GATINEAU, Qc – The federal telecommunications regulator has rejected a controversial plan that would have allowed the big phone and cable companies to impose a usage-based billing model on Internet service resellers, a system that the Conservative government and many consumers had opposed.
The Canadian Radio-television and Telecommunications Commission’s decision on Tuesday instead gives the companies a choice of either charging the smaller Internet providers a flat rate per user or selling the ISPs a specific amount of capacity on their networks.
“The net effect of it is that there will be no caps, no limitations, no metering of use for retail customers as a result of this CRTC decision,” CRTC chairman Konrad von Finckenstein said Tuesday.
The decision reverses an earlier plan that would have seen some independent Internet service providers – which provide unlimited download services – forced to adopt the same pricing model as Bell with limits usage.
The regulator launched its review after a social media campaign launched by the ISPs and an ensuing public backlash, as well as urging by former industry minister Tony Clement.
“Our original decision was clearly not the best one. It was wrong as was pointed out by a lot of people, including minister Clement. He was right. We have today fixed it. We have made this new decision,” von Finckenstein said.
Under the new capacity-model for billing, a small ISP buys a certain amount of network capacity from one of the big providers and if its customers unexpectedly increase their usage, their service could slow.
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“If they buy too little they have a problem with their end customers, if they buy too much they pay for something that they don’t use,” von Finckenstein said.
Bell (TSX:BCE) and some cable companies had proposed they be allowed to charge their wholesale customers based on the volume of data they used, something that the CRTC rejected.
However, Mirko Bibic, senior vice-president of regulatory and government affairs at Bell parent company BCE, said the capacity method will force the smaller providers to take on some of the risk that was carried by Bell.
“It becomes a question of whether or not the independent ISP need to buy from us one lane, two lanes, three lanes or 10 lanes in order to accommodate the total traffic that their customers use,” he said.
During the public hearings, Bell Aliant, SaskTel, Shaw Communications Inc. (TSX:SJR.B) and Telus Communications (TSX:T) had supported the flat rate model, while MTS Allstream (TSX:MBT) had proposed the capacity-based model.
Chris Peirce, chief corporate officer for Winnipeg-based MTS Allstream, which has some smaller independent Internet providers on its network but also uses the wholesale services of big telecom and cable companies, called it a “pro-competitive decision.”
“Any competitor ends up having to use pieces of the incumbents’ network, which is why this decision is so important. Adopting our model will not allow the incumbent to control the retail activities of the competitor,” he said.
Independent Internet service provider TekSavvy was pleased with the structure adopted by the regulator, but said the actual rates will increase costs for consumers.
“The rates approved by the Commission today will make it much harder for independent ISPs to compete,” TekSavvy CEO Marc Gaudrault said.
“This is an unfortunate development for telecommunications competition in Canada.”
Critics had said that Bell’s plan would have put small ISPs at a competitive disadvantage.
NDP digital issues critic Charlie Angus called the decision good news for Canadians.
“We’re happy to see the CRTC finally listen to voices against usage-based billing,” Angus said.
“Allowing big telecom companies to reach into the pockets of struggling families and ask for even more money is just plain wrong.”
The issue also led to debate about how Canadians should be charged for Internet services and how much bandwidth they use.
But the CRTC focused only on the wholesale prices independent Internet providers pay for network use – not the monthly retail rates they charge their customers.
Bell has argued that independent Internet providers contribute significantly to network congestion, and the price they pay to large telecom companies should reflect their weight in data traffic.
Canada’s largest telecom company has said wholesale independent service providers make up 17 per cent of users in Ontario and Quebec. They also drive 29 per cent of total traffic on Bell’s network in those provinces.
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