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Bell's proposed usage-based billing model could force ISP's to pay more for transport

July 15, 2011 - 6:15am | by brianbeaton

From CBC.ca

Bell internet plan risks 'double-charging' users, CRTC told

Posted: Jul 14, 2011

Independent internet service providers risk having to pay twice for the same internet usage if the CRTC approves a new usage-based billing model proposed by Bell, MTS Allstream says.

"Bell is attempting to charge in multiple ways for usage, which sets up the conditions for double-charging competitors for the same network transport component," Mike Strople, MTS Allstream's vice-president of technology, said at a CRTC hearing Thursday.

Volume vs. peak capacity

The big debate at the CRTC hearings week has been whether small ISPs should be charged based on the volume of internet usage or the peak capacity they consume.

If the network access rented by small ISPs from companies such as Bell and MTS Allstream is likened to a ramp onto a highway and cars represent data, peak capacity is the greatest number of lanes occupied by cars at any given time (which, in turn, is limited by the total number of "lanes" ordered by the small ISP). Those who favour this measurement argue that this is what is most closely correlated to congestion.

Volume is equivalent to the number of cars that pass through the ramp on a given month. Bell argues total volume is a better measure because there can be bottlenecks on the highway other than the ramp itself that can be affected by traffic to and from a certain ISP’s ramp.

Independent ISPs say it’s the job of wholesalers such as Bell to manage traffic on other parts of the highway and to predict how it will be affected by the amount of traffic that could be generated from each ramp, given its peak capacity.

The hearing, which opened Monday, will determine how independent ISPs should be charged by larger telecommunications companies such as Bell for access to their networks. That access allows the small ISPs to connect to individual customers and create their own retail internet packages, in order to meet the CRTC's goal of boosting competition.

MTS Allstream provides wholesale network access to small, independent ISPs in some areas, as Bell does. However, in other areas, it rents similar access from other telecommunications companies

Strople said MTS Allstream's plan has similarities to Bell's — both include fixed fees for network access and a component linked to the capacity of the network link that would vary with the number of customers and their usage. However, MTS Allstream's proposal would not place a cap on the volume of usage or impose a surcharge for overuse.

Strople said that extra component "adds the opportunity to charge twice for the same capacity" and the surcharge for extra usage above the cap would make it difficult for small ISPs to predict their bill for each month.

The company gave examples showing that under certain scenarios, an ISP's bill would be four times higher using Bell's billing model than MTS Allstream's.

Small ISPs' proposal poses 'challenges':MTS Allstream

Earlier in the week, the Canadian Network Operators Consortium, a group representing small ISPs, also proposed that small ISPs be charged based on peak capacity.

However, MTS Allstream criticized that group’s model because it would not require small ISPs to predict the amount of capacity they would need ahead of time — it would simply charge them for the peak capacity they used after the fact.

“Its variability provides challenges for both parties,” Strople said.

MTS Allstream would require ISPs to reserve a certain amount of capacity ahead of time that they could not exceed in a given month.

CRTC commissioner Michel Morin asked what would happen if an ISP needed more capacity in a month than they had scheduled.

Strople responded that as the limit was approached, the quality of the service would degrade — data packets would be lost and the network would slow down for all users until the amount of traffic declined again. It would be the ISP's job to manage the traffic of their customers to avoid that, he added.

However, he said, the ISP would be able to order more capacity for delivery within several weeks.

At least two the CRTC commissioners pointed out that Bell’s model appears to allow ISPs to get extra usage on the fly if needed, unlike MTS Allstream’s.

Strople clarified that the extra usage was a different measure — volume in gigabytes transferred — and that if an ISP exceeded its allotted peak capacity on Bell’s network, it “would be in the same position that they would be with us, regardless of where you may be on total gigabytes transferred.”

Teresa Griffin-Muir, vice-president of regulatory affairs at MTS Allstream, said volume-based pricing is sometimes used for retail internet customers because it provides a measure of a customer’s usage that the customer can look at. However, when applied to the ISPs, it limits their flexibility and effectively imposes a pricing model on them, she said.

Small ISPs had expressed similar concerns earlier in the hearing.

CRTC chair Konrad von Finckenstein observed, “You make it sound like a revenue grab more than anything else.”

“Uh, yeah,” Griffin-Muir responded.

Claude Hénault, a former journalist and public servant who also appeared at the hearing Thursday, had a similar view of Bell’s proposal.

“Usage-based billing is double-billing,” he said, noting that users already pay more for higher speeds.

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