CRTC sets new wholesale ISP billing model based on capacity, not volume

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The Canadian Radio-television and Telecommunications Commission (CRTC) has outlined a new wholesale access billing model incumbent service providers like Bell Canada (NYSE: BCE) can use to charge smaller ISPs.

With the "approved capacity model," incumbent service providers will now have two options for charging independent internet service providers: a flat rate or a rate based on capacity and the number of users.

For residential broadband services, the new capacity model incorporates a number of new elements: a monthly access rate for each of the wholesale ISP customer's retail subscribers; a monthly capacity charge, offered in increments of 100Mbps; and ancillary charges, including a monthly interface charge (where required) and associated service charges (as applicable).

Under the terms of the new capacity rate model, service providers like Bell can charge wholesale ISP customers based on the speed of the service. In other words, competitive service providers like TekSavvy would pay for the size of the pipe they buy versus the amount of data that travels through that pipe. Still, these ISPs will have to pay higher fees to provide higher speed bandwidth services to their respective customer base.  

Bell Canada and MTS Allstream (Toronto: MBT.TO) will now adapt their wholesale billing models to the new framework, while other major wireline service providers including Telus (Toronto: T.TO), Shaw Communications (NYSE: SJR), Bell Aliant (Toronto: BA-UN.TO) and SaskTel will be able to continue charging their wholesale residential ISP customers using their existing flat rate models, which allow unlimited Internet bandwidth usage.

In January, the CRTC initially approved Bell's proposal to charge fees for any wholesale customer that went over a bandwidth limit. Following outcry from competitive providers and a number of political leaders, including Industry Minister Tony Clement, who asked the CRTC to revise its decision, the CRTC went back to the drawing board to revise the billing structure.

In the ruling, the commission said that the approved capacity model and the flat rate model "allow for the setting of just and reasonable rates, and fulfill policy objectives by fostering innovative and healthy competition while ensuring regulatory efficiency and symmetry."

Konrad von Finckenstein, the CRTC's outgoing chairman, admitted in a CBC News article that the agency's initial decision to let Bell increase its wholesale rates was a mistake.

"Our original decision was clearly not the best one. It was wrong and it 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.

He added that "The bottom line is that you as a consumer will not face a cap or limitation of use because of anything mandated by the CRTC."

For more:
- CBC News has this article
- see the CRTC's decision

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