Features | Who will win the web war?

BURNABY, B.C. (CUP) – It lasted only a week and a half, but the furor that spread throughout social media frequented by Canadian users was difficult to miss.

The once-obscure jargon of usage-based billing became commonplace as articles predicted Canada’s collapse into an online ghetto. Outraged internet users plotted ways to fix the damage that had been done, with solutions including online petitions, Facebook status campaigns, class-action lawsuits, and mass rallies in the streets.

Ten days later, however, the outrage transformed into celebration in response to a government message originally distributed through the Prime Minister’s Twitter account.

Tuesday, January 25

The mass outrage started on January 25, after a long-awaited decision by the Canadian Radio-television and Telecommunications Commission (CRTC), an arm’s-length government body responsible for regulating Canada’s broadcast and telecommunications systems, including internet service providers (ISPs).

Under the system set up by the CRTC in the 1990s, the four major Canadian ISPs, owning the vast majority of Canadian internet infrastructure, are required to lease use of their networks to smaller, independent ISPs. In large part, this arrangement was intended to ensure that there would be a sufficient amount of competition in the ISP market, since an oligopoly of only four companies would easily be able to organize into a cartel and drive up prices.

The major ISPs – Bell, Rogers, Shaw, and Telus – have been wanting for years to implement usage-based billing, in which heavy internet users are charged a greater figure for the greater level of network resources that they use. However, in order to do so, they would need the independent ISPs to adopt a similar scheme. If the big four priced their services in this manner, the independents could easily undercut them by offering unlimited internet for a similar or lower price.
Accordingly, the major ISPs petitioned the CRTC to allow them to charge the independents in a usage-based model, allowing them to set a minimum price for all ISPs operating on their infrastructure.

Independent ISPs were alarmed by this proposition; many based their business model on providing cheaper internet access than the major telecoms. They asked the CRTC to require the major ISPs to offer them a fifty per cent discount on their billing rates compared to what they charge their direct customers. Such a scheme would allow the smaller internet providers more flexibility in their pricing.

On January 25, the ruling was finally returned: Independent ISPs would get a discount, but it would be much smaller than requested – only 15 per cent. The changes were to take effect on March 1.

Nine days of outrage

Backlash against the decision was swift and strong. Thousands of posts protesting the arrangement appeared on forums, message boards, and social networking sites. All over the internet, Canadian users began planning ways to voice their displeasure and co-ordinate their efforts to get the decision overturned.

One of the central campaigns in this effort was the “Stop The Meter” online petition, created by openmedia.ca, which had 41,000 signatures when the CRTC decision was announced. By February 3, that figure had grown to over 350,000.
“The independent internet service providers were created to be a check on [the four major ISPs] so that the pricing structures would even out in favor of the consumer,” explained openmedia.ca communications manager Lindsey Pinto.
Following the CRTC decision, however, major ISPs will be “able to impose this internet metering on their independent competitors, which basically means that these independent competitors no longer provide a check on that market, and that these big four telecommunications companies are able to say how much the internet is going to cost.”

This ability to unilaterally set the price of internet access in Canada was not the only motivation that the big four had for establishing such a scheme. “We have internet service providers that also own content,” Pinto pointed out. “For example, Shaw owns Global, and Bell is in the process of acquiring CTV. There are [online] services like YouTube that allow people to create that same kind of televisual content. So in addition to wanting to generate greater revenues from the internet, they’re also protecting their television interests and their content interests from competitors.”

A particularly striking example of this is the case of Netflix, an American company that has recently begun to offer unlimited on-demand streaming of movies and TV shows to Canadian customers. This service competes with both the big four’s television holdings and their own on-demand video services. Because Netflix streams its videos over the internet, a usage-based billing scheme would allow an ISP to charge users for the bandwidth used to watch a Netflix movie, driving the price of such content up substantially.

Most usage-based billing schemes charge consumers a flat rate for a certain amount of bandwidth per month and add an extra fee for each gigabyte by which users exceed that cap. Much of the online outrage was directed toward perceived price gouging in this arrangement, but some was pointed at usage caps that were perceived as being too low. Bell’s new basic internet package would offer 25 gigabytes of bandwidth per month – enough to stream only 8.3 two-hour HD movies from Netflix, without allowing for any other internet usage of any kind.

Primarily, however, public scorn was directed at the inflated pricing of bandwidth exceeding the cap: The same Bell plan prices extra bandwidth at $2 per gigabyte.
“The comparison that we’ve been hearing a lot from public policy advisors, et cetera, is that it costs [ISPs] between $0.01 and $0.15 per gigabyte, and that they’re charging overages of $1 to $4,” explained Pinto.
The absurdity of this inflation was highlighted in an image that began circulating on the internet early last week. The creator of the image had calculated that if one were to purchase a 160 gigabyte solid-state hard drive – roughly $300, or $1.88 per gigabyte – fill it with useful data, and spend $10 on next-day shipping to send it from one part of Canada to another in 24 hours, they would pay $1.94 per gigabyte to have effectively sent themselves that data at just over 15 megabytes per second – a common speed for Canadian internet connections.

In other words, it would be cheaper to purchase an expensive hard drive, express-mail it to yourself, and then throw it away than it would be to pay Bell’s fees for the same amount of bandwidth.
One of the industry’s primary arguments in favour of the new arrangement is that government intervention in the operation of such companies represents an unjustifiable compromise of the normal operation of the free market.
“That is the opposite of what’s happening,” Pinto said. “By allowing big ISPs to control how smaller ISPs offer their customers prices and other metrics, we’re basically stifling that competition, and we’re eliminating the check that was once there.”

The major companies have also defended the practice of high-priced, usage-based billing as necessary to allow for maintenance and expansion of Canada’s internet infrastructure, but Pinto again differs, stating, “That doesn’t have much to do with usage. It indicates a general need for more revenue rather than a need to introduce a particular system of pricing.”

She added that telecommunications companies are “incentivized and partially publicly subsidized to lay down the lines.”

Indeed, although modern internet infrastructure is now available relatively cheaply to the major ISPs, they have been slow to implement it, leaving Canadian users to use outdated technology, as countries like Japan and Norway are able to offer internet users 100 megabyte per second connections at rates cheaper than those in Canada.

“We are now 23rd out of the 25 OECD countries in terms of broadband speed and affordability,” Pinto said. “We’re falling behind the rest of the world. It’s not great.”

The end of the controversy?

With the spectre of an election looming large before the federal political parties, it is not surprising that the NDP and Liberals seized the opportunity to align themselves with the tide of populist outrage that followed the CRTC’s January 25 announcement. Both the Liberals and the NDP have added pages to their party websites coaching users on ways to assist in the effort to get the CRTC ruling overturned.

Seven days after the decision was published, however, something surprising happened. Prime Minister Stephen Harper’s official Twitter account was updated with a post: “We’re very concerned about CRTC’s decision on usage-based billing and its impact on consumers. I’ve asked for a review of the decision.”

Two days later, Minister of Industry Tony Clement confirmed what many Canadians had been hoping for. He stated via Twitter that he would ask the CRTC to review their decision, and that if they did not overturn it on their own, the Conservative government would do it for them.

The online message boards that had been teeming with outrage over usage-based billing only hours before quickly shifted to an atmosphere of guarded celebration.

“I think it is an excellent step in the right direction,” said Pinto, but she also tempered her enthusiasm. “We’re not sure exactly what this means. We know that the Harper government is going to ask the CRTC to overrule a decision related to internet metering, but we’re not sure if that’s going to relate to the structure of what usage-based billing is going to look like, or whether that’s going to overturn internet metering and bandwidth caps in their entirety.

“This is the government going to the CRTC and going, ‘You have to make a favourable decision on this or else we’re going to overturn it.’ What constitutes a favourable decision for the government is up in the air.”

The following day, CRTC chairman Konrad von Finckenstein appeared before the House of Commons Standing Committee on Industry, Science, and Technology with a defiant attitude that surprised many observers. He stated that the CRTC would delay the implementation of usage-based billing for two months, giving independent ISPs until at least May 1 before their pricing structures would be altered.

He also stated that “I would like to reiterate the commission’s view that usage-based billing is a legitimate principle for pricing internet services…the vast majority of internet users should not be asked to subsidize a small minority of heavy users. For us, it is a question of fundamental fairness.”

The specifics of the government’s plans remain unclear; accordingly, those fighting against usage-based billing are encouraging the public to persist in their efforts. A public letter from Michael Ignatieff has exhorted Canadians to sign the openmedia.ca petition and spread the word on social media. Additionally, openmedia.ca is encouraging participation in a national day of action later this month.

Although the anti-usage-based billing movement has scored a major victory, a historically unsympathetic government and a defiant CRTC seem to present a threat that will last into the future. The story that will change the face of the internet in Canada has reached a dramatic climax, but it is far from over.


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