http://business.financialpost.com/2011/11/15/crtc-offers-compromise-plan-on-internet-billing/
TORONTO — The country’s independent Internet service providers were hit Tuesday by a regulatory ruling allowing major network owners such as BCE Inc. to charge “significantly” higher rates for wholesale Internet access.
Though affecting less than 10% of Canadian retail Web users, the decision holds broader implications for competition in the sector if some smaller Internet Service Providers (ISPs) cannot afford the hikes and are squeezed out of the market.
“The issue is that [wholesale] ISPs need to compete to give consumers choice, and if these rate hikes mean they can’t, there’s going to be less choice,” said Bill Sandiford, president of Canadian Network Operators Consortium, a trade body representing scores of small providers.
In its ruling, Canadian Radio-television and Telecommunications said it is allowing large Internet providers to use a new model of usage-based billing for wholesale Internet services based on capacity.
The decision means large companies can charge wholesale Internet providers for network access based on either the existing flat-rate model or a new capacity-based billing model.
Under the new capacity-based approach — which the commission believes offers enough flexibility for smaller IPSs to offer competitive retail services without capping bandwidth — independent ISPs will have to determine at the beginning of every month the amount they need service their retail customers and then manage network capacity until they are able to purchase more.
BCE, the largest network owner in the country, has been leading the push among the big operators pushing for tariff hikes, arguing through numerous hearings that surging traffic volume now requires higher rates to invest in capacity.
While regulators rejected many of the terms in BCE’s latest proposal, the company’s head of governmental affairs said the commission nonetheless selected the “correct” model.
Senior vice-president Mirko Bibic said the decision gives independent ISPs full flexibility to devise their own pricing structures while rates will only rise for the heaviest users. Further, while “capacity” costs will climb, “access” fees have been lowered.
Mr. Bibic said it was “too early” to determine whether the decision was revenue-positive for BCE, the country’s largest telecommunications firm as well as other major network owners such as Telus Corp., Rogers Communications Inc. and Shaw Communications Inc.
The decision is the culmination of a long-running regulatory war between BCE and the scores of ISPs that lease access to its network and resell it. The issue was dragged into the national spotlight in January when Bell won regulatory permission to impose so-called “usage-based billing” onto the smaller companies.
The Montreal-based former phone monopoly successfully argued that network congestion requires the heaviest users to pay more, regardless of whether they were Bell retail subscribers or customers of a wholesale provider.
The January decision ignited a consumer backlash led by activist groups such as Open Media, which warned the small sub-sector faced being wiped out — and, more important, of the upward pressure it could place on retail prices generally as a result. A wave of public scorn hit Ottawa ahead of the May federal election, quickly turning into a hot-button issue for a minority Conservative government and opposition parties alike.
On Feb. 3, the federal cabinet advised the CRTC that if it did not review the decision and come back with a new one, it would be reversed completely.
The hearings in the summer produced consensus among most, including many small ISPs, that the existing flat-rate model would need updating, according to Chris Peirce, head of regulatory affairs at MTS Allstream Inc.
Tuesday’s decision, which leaves Allstream’s enterprise market unaffected, but Mr. Peirce agreed “questions” about residential wholesale rates remain, rates some smaller providers said Tuesday they will be challenged to afford.
Without competition from wholesalers in either the business or residential markets, “things will settle into a world where prices are going up,” the executive said before the decision.
The question now is if cabinet will once again review the ruling, or, with a majority secured, whether political appetite has waned.
TORONTO — The country’s independent Internet service providers were hit Tuesday by a regulatory ruling allowing major network owners such as BCE Inc. to charge “significantly” higher rates for wholesale Internet access.
Though affecting less than 10% of Canadian retail Web users, the decision holds broader implications for competition in the sector if some smaller Internet Service Providers (ISPs) cannot afford the hikes and are squeezed out of the market.
“The issue is that [wholesale] ISPs need to compete to give consumers choice, and if these rate hikes mean they can’t, there’s going to be less choice,” said Bill Sandiford, president of Canadian Network Operators Consortium, a trade body representing scores of small providers.
In its ruling, Canadian Radio-television and Telecommunications said it is allowing large Internet providers to use a new model of usage-based billing for wholesale Internet services based on capacity.
The decision means large companies can charge wholesale Internet providers for network access based on either the existing flat-rate model or a new capacity-based billing model.
Under the new capacity-based approach — which the commission believes offers enough flexibility for smaller IPSs to offer competitive retail services without capping bandwidth — independent ISPs will have to determine at the beginning of every month the amount they need service their retail customers and then manage network capacity until they are able to purchase more.
BCE, the largest network owner in the country, has been leading the push among the big operators pushing for tariff hikes, arguing through numerous hearings that surging traffic volume now requires higher rates to invest in capacity.
While regulators rejected many of the terms in BCE’s latest proposal, the company’s head of governmental affairs said the commission nonetheless selected the “correct” model.
Senior vice-president Mirko Bibic said the decision gives independent ISPs full flexibility to devise their own pricing structures while rates will only rise for the heaviest users. Further, while “capacity” costs will climb, “access” fees have been lowered.
Mr. Bibic said it was “too early” to determine whether the decision was revenue-positive for BCE, the country’s largest telecommunications firm as well as other major network owners such as Telus Corp., Rogers Communications Inc. and Shaw Communications Inc.
The decision is the culmination of a long-running regulatory war between BCE and the scores of ISPs that lease access to its network and resell it. The issue was dragged into the national spotlight in January when Bell won regulatory permission to impose so-called “usage-based billing” onto the smaller companies.
The Montreal-based former phone monopoly successfully argued that network congestion requires the heaviest users to pay more, regardless of whether they were Bell retail subscribers or customers of a wholesale provider.
The January decision ignited a consumer backlash led by activist groups such as Open Media, which warned the small sub-sector faced being wiped out — and, more important, of the upward pressure it could place on retail prices generally as a result. A wave of public scorn hit Ottawa ahead of the May federal election, quickly turning into a hot-button issue for a minority Conservative government and opposition parties alike.
On Feb. 3, the federal cabinet advised the CRTC that if it did not review the decision and come back with a new one, it would be reversed completely.
The hearings in the summer produced consensus among most, including many small ISPs, that the existing flat-rate model would need updating, according to Chris Peirce, head of regulatory affairs at MTS Allstream Inc.
Tuesday’s decision, which leaves Allstream’s enterprise market unaffected, but Mr. Peirce agreed “questions” about residential wholesale rates remain, rates some smaller providers said Tuesday they will be challenged to afford.
Without competition from wholesalers in either the business or residential markets, “things will settle into a world where prices are going up,” the executive said before the decision.
The question now is if cabinet will once again review the ruling, or, with a majority secured, whether political appetite has waned.
