Independent internet service providers appeared before the CRTC on Tuesday to suggest how they would like to be billed by large companies such as Bell.

How those ISPs are billed could in turn affect the internet rates and packages available to their customers. Consumer advocates fear the wrong rules could lead to higher prices or lower download limits.

The Canadian Network Operators Consortium, which represents a group of small ISPs, is proposing that they be billed monthly based on peak traffic — not the total amount of internet usage by their customers, the quantity that Bell would like to bill them on.

Bell and other "incumbent" telecommunications companies are required to rent access to their networks to independent ISPs — their wholesale customers. That allows the small ISPs to create internet packages to sell to their own retail customers and meet the CRTC’s goal of boosting internet competition.

On Tuesday, the second day of a hearing into how independent internet service providers should be billed by large telecommunications companies such as Bell, the CNOC likened data networks to pipes. Once those pipes are paid for, it costs very little to move data through them, the group said.

"What’s consumed is peak capacity, not bits travelling across a pipe," said Christian Tacit, a spokesman for the group.

The only potential cost to companies such as Bell is being forced to expand their infrastructure as the peak traffic approaches the capacity of the pipe, the group argued.

 "Our model is focused on compensating the incumbents for costs they actually incur, but not providing them a windfall when they do not incur costs," said Peter Rocca, a CNOC member.

CRTC chair Konrad von Finckenstein questioned CNOC about Bell’s comments that CNOC’s billing proposal, known as the 95th percentile method, would be impractical to implement and require them to make big changes to their billing system.

Tacit responded that simple measurement tools can be downloaded from the internet. Many of the incumbents already use the system for certain other types of internet services, he said, and the big companies have rejigged their billing systems before, such as when they decided to start billing their customers based on usage.

Commissioner Candice Molnar asked CNOC to respond to the fact that its proposal doesn’t account for the up-front risk that companies like Bell assume when they expand their networks capacity based on anticipated traffic.

Tacit responded that in an earlier decision, the CRTC allowed companies such as Bell to charge small ISPs an extra 10 per cent to account for that risk.

"Now, it’s another trip to the well for the incumbents," he said. "I don’t buy that … the issue’s kind of been put to bed."

'Big telecom' internet investment too low: consumer advocates

Earlier in the day, CNOC’s proposal was favoured over Bell’s proposal by a group of consumer advocates who made the first presentation of the day at the hearing.

Open Media and Canadian Internet Policy and Public Interest Clinic at the University of Ottawa said they thought the proposal was more in line with the costs faced by incumbents providing wholesale network access to independent ISPs.

However, they said they didn’t think any kind of usage-based billing was necessary, and big telecommunications companies should tackle internet congestion by investing more in their networks.

"We should not be deterring Canadians from using more internet," said Steve Anderson, executive director of Open Media.

"Functional marketplaces meet demand by increasing supply — not by squashing demand and seeing who can gouge Canadians most."

Anderson’s group collected 400,000 signatures in a campaign against a usage-based billing proposal by Bell earlier this year.

He told the CRTC that growth in internet use has decreased in recent years, from about 100 per cent annually to roughly 40 per cent per year.

"Big telecom’s investment in network infrastructure in Canada as a percentage of revenue has failed to keep pace with our OECD counterparts," he added.

That Organization for Economic Co-operation and Development (OECD) is a group of 34 countries including Canada that issues international comparisons of economic and social indicators such as internet infrastructure and use.

Anderson also noted that some Canadian telecommunications companies such as Telus are able to avoid congestion without billing their wholesale customers based on monthly customer usage.

"They seem to be doing fine with network investment," he said.

Bell had told the CRTC Monday that it spent more on internet investments than it earned from internet revenues in the past two years and that the customers of independent ISPs contributed disproportionately to congestion.

It has proposed a new usage-based billing model known as "aggregate volume pricing." It 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.

Canadian cable companies, including Vidéotron owner Quebecor Media and Rogers, also pitched an alternative method of usage-based billing Tuesday, suggesting that ISPs be charged based on average monthly usage caps per user. ISPs would be charged for usage above the cap, but could bundle together the accounts of many users so that when heavy users exceed the cap, lighter users could absorb the excess with their unused capacity below the cap.

LIVE BLOG REPLAY: Updates on the CRTC hearings

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