CRTC Chariman Konrad von Finckenstein says internet billing models must drive investment and innovation, while allowing flexibility for independent providers. (Pawel Dwulit/Canadian Press)

Canada’s telecommunications regulator is hearing competing ideas about how independent internet service providers are billed by large internet service providers such as Bell — rules that could affect prices and options available to regular internet users.

The CRTC hearings could affect how much smaller ISPs charge customers who go to them because of their higher limits on downloading and uploading.

Bell spent much of Monday morning before the Canadian Radio-Television and Telecommunications Commission arguing in favour of its new proposal to charge independent internet service providers based on their customers’ total internet usage.

The proposal, known as "aggregate volume pricing" allows independent ISPs to buy pre-paid network access based on a cap on the total amount of internet usage by their customers. Bell proposed charging $200 per terabyte, plus a surcharge of 29.5 cents for each gigabyte over the allotted block.

About the hearing

The Canadian Radio-Television and Telecommunications Commission in Gatineau, Que., is looking into new pricing models proposed by such large telecommunications companies as Bell to determine how they charge independent ISPs for access to their networks.

"The pricing model for wholesale high-speed access services should drive large companies and independent ISPs to invest in their respective networks and maximize innovation," CRTC chair Konrad von Finckenstein said in the written text of his opening remarks Monday. "In addition, we will examine the proposals with a view to providing independent ISPs the flexibility to offer innovative services and pricing options."

The hearing was expected to last four days. Von Finckentstein said the CRTC will make the "final determination on the rates for wholesale residential high-speed access services."

Bell first proposed the new model in March after its previous proposal caused outrage among small ISPs, internet advocates and internet users.  That model was based on usage-based caps and "overage" charges per user, and was similar to the way Bell charges its own retail customers.  Critics argued that would effectively force independent ISPs to provide packages identical to Bell's retail packages, making it impossible for them to differentiate themselves and driving them out of business.

In response to questioning by CRTC commissioners, one of Bell's spokespeople argued consumers are happy with their retail pricing despite the firestorm of controversy over usage-based billing last winter.

"I don't think that's an indication of users having a problem" with the prices Bell offers, Mirko Bibic said.

Bell maintains usage-based billing is necessary to deal with network congestion caused by heavy internet users.

"At this point, almost all parties acknowledge that wholesale pricing for internet services should have a usage-based component," Bibic, Bell’s senior vice president of regulatory and government affairs, told the CRTC.

Bibic said the ISPs that make up Bell’s wholesale customers are responsible for 29 per cent of the traffic on Bell’s network in Ontario and Quebec, even though they only service 17 per cent of the customers on the network.

'Disproportionate' share of congestion

"Clearly, wholesale users contribute a disproportionate share of total traffic, and by extension, congestion," he said.

The Canadian Network Operators Consortium, which represents small internet service providers, has proposed an alternative nicknamed the "95th percentile" model, based on peak traffic. The model would take snapshots of an ISP's network usage on a sample basis to determine its peak, then use a method called the "95th percentile measurement" to bill the ISP for usage pushed through at times of peak traffic.

Bob Allen, president of the British Columbia Broadband Association, which represents 28 small ISPs, supported that model when he appeared by videoconference Monday afternoon. He said it will allow independent ISPs to help manage congestion with creative solutions such as time-of-day pricing.

It would also prevent users and independent ISPs from paying an "unduly large amount" for internet traffic during off-peak hours when congestion is not an issue, he said.

However, Bell said the model won’t provide an incentive to reduce congestion and could lead to billing disputes, depending on when the "peak" measurements were taken.

Critics have disputed whether network congestion is a major problem, and argue that if it is, companies such as Bell should invest more in their networks.

But Thomas Little, president of Bell Canada’s wholesale unit said Bell spent more on its internet revenue infrastructure last year than it brought in from sales of internet services.

"The model for recovering those costs is broken," he said. "The solution is to ensure that those who use the most pay the most."

Usage peak doesn't exist: Telus

Telus Corp. supported Bell’s solution in its presentation to the CRTC.

Aggregate volume pricing is simpler and easier to implement than the 95th percentile system, said Michael Henessy, senior vice president of regulatory and government affairs.

He added that current internet usage patterns no longer create a peak, but heavy usage in a wide part of the day.

"There really isn’t any period in the day to which usage will move," he said.  "In fact, if video is a key driver of increased traffic, it is very unlikely that internet customers will delay video streaming to the early hours of the morning. "

If there is no peak, he said, then "peak usage" and "total volume" should look very similar. Both billing methods should therefore give similar results.

Telus said it currently doesn’t charge its wholesale customers based on usage, but would like to reserve the right to do so in the future if congestion becomes a problem.

The CRTC will hear Tuesday from:

  • The Canadian Internet Policy and Public Interest Clinic, a consumer advocacy group based at the University of Ottawa. 
  • Cable internet providers.
  • Canadian Network Operators Consortium, which represents a number of small internet service providers.
  • A panel of consumers from western Canada.

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