OTTAWA – Just like Proctor and Gamble pays Loblaws for a front-and-centre placement in the laundry detergent aisle for Bounce dryer sheets, so should companies like Google or Apple or Amazon have to pay ISPs like Videotron for transmitting their goods to consumers along the Internet backbone.
In a speech Tuesday at the Fourth Annual Telecommunications Forum in Ottawa, Dépatie’s speech just might rip the lid off the so-called "net neutrality" debate in Canada. On one side we have sectors of consumers fearing their unfettered access to the Internet will be disrupted (or unduly influenced by who pays the ISP the most money for display), and the content producers who clearly don’t want to pay any extra fees since, after all, the end-user already pays for Internet access.
On the other side are the network owners watching eBay and Apple and others reap billions from their web services while paying nothing to the owners of the very networks who deliver all those viewers to them. It’s like a retail store not paying rent in a mall.
While the consumer pays an ISP like Videotron for broadband service and the content provider like Apple for their iTunes, and while Google earns billions reaching those consumers with targeted ads, none of those companies benefiting from that access are paying the network providers for anything.
"What is missing in this model is a way for the provider of content to share part of the content revenue stream for the use of the network," said Dépatie. "If the movie studio, say, were to mail a DVD… they would expect to pay postage or courier fees – why should they not expect a transmission tariff?
"Before I worked at Videotron, I was in the food business – we were a ‘content producer’ in the parlance of today’s communications business. To reach our customers, we dealt with a distribution channel, in our case, grocery stores.
"To reach our customers we needed to convince our distribution channels to place our product in advantageous positions (end of aisles, eye-to-shoulder height on shelves – too high, or too low and sales suffered), and to help promote our product," he explained. "We paid for that service. We compensated the distributor for his ‘help’ in making our product more successful. Now that I am in the driver’s seat of a distributor, I wonder why we have so much resistance to a proven mutually-rewarding strategy."
Dépatie pointed out how web use is growing and bandwidth consumption seems to know no bounds – and how companies like Videotron have to spend to boost performance. He said the company will spend over $300 million on its network in 2007.
"In 2005 a typical Videotron High Speed user paid $60/month for 5Mbps service; a typical transaction would be the purchase of a MP3 file for $1. Total network load would be two to three minutes," said Dépatie.
"Last month both Amazon and Apple announced movie download additions to their catalogues. Our Videotron High Speed customer now has 20 Mbps for which he pays $79/month – but the movie download represents a sustained network event for half an hour.
"The content-owner now receives 15-times more money for the larger file, but the network use is 100-times more for which the content owner pays nothing," he continued.
What will the Internet look like in 2009? We expect our service to be in the order of 50 Mbps… the engineering isn’t the problem, it’s the math… a 20-fold increase, in two years, is without precedent… This isn’t just an incremental change, a business-as-usual growth — this is a 20 times increase."
And what Videotron doesn’t want to do, said Dépatie, is foist all those costs on its customers. "We merely think that the burden of the costs of provision of high speed access should be shouldered by all who benefit – that includes companies whose services flow along the network," he said.
Deputy’s speech also address other hot button items, like de-regulating cable and rectifying inequitable regulatory treatment (such as requiring certain TV channels remain must-carries) in favor of competition.
"We are calling for it with all our might because competition generates ideas and innovation. It makes companies better and more creative by forcing them to innovate and offer superior products and services at more affordable costs," he said.
"Presently, there are more than 200 CRTC rules governing our actions, restricting our freedom of operation and as many that stop our capacity to innovate. If residential telephone service is to be deregulated, then in all basic equity, the CRTC must free cable companies from the regulatory burden preventing them from offering better choice and prices to consumers," Dépatie continued.
"For example, under one of these rules, cable companies are presently requested to broadcast television channels in analog, digital and high-definition modes, when available. This results in a clearly disproportionate use of the bandwidth and a considerable reduction in the capacity to broadcast other channels that would meet more specific consumer needs."
He also went after the state of the wireless industry as well, saying that there are so few players Canadians are forced to pay higher prices when compared to other countries and results in a lower penetration rate of the wireless in Canada. Videotron has just launched its own wireless service on the Rogers Wireless network.
"Canadians could really benefit from having new players on the market; they would take advantage of increased innovation and more affordable prices," he said.
