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Usage Based Billing: What Kind of Internet Do You Want?

There has been a lot of talk recently about usage based billing for Internet services in Canada.

You’re probably with a major Internet Service Provider (ISP) now, but the opportunity to switch to an indie ISP and get more Internet for less money is being threatened. If you sell music on iTunes, offer recordings for download, upload HD video, enjoy watching recordings of live performances on YouTube, etc., you should be paying attention. If you’re excited about Netflix in Canada, if you consider using online backup services, or if you make Skype Video calls, etc., you should be concerned.

Chances are you’re already paying way too much–now is as good a time as any to check out an indie ISP.

Background

Router offline

Credit: comedy_nose [CC BY]

When it comes to Internet Service Providers (ISPs), Canadians seem to have few choices. Bell, Rogers, Shaw, Telus, and Videotron are the only major players, and it’s usually a choice between two of them in any particular place. Most people aren’t aware that many other indie ISPs exist, often offering more Internet for less money.

The major ISPs have a monopoly on the wires into our homes. They built their networks largely on tax dollars, and have special right-of-way privileges “to put wires above and below public and private property without needing permission from or payment to the property owners.” We give them tax dollars and these special privileges so that the networks get built, but we require them to let other companies–the independent ISPs–connect to that “last mile” in order to encourage competition.

The Indie Difference

My family used to be Rogers cable customers. At ~$55/month on the most expensive plan at the time, we always exceeded the 90 GB monthly usage limit, and were often hit with the maximum $50 monthly penalty on top of our monthly fee. (Compare Rogers to Comcast, a major American ISP with a cap of 250 GB.) It was easy for a family of five creators, gamers, students and professionals with home offices to hit 120 or 150 GB per month. Rogers eventually offered a plan with a higher cap, for a whopping $150/month. It’s since come “down” to $100.

We dropped Rogers for Teksavvy — an independent ISP that offered up to 200 GB per month for just $32. And it was only $0.25/GB over the limit, compared to a $2/GB penalty with Rogers. Finally, an honest company that wasn’t trying to gouge us!

Usage Based Billing and the CRTC

A recent decision by the Canadian Radio-television and Telecommunications Commission (CRTC) would allow companies like Bell to impose restrictive usage based billing on resale ISPs like Teksavvy, with low caps and penalties for going over, effectively forcing them to raise their prices. That $32 Teksavvy plan will drop from 200 to 25 GB on March 1. The major ISPs have got the green light to set serious limits on indie ISPs, just as services like Netflix launch in Canada, and as more and more Canadians are uploading HD video to the web.

The major ISPs argue that it’s about customers paying for what they use to combat network congestion. But Hugh Thompson at the Globe recently looked into what a fair price for Internet service might actually look like and found that Internet usage has been growing exponentially, but network capacity has been growing even faster. The true cost of data transfer could be as low as 3 cents / GB, yet some providers charge up to $5 per additional GB. Under this decision, indie ISPs would be charged ~$2 per additional GB.

Shipping hard drives via Canada Post could offer better speeds and bandwidth per dollar.

The only reason for more restrictive usage based billing is to suck more money out of you. The CRTC decision would effectively handcuff indie ISPs, preventing them from offering anything different.

Stop The Meter Campaign

OpenMedia.ca has gathered over 200,000 signatures through its Stop the Meter campaign and… shockingly, politicians are listening. The NDP have been consistently opposed to usage based billing. On Tuesday, the Liberals demanded the decision be reversed, and both Minister Clement and Prime Minister Harper said they were “very concerned” and have asked the CRTC to review its decision. On Wednesday night, Clement essentially confirmed that the government would order the CRTC to start over on the issue. This is reminiscent of December 2009, when the Tories overruled a CRTC decision that would have stopped wireless carrier WIND Mobile from launching in Canada.

The CRTC has done something amazing: it’s got the Liberals, Tories and the NDP to agree!

So what?

How many people are actually taking advantage of what indie ISPs are trying to offer? Apparently, 96% of Canadians are with the big five. The really shocking part: even if the CRTC decision stands, my Teksavvy plan ($31.95 + $14.25 “insurance” for 145 GB total / month) still has better usage caps than Bell or Rogers!

Many Canadians are up in arms about usage based billing after the CRTC’s decision, but the reality is that most people are already being ripped off. The CRTC decision would point Canada in the wrong direction, effectively prohibiting indie ISPs from offering high caps or unlimited plans, but things are already bad—the major ISPs already have low caps and high penalties.

Canada is virtually alone in this regard.

Usage Caps and Mental Transaction Costs

We all know what usage based billing feels like. Just look at the major cell phone providers in Canada (most of whom are the major ISPs). Sending a text message costs up to four times more than sending a message to the Hubble telescope. Anyone who’s traveled with a cell phone knows how careful and pro-active you have to be to avoid hundred of dollars in roaming charges. We often think twice before using a cell phone in these situations.

It’s not just about saving money. It’s these mental transaction costs that really harm innovation.

Do you want using the Internet in Canada to feel like using a cell phone? You might think twice before watching the latest video from Roots Music Canada — are you close to your usage limit for the month? Your fans might think twice before watching your next HD video upload to YouTube, or before downloading from iTunes. Netflix can offer unlimited movies, but it’s not $8/month if your cap is 25 GB and an HD movie is 2 GB/hour.

That’s not the kind of environment that will foster business, arts, culture or community online.

Check Out an Indie ISP

How much are you paying every month to access the Internet? My bill was cut by two-thirds by switching to an indie ISP. Do yourself a favour, and check out Teksavvy, Yak, Acanac, or any of the other indie ISPs. (Note: some are showing low caps because of the CRTC decision — that will likely be undone, and the plans are still reasonable anyways.)

It’s not just about saving money, but also about voting with your wallet for the kind of Internet you want to see in Canada.

Blaise Alleyne is a writer, musician, and programmer based in Toronto.

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8 comments

  1. avatar
    Jim Moffatt 3 February, 2011 at 17:56

    Thanks for the info. I have been hearing a lot and like many Canadians I feel overwhelmed by the constant pressure of trying to understand, educate myself and make an intelligent decision.
    It just feels like too many companies are trying to get too much from us all by giving less and less service. It needs to stop! These tella comps are just finding legal ways to steal and the government agencies that are supposed to protect our intrests are too busy making friends and lining their pockets.
    I am tired of it
    jim

  2. avatar
    Andy Frank 3 February, 2011 at 23:21

    Blaise, SUPERB piece, very enlightening – yes, the CRTC decision is on hold and likely to be reversed as per the Feds, but Aussie, for example, is living under a similar system as was proposed by Rog/Bell/CRTC, and we need to remain vigilant

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