Download limits only a symptom of the problem

13 Jan

I thought I’d take a break from blogging about all this adult entertainment stuff that went on last weekend and instead write on a related topic: how Canadian internet users are getting screwed.

I came across a couple of items this week that relate to the issue. The first was an open letter addressed to the media and various government departments opposing the metered usage schemes that have been implemented by big internet providers here in Canada (also known as usage-based billing). The letter, posted on the Open Media internet activist website, goes into detail about how this is bad for Canada in a number of ways. The Reader’s Digest version:

1. Smaller and smaller download limits runs contrary to how Canadians are using the internet, which is more and more.

2. With that dichotomy in place, it means we’re inevitably going to be paying multiple times for certain services. Netflix, for example - not only do we pay a monthly bill to access the internet so we can get the service, we also pay a monthly subscription fee to Netflix. With smaller download limits, that means we ultimately have to pay a third time if we watch more than a few movies on it.

3. Given those facts, such services are going to avoid doing business in Canada, or they’re going to be considerably more expensive here, as a recent report found.

4. There are also involuntary services that chew up our bandwidth, such as software updates for computers. Sure, we can decline these, but then Canada is going to a haven for the viruses, etc., that inevitably get through. Nobody wants that.

5. Notwithstanding all of that, low usage caps will also significantly limit the ability of any such Canadian services developing, such as a competitor to Netflix. In other words, low caps limit innovation and stifle new businesses.

I can’t say I disagree with any of those arguments, but I do think the letter writers are barking up the wrong tree. I’m not necessarily opposed to usage-based billing, but I do think that market forces need to exist to keep such schemes honest. If the big internet providers want to keep lowering usage limits, there need to be alternative ISPs that won’t - that way the consumer can decide which company and plan is right for them. The problem in Canada, as I’ve said before, is that those market forces don’t exist and smaller ISPs have had the bigger companies’ business models foisted on them.

That brings us to the second item: a regulatory ruling yesterday on something called unbundled local loops. Warning: this is a topic that can put even the biggest nerds to sleep, so I’ll try to keep it brief and simple.

For much of the past decade, Canada and virtually every other developed nation has recognized the need for competition between internet providers. Only when such companies compete with each other do consumers benefit from faster, better and cheaper services. However, governments and regulators have also recognized that it is considerably expensive to build competing networks.

As such, the concept of local loop unbundling was rolled out across most of the developed world. The idea was to take the networks owned by major phone companies and allow other providers to access them to sell their own internet services to customers. So for example: a small company such as Chatham, Ont.-based Teksavvy could connect to Bell Canada’s network and get its own subscribers.

Under this scheme, there was of course the recognition that the network owners should get some sort of compensation for other companies using their networks. Those other companies were thus effectively charged rent, generally determined by regulators, to do so.

The intent behind the whole plan was to allow smaller, less well-funded companies to build up a good business, at which point they could afford to build their own infrastructure and eventually ween themselves off the networks of the big phone companies.

The trick, however, has always been in the rent set by the regulator. If that rent was set too low, a smaller internet provider would have no incentive to ween itself off the bigger company’s network; why spend money building a network when the one you’re using is really cheap? If the rent was set too high, though, the smaller provider wouldn’t make much money and therefore couldn’t afford to build its own network.

Guess which situation unfolded in Canada? You got it: the rents are too high. According to a Harvard report (PDF, on page 168), “Canada has the highest monthly charge for access to an unbundled local loop of any OECD country.” I believe the term for that is: booya.

The result: small Canadian internet service providers can barely eke out a living, let alone think about building networks to compete with the likes of Bell and Rogers.

But wait, it gets better. Not only is that a problem, even if a small ISP performed relatively well and was able to position itself as a decent challenger - which some miraculously have, like Teksavvy - it’s not like they could even find someone to loan them the money they’d need. We all know a non-Canadian company can’t get involved, thanks to our foreign ownership limits, and I believe the Canadian banker’s proper response when somone asks them for money to compete against Bell and Rogers is: “Bwahahahahahaha!”

What have the big boys been doing during all of this? Well, they wouldn’t be smart if they weren’t trying to put their foot into the smaller ISPs’ figurative nards. Bell applied to our regulator, the CRTC, to raise those rents further and, from the looks of it, got them. According to some of the smaller ISPs, yesterday’s ruling will cause those local loop rates to change, generally not for the better, which is further going to squeeze them and their ability to build their own networks (translation: it’s not going to happen).

To go back to the beginning of this post, while it’s good that people are complaining to politicians about our incredible shrinking usage limits, the issue is only a symptom of the deeper problem. I’ve said it many times: lack of competition is the real problem and it needs to be fixed, pronto. That’s what people should be complaining about.

There are two potential ways to do this: either the government lifts those foreign ownership restrictions and throws open the battlefield for anyone to enter, or as a consumer watchdog group recently suggested, it orders the CRTC to start taking a heavier and more proactive hand in regulating again. Given the ideological bent of our government, it’s obvious the first option is much more preferable. To put it bluntly, Industry Minister Tony Clement needs to crap or get off the pot because things are really starting to stink.


Posted by on January 13, 2011 in crtc, government, internet, telecommunications


23 Responses to Download limits only a symptom of the problem

  1. RobertMano

    January 13, 2011 at 1:03 pm

    Excellent post… The ISPs would prefer that we are all good little sheep, and keep this quiet, but I have a feeling that Canadians arent going to put up with this internet price gouging for much longer. However, while the CRTC is involved, it may just stay like this forever. A bunch of former bell execs, looking out for corporate interests. Be sure to sign the petition at

  2. Alexander Trauzzi

    January 13, 2011 at 1:17 pm

    Good writeup and definitely takes a look at the more political angle. And you’re right to identify that Tony Clement likely won’t look at more regulation. But I think that may end up having to be the course of action we take.

    Opening things up for competition won’t be enough because I think like all things, the effort will be a half-measure. All ultimately an attempt to market a solution while not providing one.

    I should also add, you may want to correct a few misunderstandings about how internet usage is measured. First in how the term “bandwidth” is used. While bandwidth *is* the correct way to monitor usage, it does not mean what people think it does.
    What usage based billing talks about is simply data use over a billing period. Tracking how much total data someone transmits over the course of a month doesn’t yield a figure you should be billing off of. It is an ultimately inconclusive figure. Given that data is in unlimited supply, what you really want to look at is how *quickly* that information was delivered. Which is bandwidth - when correctly defined.

    In that sense, Canada has had the correct billing structures in place for around 20 years now. We know these as the various service levels (lite, regular, nitro, extreme, lightning, etc…).
    To be honest, there is no such thing as a heavy internet user in Canada. The extremes that ISPs complain about would make any user in Asia and Europe laugh. This whole situation is making our country look like a greedy and self destructive mess to be quite honest.

    Frankly, ISPs have been allowed to run off the rails with misuse of terminology for far too long. It has cost our country dearly and it will cost us far more if it is allowed to continue. This is a situation that affects every Canadian.

    I’ve made up two google buzz postings to help those interested in taking action (email your MP and Tony Clement!):

  3. D Scott

    January 13, 2011 at 2:16 pm

    You’re absolutely right, and thank you for referencing the letter (I was the one who wrote it). It was written more from the standpoint of the average home user, drawing attention to how all this will affect our daily lives. The bigger issue though, as you pointed out, is the regulation and lack of competition in the country. Everyone should hit up the link that RobertMano posted (above) and sign the petition.

  4. drumstick

    January 13, 2011 at 3:17 pm

    Great commentary. This country is run like a Soviet oligarchy. The big companies use the government to shore up their monopolies and crush dissent…

  5. AA

    January 13, 2011 at 4:15 pm

    Excellent post, and very to the point!

    My only question is: how realistic is it to ask the CRTC to start taking a more proactive role in actually REGULATING the industry if, from what I understand, the CRTC itself is COMPRISED of the executives of the very industry it is supposed to regulate?

    If this is the case, it would be like asking your members of the Parliament to be more modest in legislating themselves pay raises out of our tax money…

  6. bwalzer

    January 13, 2011 at 5:26 pm

    We don’t really want multiple ISPs digging up the street anyway. I would like to see Canada move toward something like the Australian national broadband network. There they have a independent entity that is to install and maintain a fiber network that connects up the buildings. Other companies will provide things like internet, TV and phone service by connecting to this network. There is no reason to have more than one connection to any particular building. Encouraging multiple networks will just produce a situation that is very wasteful.

  7. Josh

    January 13, 2011 at 9:42 pm

    I think that anyone complaining about the usage based billing fundamentally understands that it’s a problem of competition, with small ISPs in a compromised position, so I think your piece is a bit off to make this point.

    If your recommendation is to appeal to the government to effect change within the CRTC, I suggest that that option might be off in favour instead of dissolution:

  8. Bob Dobbs

    January 14, 2011 at 3:27 am

    Bingo, data networks are infrastructure, the best networks in the world for speed and cost are government owned. Nationalize ours. Federal backbone to Municipal FIBER pass building code requiring Fiber in all new construction or renovations. Lets face it the rate hikes are to kill the competition in both the ISP Business and to kill netflicks or any other company that tries to replace the cable TV model that Shaw, Rogers and now Bell have control of. while we’re at it a nice anti monopoly law so that ISPs can’t also be content providers or re-packagers. They can compete for the from the house to the street service and the administration of the accounting. and I consider cell towers to be Data infrastructure now too 10 cents for editing a data packet the phone sends to the tower regardless of whether I edit it or not? Bite me, we’ve paid that SMS charge long enough. damned if I want these gouls setting data rates on REAL G4 service and Damnit I WANT the new HTC droid phone not a 2 year old neutered one.
    and do I expect the Tories to care about us instead of their friends, no

  9. Doug Stark

    January 14, 2011 at 9:38 am

    Here’s a thought; take away the motivation behind these applications to the CRTC that companies like Rogers, Shaw, Telus and Bell bring forward to the CRTC. Require all TV signal and internet carriers to divest themselves of ownership in production of content, ownership of television networks (and stations) as well as ‘on demand’ movie networks and DVD rental stores. Watch the squeaking and shouting from these people as if we have squeezed their nuts.

    You are either a carrier of content or a producer of content – but not BOTH. This is the real problem we have here in Canada. The CRTC, (all former signal carrier execs) are allowing vertical and horizontal integration of the market place and this forces all others out of the market – which is their master plan.

    The cable giants such as Rogers to name one - owns several content production houses, several TV networks, the delivery mechanism, on demand content channels as well as corner store DVD rental outlets. Doesn’t anyone see the problem here?

    For years these cable giants (as well as Telecom’s like Bell) thrust the idea that the consumer is at fault – such as their lame ass ‘buffet table model’. The party line goes like this: if everyone goes back to the table too many times or hogs the food, there won’t be enough for all.

    This was ‘marketed’ to us plainly to mask the real issue that these mega Cable/Telecom’s keep inviting more and more people to the table and don’t expand their restaurant! But wait, they also include new services such as internet home phone services, market internet usage to kids doing on line gaming and invite all of us to their online newspaper websites offering streaming content that hogs (and uses up) your newly introduced ‘cap’.

    Isn’t the real plot of all this to generate increased fees because they KNOW the future bandwidth usage is going up and if they all wait long enough – not one of us will be able to keep within the ever decreasing cap’s they are applying – all with CRTC support?

    Think of the Oil Cartel model here; reduce refining capacity knowing demand is going up, then raise prices and fall behind the ‘supply and demand’ flag. Wave that flag high and fast my friends – because that is exactly what the Cable and Telco monopolies are doing here. No real increase in capacity (the oil refineries closing model) and just watch as the demand increases and watch the cash roll in when we all go ver the low cap’s.

    In fact this internet business model has been improved (perverted?) upon more then the oil industries could have ever dreamed of. Where the auto industry is helping out by producing vehicles that get better fuel economy year over year – here we have the electronic media world shipping out bloated programming and java app’s, video bandwidth busting content that in affect, is like going from people using Smart cars online to 1951 Cadillac’s driving down this 407 like, not so super highway, sucking Gigabytes like an old fashioned Holy carburetor like its nothing.

    There is a huge disconnect between ‘true’ content producers and content deliverers. If I were of the X-Files fan club I would say they are all conspiring together. Outside of North America and perhaps the US - I think it’s been an accident and quite frankly it’s counter productive for each group to be screwing the consumer. When people wake up to the content/delivery charges – they’ll find new ways to entertain themselves, (going back to movie houses – gaming ‘in house, walking the dog even) and both these business groups will suffer when we tune out.

    Oh but here in our own protected Pollyanna like country, where politician’s such as Vladimir Putin would feel right at home we are ‘protected’ by the CRTC. (I just threw up in my mouth a bit typing that protected bit)

    Now the race is on (some say already lost) to merge these two groups, (content producers and carriers) into one ownership group structure spread between the big five companies. It’s almost complete and it has been allowed by their industry lobby group – the CRTC. The CRTC is no different then that other lobby group the Insurance Bureau of Canada that the insurance industry owns outright – you know that group – the one that tells you how much to pay for car insurance and how much you should enjoy the reaming and smile?

    So remember – it’s all OUR fault that we’re all internet table grazing gluttons and as your bending over, remember to say thank you as polite Canadians should always do to ur fine CRTC group for ‘protecting’ us.

    Meanwhile I’m going out to buy Rogers and Bell stock because I see where this is going…

  10. Jabba

    January 14, 2011 at 12:14 pm

    You will never see the CRTC stand up to bell or rogers, not in a million years, whatever BELL wants BELL gets, since the CRTC is made up of ex bell employees who obviously have a good stake in the company.

  11. IamME

    January 14, 2011 at 1:56 pm

    You know, anyone can say things like, “Canadians arent going to put up with this internet price gouging for much longer” and I have myself stated as much in various postings. But really, what are we going to do…go to Tim Horton’s and bitch at eachother? Unfortunately, Canadians, by and large, are used to getting screwed and will just accept whatever comes their way in a very typical and passive Canadian fashion. I don’t have Netflix, why (Not counting the fact that the Canadian version sucks), because my ISP implements a very strict 60G limit and my Internet actually stops working if I exceed that. I live in a rural area and have to use wireless to get Internet. For that service I pay $65/mo.

    Here’s an easy test one can try. Leave your computer off for 24 hours then go and see how much bandwidth you used. Mine will use between 30M and 50M in a 24 hour period with nothing other than the router running. That’ll easily average over a gig of lost usage in a month period. That doesn’t sound like much, but what about those who have basic plans with small bandwidths like 10G or less. While I agree that the lack of competition is a problem, I think the far greater problem is the extreme complacentcy on the part of the Canadian cunsumer.

    While I do agree something has to be done, nothing positive will get done until Canada, as a nation, falls so embarrassing behind in world standards that some will HAVE to be done. That point is probably still several years out. In the meantime as more consumers get frustrated more and more will turn to illegal services like Bittorrent or services like proxy servers and VPNs to access desired content currently blocked in Canada such as Hulu and Pandora. I can say from personal experience Hulu works fine with a proxy while Pandora requires a VPN due to the huge Adobe Shockwave application they use. But bandwidth is still going to be an issue with Hulu. When bandwidth is precious, it’s far more efficient to download a season pack for a TV show from Bittorrent than it is to stream it. If they want to know why “so called” piracy is so high in Canada, they need look no further than their own outdated business models. For the businesses and services a vast major of younger consumers desire, they are going to have to open up bandwidths or face further losses.

  12. JM

    January 16, 2011 at 8:40 pm

    Regarding “Canadians arent going to put up with this internet price gouging for much longer” Just like the Gas prices and Taxes Eh! - Not gonna happen.

    And Bandwidth limiting will effectively shut down the use of Hulu on a VPN or Bittorent etc.

    In the US CBS just bought Comcast - go figure - it is not a coincidence.

    • Melissa

      January 30, 2011 at 3:41 pm

      I think the difference between gas prices, taxes and the internet is how much much this issue specifically matters to young people.

  13. JM

    January 16, 2011 at 8:41 pm

    NBC bought Comcast

  14. Moosebump

    January 19, 2011 at 3:55 pm

    one more try?

    Comcast bought NBC

  15. Canucklehead

    January 21, 2011 at 9:16 am

    Good work and stay on the case Peter! Big telco and big cableco are counting on the fact that they can slide this in under Canadian’s noses. The message has to get out there.

  16. Canknuckle Head

    January 21, 2011 at 9:18 am

    Good work and stay on the case Peter! Big telco and big cableco are counting on the fact that they can slide this in under Canadian’s noses. The message has to get out there

  17. Randy

    January 26, 2011 at 10:12 pm

    I think that many people, including the CRTC and possibly every blogger I’ve read to date is missing the point of what is really happening here. This is not just about ISP competition; this is about revenue from multiple sources.

    All of the ISP’s in Canada are also entertainment providers, and unlimited broadband access is hurting their profits at the other end. Access to entertainment in the form of Netflix, Hulu, even youtube is hurting their sales. By capping your ability to access broadband, they force you to rethink that Netflix movie that you don’t know the actual cost of, and go with one from the cable or satellite company that has a fixed $6.99 cost. Not to mention that this will kill off Skype / Vonage / Google Voice / Magic Jack in favor of the telecoms. When the telecoms in Canada found themselves as the keepers of the Internet back in the early 90′s, the plan day one was to create a highway, find content and charge for the delivery of that content, but they never in their wildest dreams thought that the content they were going to provide would be direct competition to their traditional offerings.

    Another problem from the consumer side is that there is no reasonable way for the average domestic consumer to be able to meter their usage. And with more and more activities that require this access, it is very difficult to deal with being over the limit in any month.

    It’s too bad that the CRTC and the various providers are so deep into each other that they can hold the entire country hostage. Canada has one of the highest cell phone usage costs in the world, and now the internet gets the same treatment. Funny that both these services are essentially run by the same oligopolies

  18. Laurentien

    January 27, 2011 at 10:04 am

    This policy is not surprising for a conservative right party. They are protecting the powers of a minority of big guys.

    The problem here is that this novel approach to have people to pay even more money is going to export itself. Canada is just a test bed for much more around the globe. The next country that is much likely to apply this scheme will be the UK also damaged by a conservative right party, and then France and then Italy… all led by conservative right parties doing everything to concentrate more powers in the hands of the few “chosen” leaders.

    But, why do they want to tax the bandwidth ? Because simply this means file or media downloading which is meaning a lot of money lost in translation. And we all know that major companies like SONY, Universal or Columbia are mad about getting those peer-to-peer users down and getting their money.

    A question of big money there, no doubt and the government is not going to defend the Canadian citizen against those sharks. Maybe, the feds in Ottawa should remember their duty and make sure that the law is helping the people to do better than in other countries. Let’s improve Canadians’ quality of life and no doubt that profit will be at the rendez-vous for big companies anyway.

  19. Martin Levenson

    January 27, 2011 at 4:49 pm

    I’ve been annoyed by this for a while now. I share the house I own with two, sometimes three other people, who rent and pay a share of utilities. I don’t livestream, or download very much, but sometimes the other people do. Up to now, we just split the cable/internet bill.

    Any suggestions as to how to meter all the downloads? Currently, I just run a router from the cable line, and everyone attaches to that. Now, it looks like I’ll need to set one computer up as a router if I need to meter usage.

    With the long-distance phone bills, I get a printout of usage, or they’ll send me the bill. Maybe the ISPs should be required to provide an invoice of use! If they have to do that, they would probably re-think the wisdom of charging more for less.

    Further to that, I should now have the right to refuse advertising downloaded. The ISP should have to ask me if I want commercial content.

  20. Jonas

    January 29, 2011 at 3:32 am

    While I appreciated this article, I think to “throw open the battlefield” or to disband the CRTC are very poor ideas.

    What is unfolding here is virtually identical to how the battle for public radio airwaves took place in the United States.

    Then, government panels were stacked with industry insiders (much like the CRTC today), who put in place recommendations and policies that favoured private capital broadcasters over radio stations operated by community groups, education institutions, and organized labour, to name a few.

    American regulators failed to regulate in the public interest, but instead acquiesced to the interests of capital. The private sector took control of virtually the entire “bandwidth” of radio. Television was easy pickings later on.

    The role of a regulator should be to protect public interest. Obviously the CRTC is not doing this, and it needs to be fixed. Not disbanded. Fixed.

    To “open the battlefields” to foreign capital or to disband the CRTC is a virtual guarantee that control of our internet networks will belong to the highest bidder. This will further and much more deeply morph the internet into a corporate - not public - sphere of information, controlled by American interests and able to strangle out access to information based on the what is most appropriate for their business model.

    For the public - you and I - to have any hope of long-term control over true, public access to information, ISPs need to be properly regulated by the government.

    Robert McChesney has written extensively on the corporate takeover of broadcasting bandwidth in the United States - he’s the preeminent historian in this area. It would be very useful to read his history of radio broadcasting to understand and juxtapose what is happening to our internet bandwidth today.

    The private sector is trying to control the internet and profit from it. This isn’t “conspiracy theory” - it’s good business. But throwing open the doors to “highest bidder” competition or disbanding our regulators is granting complete corporate control over our access to information.

    This is bad for the public good.

  21. ChuckM

    February 1, 2011 at 5:48 pm

    I’m a little lost. How is this bad to the bottom line of the small ISP exactly? Are small ISPs going to loose business back to Bell or Rogers? I doubt it.

    This basically increases the rates for those small ISPs… bumping up their bottom line.

    Other than the “we’re on your side” statements I hear, I don’t see how this is bad for their businesses… if it’s across the board and regulated.

    Also, the article somehow implies ownership is an issue. Please name one world wide player that would come in and buy up Teksavvy that would somehow alter any of this? Or, make a real, massive investment to implement thier own wired network (roll the trucks, cables to the homes, etc…), that would compete. None likely. Now ask yourself, what is compete? Just join the party? Or reduce the monthly costs? No one I can think of would compete… just join the party.

    Opening up the ownership bottle doesn’t mean it’s good for the small ISP or new competition. The likely outcome, is massive financial investment in ownership in Bell, Rogers, Telus, etc… that’s where you put the institutional smart money. Not in competing.

    The only “Easy way” to roll out a network is wirelessly, and that’s limited in spectrum and the real throughput once it becomes popular… We’ve seen how well that worked on the cell side already.

    No doubt, this stinks. But I don’t think it’s black and white… I might suggest a public owned network, that is built out by the government. But I don’t see the difference between that and someone like Bell owning the network, but being regulated to keep it running in the best of everyone’s interests.

    BTW, I use Teksavvy and do not like the big players.


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