retail billing models.
However, as Bell has indicated, there is not necessarily a correlation between peak usage at the point of network interconnection (between the retail and wholesale ISPs) and the various portions of the shared network that may experience congestion.
95th percentile is currently used as a billing method with regard to point-to-point services such as network transit and enterprise connections. In such circumstances 95th percentile adequately represents usage of the point-of-interconnection.
Wholesale access is more of a point-to-multipoint type service, for which Bell argues that a volume based billing model is a better proxy. On the other hand, TELUS does not charge usage sensitive wholesale or retail rates nor has it proposed to do so. As such, TELUS has requested that the CRTC continue to allow wholesale services to be offered on a flat rate basis, should it decide to.
TELUS supports the general position that an ILEC or cable carrier should be able to charge volume-sensitive wholesale rates should it wish to do so. All networks are not alike. Different architectures, different levels of investment, different usage patterns and different life cycles necessarily mean that networks will experience congestion and usage driven costs differently. TELUS has observed that data usage has been growing at an accelerating pace amongst its Internet customer base, including those end-customers that are served by wholesale ISPs. As a result, TELUS (or any other network provider) might ultimately, in the near to medium term, be required to examine volume-sensitive pricing models to deal with the costs associated with managing this data growth.
In choosing between usage sensitive billing models, TELUS supports an aggregated volume based model, because it is relatively simple to implement, easy to understand and less costly. A submission on behalf of Rogers, Cogeco and Videotron agreed and discussed the risk of arbitrage that would be enabled by the 95th percentile model.
I’ll have more later in the week. I welcome your comments.
I’ve asked this before and never really gotten a full answer from you Mark: Are there not *already* volumetric tariffs for GAS/AHSSPI services? How would additional UBB charges not be double-dipping? I get that the charges are built as components relating to the different elements of the service, which allows for some obfuscation of who’s paying for what via which mechanism, but are there *any* wholesale purchasers (ISPs) out there who are not paying any volumetric charge for their own retail customers’ usage, be it on an aggregate, individual or any other basis? I don’t believe that it is effectively possible for ISPs to avoid volumetric fees under the current pricing structures, so I’m still baffled by the insistence on the part of some (but not all – which is telling!) wholesale providers that an additional UBB fee is required.
The answer to this is more than can be fully captured in comments – and really goes to the heart of the entire proceeding. While a component of the total arrangement is “volumetric”, the issue is whether the pricing is appropriately compensatory. That leads to issues of where the measurements are taken and what the unit pricing is.