Canada's UBB restrictions: A blow to competitors and consumers

Sean Buckley, FierceTelecomIf there's one thing that Canada's ongoing war over proposed unlimited broadband rules for competitive broadband provider's shows is that all consumers don't want or like bandwidth usage caps.  

At issue in Canada is the Canadian Radio-television and Telecommunications Commission's (CRTC) proposed ruling that large incumbent operators such as Bell Canada (NYSE: BCE) and Telus (Toronto: T.TO) will be able not only to charge their wholesale competitive ISPs customers (TekSavvy and Primus) a flat monthly fee, but also set monthly usage limit. Then, if the wholesale customer goes over the monthly limit it will be charged by the gigabyte.

Ultimately, what this means is that competitive ISPs such as TekSavvy, which currently offers unlimited bandwidth usage plans--one of its differentiators over the incumbent service providers--will have to adhere to a bandwidth usage limit every month.  

One slight reprieve came when the CRTC mandated that Bell give its wholesale customers a 15 percent discount on usage-based rates, a far cry from the 50 percent discount that competitive ISPs initially asked for.

Now, the CRTC's proposed plan embroiled in a political battle between the CRTC and Canada's Prime Minister Steven Harper and Industry Minister Tony Clement, who both vowed to block the initiative from moving forward.  

Bandwidth throttling is not just a Canadian phenomenon, however. Since 2008, three U.S.-based service providers, including now infamous trials conducted by the likes of AT&T (NYSE: T) and Time Warner Cable (NYSE: TWC-WI), but also Frontier (NYSE: FTR), have conducted their own separate trials of usage based billing in select markets.

While AT&T and Time Warner Cable both put their bandwidth usage efforts on mothballs, Frontier has continued to incorporate bandwidth caps into its 3-6 Mbps DSL service. Ironically, Frontier previously lambasted Time Warner Cable about its bandwidth metering trials.

To soften the blow to consumers, last summer it said would no longer include language in its DSL brochures about "excessive" usage and that it would give users 5 Gigabytes of usage every month. While I agree that most users probably won't go near that limit, the reality is that users don't want to have a fear hanging over their heads either.

One reader pointed out to me in a previous Editor's Corner on bandwidth metering that the reason why service providers like AT&T, Frontier and Time Warner want to impose caps is that they "want more revenue for providing their services."

Okay, fine, they need to earn more revenue, but in creating caps service providers will likely lose more subscribers. Perhaps the better way to could get more revenue from broadband consumers would be by giving them incentives to stay on board such as offering incremental add-on services such as cloud-based storage and security.

Not surprisingly, all of these bandwidth usage throttling efforts were met scorn from users and consumer groups, including the Stop the Cap coalition that's been an outspoken critic of bandwidth caps.

Back up in Canada, the reality is if Bell and the CRTC get their way, it will put all of the power back into the hands of the incumbent telco to stamp out competitive players with burdensome fees.

What's more, such a ruling would be a major blow to over the top video player Netflix, which last September announced last September that it would offer a streaming video service in Canada.

How convenient for Bell Canada and other incumbents? Bell, for one, has been building up its own TV service play organically, but also through its impending purchase of broadcaster CTV, a move that will give it major pieces of content such as the 2012 Olympics to provide to its IPTV, satellite and even broadband subscribers.

I agree with CRTC's chairman Konrad von Finckenstein that everyday users shouldn't "be asked to subsidize a small minority of heavy users." If you want unlimited or lots of bandwidth, you should pay for it, what about the user that does the occasional TV show download?

If the proposed regulations do go forward, there's a possibility users would see their broadband bill jump if they decide to leverage the service.

Hopefully, the CRTC will realize that as broadband caps do nothing, as suggested by Rocky Gaudrault, CEO of TekSavvy, than serving the incumbent carrier's not the consumer's interests.--Sean

What's your take on Canada's proposed bandwidth caps? Join the discussion at our LinkedIn group.

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