Our submission to the UBB proceeding: A summary

We recently made our final submission to the CRTC's usage-based billing (also known as "UBB" or "Internet Metering") hearing, which was brought about because of the hundreds of thousands of Canadians who raised their voices by way of the Stop The Meter campaign.

You can read the final submission (where we methodically rip apart Bell's arguments) in full HERE. Because the submission is rather long and technical, we're providing a short summary in this post.

Before you start reading, it's important to note that the debate has moved considerably in a positive direction since we first started the Stop The Meter campaign. For example, Bell is now asking for indie ISPs to pay 17.8 cents per gigabyte; when this all started, they were asking for $2.50!

Special thanks to all the unsung heroes of the pro-Internet community for helping to make all of this happen.

Gouging Galore: UBB has nothing to do with incumbent costs

Our final comments draw significantly on the difference between measuring usage in terms of volume and in terms of capacity. We point out that the volume-based measurement, which is the basis of usage-based billing, is flawed insofar as it overcharges for Internet use that takes place outside of peak periods. By examining only volume, Big Telecom companies like Bell price most Internet use five times higher than it ought to be.

Quick Facts:

• An off‐peak byte appears to cost a big telecom company approximately 1/5th as much as a peak‐period byte.
• 77% of bytes that a wholesale ISP will be charged for are off‐peak bytes.
• Most volume usage occurs during off-peak periods.
• The aforementioned facts leave significant room for overcharging, because they ignore peak/off-peak distinctions.

Our submission points out that indie ISPs could lower costs to Big Telecom even while registering higher per-month volumes if, for example, they were to succeed in convincing their customers to watch movies at 1am (or to make greater use of more efficient protocols such as P2P). Examples like these demonstrate that the volume-based model is clearly flawed.

Peak Period Billing: Volume vs. Capacity

The proposal we support, the CNOC model, is based on something called 95th percentile peak capacity (also known as Burstable Billing). The 95th percentile model allows usage to exceed a specified threshold for brief periods of time without the financial penalty, which would allow indie ISPs to have a little bit more flexibility in their pricing. This would allow more autonomy for indie ISPs and thus greater ability to compete.

Quick Facts:

• Link utilization and network congestion are typically measured in bps capacity, so provisioning costs are, essentially, incurred in bits per second as well.
• While the number of bytes passing through a link over the course of a day or month may bear some relationship to congestion on that link, it is the density of bits (on a per-second basis) that determines whether congestion will occur.

Bell on the Cost of a GB

We argue that Bell’s current pricing structures are fundamentally flawed. Regardless of whether a capacity or volume-based approach is ultimately adopted, these structures must be re‐examined. Our submission calls Bell's model, a per GB rate applied uniformly across all times that forces off‐peak users (or wholesale ISPs with greater off‐peak usage) to subsidize peak users, "troubling."

Our submission points to Bell’s mechanism for determining volume-based costs, and notes that it ignores the monthly and annual equivalent costs traditionally used when describing the demand-based costs of providing Internet service (these are called "Phase II costs"). Bell has instead adopted a new, and problematic, mechanism for determining the incremental costs of a GB. Bell’s per-GB costs appear to heavily favour Legacy over fiber-to-the-node (FTTN), which will put wholesale ISPs at a disadvantage in the long-term, as more customers migrate to FTTN services and Bell’s relative per-GB cost decreases.

In short, the problem with Bell's costing method is that it derives its per-GB rate based on end user costs, not based on wholesale ISP aggregate costs. With this model, wholesale ISPs are being asked to pay full peak period rates for each and every GB.

On this, we state:

The subsidy, then, is not in favour of off‐peak period users or off‐peak‐period‐heavy wholesale ISPs. Rather it is in favour of Bell. Further, CIPPIC/OpenMedia.ca is having a difficult time squaring Bell’s strong aversion to peak period 95th percentile pricing with this description as it appears that Bell’s own methodology takes peak hour network wide capacity as the basis of its entire costing model...Clarification would be welcome.

In other words, this model would essentially be a regulatory bailout for Bell.

What Should be Done

• We maintain that wholesale billing principles adopted by the CRTC should be calculated in order to address retail‐market concerns.
• Billing practices should maximize indie ISP autonomy and, hence, their ability to provide competitive checks on retail usage‐based billing.
• Tariffs should be designed to provide wholesale ISPs with maximum flexibility and autonomy.
• Tariffs should also develop in a fact‐based and transparent manner.

Our submission also notes that another model, the MTS model, best emulates Big Telecom's actual provisioning costs for the wholesale market. With this in mind, we submit that both the MTS and the 95th percentile models should be made available to the wholesale market, as some may find one preferable over the other, depending on available funds and business models.

Onward, pro-Internet community! And props again to our unsung heros who helped get us to this point.

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Stay engaged. Give input to help shape our work HERE.

Read our FAQ on usage-based billing HERE.

Keep up the pressure on the CRTC by signing the Stop The Meter petition HERE.