July 12, 2011 5 years 7 months ago

UBB Hearing: Indie ISPs, OpenMedia/CIPPIC hear the deal is too good; Rogers, cablers also respond

GATINEAU - Independent ISPs and some of their supporters came under significant criticism on day two of the CRTC’s wholesale usage-based billing hearing for wanting to profit off the backs of the incumbent providers and not invest in their own networks because the deal is too good.

CRTC vice-chair of broadcasting Tom Pentefountas first took OpenMedia and the Canadian Internet Policy and Public Interest Clinic (CIPPIC) to task in the morning session wondering whether there is actually an incentive for the independent ISPs to invest in building out networks. “Isn’t part of the issue that the deal is so good and they could piggyback on these incumbent providers and still be tremendously profitable and there’s no need for them to invest in networks on their own?” he asked. His question came after an interesting exchange with OpenMedia and CIPPIC regarding indie ISP network investments.

“I think there are incentives to build closer to the last mile, but I don’t think we want them to build to the last mile necessarily in all places,” responded Tamir Israel, a staff lawyer with CIPPIC.

Later in the day, CNOC had to respond to similar question from commissioner Len Katz. ”Where is the incentive for you folks to invest if in fact we agree with you that it should be cost, it should be at peak, it should be 15%. Why would you ever invest a dime?”

Chris Tacit, counsel for CNOC, said they will invest because they will have the money to do so.

“None of these people sit still in the marketplace. They want to invest, they want to move ahead, but they need the revenues to do that. We’re not looking for a handout, we want to pay the fair costs that it costs to get the services and an appropriate return that compensates [the incumbents] for the risk,” he said. “We just want to make sure that when that’s done we don’t end up cross subsidizing the incumbents in addition to that and then we will invest.”

During its appearance, CNOC defended their 95th percentile approach as a workable and economically appropriate method for billing wholesale customers for using the incumbents networks. In opening remarks, the organization said it’s willing to pay for access and usage, but only when it imposes costs on the incumbents. That, they said, comes from peak usage not overall volume.

“It turns out that when it comes to usage, the only type of usage that can lead to significant costs for incumbent networks is peak usage,” Bill Sandiford, chair and president of CNOC and president of Telnet Communications, told the commission. “It is peak usage that can cause congestion and require the incumbents to increase network capacity.”

CNOC’s stance that 95th percentile is an easy to implement solution was a point CRTC chair Konrad von Finckenstein seemed to have a hard time understanding. He noted in his question that on Monday, Bell and the cable companies claimed this approach to unfeasible and impractical because of cost related issues.

Tacit responded that all the major providers, including the incumbents, use this method to bill wholesale customers to for transit and transport services, so it would be an easy solution to implement.

“There are tools that are available for download from the Internet that you can use if you have a router to measure traffic this way,” he said. “With regards to where you should measure, we think that’s a red herring and we think so [because] if you are paying for the capacity you are using - in other words if you get the price correct for the 95th percentile measurement - and you apply the correct rate to that, we will be properly compensating the carrier for the peak demand that we cause.”

Asked how quickly this approach could be implemented by the ILECs, Tacit noted that it could be a relatively short period of time. “I’m sure if you told them we’re going to strip usage out of your flat rates and approve those and as soon as you start measuring usage, we’re going to approve your usage rates, I bet you they’ll do it pretty quickly.”

Added Sandiford: “The notion that this is a difficult concept to implement or do is very foreign to us. We have some of the smallest and largest ISPs the country in our midst and I don’t know of a single one of our members that hasn’t been able to implement 95th percentile billing.”

Cable carriers, sans Shaw, defend their position

Sandwiched between OpenMedia/CIPPIC and CNOC, the cable carriers (Cogeco Cable, Rogers Communications and Quebecor Media) used their appearance to talk about the advantages of their volume-based approach.

“One, is we wipe away this distinction between pre-purchasing and post-purchasing… a single cost-based rate. We also think that our proposal reflects very well the true cost structure of the network and also provides maximum flexibility for the wholesaler to design its own retail plans,” said Denis Beland, senior director of regulatory affairs, telecommunications at Quebecor.

The cable companies have proposed a plan that would include a set amount of bandwidth in a single charge rather than separating out access and usage under Bell’s AVP approach for fibre to the node services. Bell has proposed to bundle access and usage with legacy services. This latter approach is very similar to what the cablecos are proposing.

Cogeco et al. have suggested that over time the usage rates would decrease as the costs of providing that bandwidth dropped. But they said there are some things to remember when relying solely on the fact that costs are decreasing.

“There’s two caveats I’d put on that,“ cautioned Ken Engelhart, senior VP of regulatory at Rogers. “One is digging holes in the street is not subject to Moore’s Law. Digging holes in the street is getting more expensive, not less expensive as time goes by.“

The Rogers executive also insisted that there isn’t a bandwidth crisis as was suggested by Bell during its appearance on Monday.

“One of the things that disturbs us about this whole debate is this notion that this all about congestion,” said Engelhart. “This is not about a bandwidth crisis, this is not about a crisis at all. There are some costs that are usage sensitive. When costs are usage sensitive that means the more you use, the more you spend. It’s appropriate to send the right economic signals and it’s appropriate to charge for usage based costs on a usage basis. If people want to pay that price, and use tonnes and tonnes of bandwidth we’re happy to supply it. So we don’t see any crisis, we just think that pricing should involve the correct signals.”

The hearing continues tomorrow as Shaw Communications, PIAC and more consumers face the commissioners.