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.

Of the statements issued by three major Canadian political parties on the subject of usage based billing, I thought the Liberal’s is the least credible and most opportunistic.

The NDP critic, Charlie Angus, has been unwavering in his position that the internet needs to be regulated with intervention on the technology, network management and pricing. So his statement on UBB follows along that consistent theme.

The Industry Minister, Tony Clement, cautiously couched his language in his statement to say that it will study the issue carefully to ensure “that competition, innovation and consumers were all fairly considered.”

In their statement, the Liberals took what I believe was an unfair swipe at the people at the CRTC. Other than pandering, what was the value of the line “CRTC has come to mean ‘Consumers Rarely Taken into Consideration.’” I think it was a slur targeting public servants who, in my experience, have never acted in a manner that warrants such a cheap shot.

Where does the issue go from here? The history of the issue ties the hands of the government in how it might approach a solution to the public outcry.

The reality is that there are limited options for selling shared network services other than usage based pricing. Will the Minister send last week’s decision back to the CRTC to reconsider the pricing level? For example, the government could indicate that it wants the service to be priced on the basis of cost plus rather than as a discount off retail.

That could change the level of the caps and costing of exceeding those levels, increasing the pricing flexibility for ISPs that rely on wholesale aggregated services. But banishing usage based wholesale pricing is not a likely outcome.

I’ll have a possible way out for the government in tomorrow’s blog post.

Comcast closed its transaction with General Electric, combining NBC Univeral with the largest cable TV provider in the United States. 

The transaction eclipses similar deals we have have seen in Canada – Shaw / Canwest or  BCE / CTV. The conditions set by the FCC and Justice Department may be instructive for what we will see emerging from the CRTC hearings opening today to review the BCE / CTV deal.

The primary conditions set by the FCC south of the border?

• Ensuring Reasonable Access to Comcast-NBCU Programming for Multichannel Distribution;
• Protecting the Development of Online Competition;
• Access to Comcast’s Distribution Systems;
• Protecting Diversity, Localism, Broadcast and Other Public Interest Concerns;
• Broadband Adoption and Deployment;
• Localism;
• Children’s Programming;
• Programming Diversity;
• Public, Educational and Governmental Programming.

NBC Universal brought more than broadcaster assets into Comcast; in Universal, the deal included one of the largest content production companies. As such, while there are similarities to the convergence deals in Canada, there are important distinctions between the US review and what the CRTC will need to consider.

On a Monday morning in the fall of 1988, a few of us at BNR-RTP were chatting about the previous day’s games. A co-worker said that football was a metaphor for life. And for the next few days, everything at work was related by him to gridiron terminology. Moving the yardsticks down the field, Hail Mary efforts, fumbling the ball, and so on.

Which brings me to today – less than a week until the big game. Ever since my son’s hero, John Elway, led the Broncos to back-to-back wins in 1998 and 1999, Super Bowl Sunday has been a special day in our household. I have my rituals – the chili gets started percolating at 6am, followed by cooking the wings and whipping up my dipping sauce (equal parts of mayo and various Louisiana-type hot sauces). It has been a ritual for 14 years now. Forget the diets for one day. And hope for weather that permits barbecuing.

If  football is a metaphor for life, then the Super Bowl may be a metaphor for Canadian communications policy and regulation. Let’s explore some examples.

The CRTC home page has the Super Bowl referenced at the top of its Consumer Information list. Why are the Canadian ads different? The game this Sunday brings out the ire of many over the issue of Simultaneous Substitution. This discussion can then cascade into the issues of intellectual property rights and overall health of the Canadian broadcast system.

After a beer or two, you can then discuss how concerns about Canadian broadcasting are impacting the liberalization of foreign direct investment in the telecom sector. And that opens up another set of arguments. Some will argue that if we only had more open borders, then the competitive landscape would be completely different. Some might stream a US signal over their internet connection – but then, how could you avoid talking about usage based billing? Or other complaints?

Add another beer and by half time, the talk will certain to turn to that famous wardrobe malfunction of Super Bowl XXXVIII. How would the Canadian Broadcast Standards Council respond to a similar complaint? Emboldened by that segue, can this year’s half time show compete with a discussion about Money for Nothing, the role of the CBSC and the CRTC direction for a national review?

I’m only getting started. Feel free to join in with your contributions. It’s pre-game week and football season is coming to an end. so for one day, ignore the impact on your cholesterol count while you eat and drink in moderation. Don’t miss the roasted salami appetizers! The commercials will be available on-line, without a big impact on your download caps.

Vaxination Informatique filed a cabinet appeal of Usage Based Billing [pdf], anchoring the appeal on Telecom Decision CRTC 2010-802, which was issued on October 28, 2010. It raises some procedural issues worth exploring.

Under Section 12(1) of the Telecom Act, a petition to the Governor-in-Council may be filed within 90 days of the decision:

Within one year after a decision by the Commission, the Governor in Council may, on petition in writing presented to the Governor in Council within ninety days after the decision, or on the Governor in Council’s own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.

So the petition is on time for that Decision, however there is some question as to whether 2010-802 is the right decision to be appealed. The petition attaches a caption of “Usage-based billing for Gateway Access Service” to the decision on the cover of the document. In fact, the approval of Gateway Access Service occured with a May 6 Decision, 2010-255. The October Decision dealt primarily with the rates to be charged and the issue of whether all of the retail customers had to be charged on the basis of UBB prior to any wholesale customers.

Keep in mind that usage based billing was approved in 2009 in Telecom Decision 2009-658.

As set out by the dissenting opinion of Commissioner Molnar in the Decision last May, usage based pricing was already a rating concept that was firmly esptablished in Canada’s internet services market.

Vaxination’s cabinet appeal does not specify the relief being sought, there is no draft order proposed for approval. The closest I can find is the final paragraph of the Executive Summary, which says:

Therefore, The Commission must be told to rescind all decisions related to the TN7181 tariff an ensure that GAS and TPIA tariffs be reviewed to ensure they contain only aspects related to the nature of that service.

Under the law, Cabinet only has the power to rescind a CRTC decision withn 12 months of the original decision. For usage based billing to be eradicated, Cabinet has to act before May 6, just over 3 months from now. The problem is timing, and not just with the petition being filed too late. There needs to be a publication in the Canada Gazette and distribution to the parties who appeared before the CRTC in the original proceedings. Finally, the Minister has to notify the provinces prior to making a recommendation to cabinet. All that in the next 13 weeks if Decision 2010-255 is to be rescinded. Call me skeptical.

The way around this would have been to try to convince Cabinet to review the decision of its own motion. I wrote about that a little over a year ago in my discussion of the Globalive ownership process. In Processes and procedures, I wrote that there is not a lot of procedural definition for a Cabinet review of its motion. In an environment charged with the rhetoric of an election, this might have been a route worth pursuing, engaging legal and government relations assistance. Perhaps these would be beyond the financial means of Vaxination, but surely not Netflix, a company now worth $11B, that “worries” its business model is at risk in Canada.

If the welfare of Netflix Canada and the entire independent ISP community is being threatened by UBB, then it might have been worth someone investing a few dollars to get professional advice on how to put the best foot forward.