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The Government's Review of Usage Based Billing: What Should Come Next

By Michael Geist

Yesterday was a remarkable day for those following the usage based billing and bandwidth cap issue. In the span of 24 hours, an unlikely political consensus emerged that left little doubt that - at a minimum - the CRTC's UBB decision will be reconsidered.  Prime Minister Harper expressed his concern with the decision, Industry Minister Tony Clement hinted at overturning the decision, and both the Liberals and NDP expressed strong support for overturning the decision. Groups like the Canadian Network Operators Consortium, which represent dozens of independent ISPs, wrote to Clement to call for cabinet to reconsider all the CRTC's UBB decisions and even the Canadian Federation of Independent Businesses wrote to express its concern about the impact on Canadian small businesses.  An Industry Committee hearing on UBB will apparently begin on Thursday.

With Clement indicating that a decision will be forthcoming by March 1st, there is just one month for cabinet to address the issue.  So what comes next?

 

As I argued in my lengthy post on UBB and bandwidth caps yesterday, politicians and policy makers must recognize that this particular decision is only a small part of the broader concern over an uncompetitive broadband marketplace that has led to near-universal use of bandwidth caps. Overturning the CRTC decision is necessary, but by no means sufficient to address the current problems.  Government action should be accompanied by a broader strategy to increase competition and to guard against abusive behaviour by the dominant ISPs.  I identified many possibilities in yesterday's post.

On the specific CRTC UBB decisions, cabinet is faced with the option of asking the CRTC to reconsider the decisions or to overrule the Commission.  While it will be tempting to punt the issue back to the CRTC for reconsideration or varying the decisions with its own regulatory solutions, it should take a clear stand by rescinding the Commission's various UBB decisions. Section 12 of the Telecommunications Act gives the government the power to rescind a Commission decision within a year of its release (there is no need for a specific petition to vary or rescind a decision):

Within one year after a decision by the Commission, the Governor in Council may, on petition in writing presented to the Governor in Council within ninety days after the decision, or on the Governor in Council's own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.

It should exercise the power to rescind for the following reasons:

1.   The CRTC has gone back and forth on the UBB issue with no clear idea of what it is trying to achieve. Sending the issue back for another decision merely repeats the cycle with little hope for meaningful change. 

2.   The CRTC's attitude toward independent ISPs has been particularly troubling for those committed to fostering new competition.  As Commissioner Tim Denton concluded in his dissent in the speed matching case:

What is deplorable, in my view, is the disinclination to consider that specialist outfits like small ISPs should be allowed the opportunity for service innovation because the Commission:

a)      substitutes its opinion for what certain players in the market might decide to do; and
b)      declines to investigate the options for innovation in a serious and prolonged way.

The result is that the possibility for service innovation was turned down, without sufficient consideration, in my estimation. The current ambivalence about the role and legitimacy of smaller carriers continues. They are allowed to exist but denied the means to innovate. In a business with as much uncertainty as this, turning down the possibility for technical and business innovation seems a riskier move than letting it go ahead.

3.   Rescinding the decision is consistent with the government's own policy direction to the CRTC in 2006, which recognized the need to consider independent ISPs within the context of mandated wholesale access.  In particular, the Commission was directed as part of its review to

take into account the principles of technological and competitive neutrality, the potential for incumbents to exercise market power in the wholesale and retail markets for the service in the absence of mandated access to wholesale services, and the impediments faced by new and existing carriers seeking to develop competing network facilities

4.   Sending the decision back to the CRTC for reconsideration virtually guarantees months or years of additional costly hearings and litigation. This would effectively represent a win for Bell at the expense of the independent ISPs.  Bell can clearly afford to spend millions on litigation and lobbying in an effort to wear down the independent ISPs.  For smaller independent ISPs, the ongoing regulatory costs, which are ultimately borne by consumers, are enormous and result in a less competitive market. 

If the government is serious about fostering a more competitive marketplace, ISPs and consumers need policy decisions that promote competition, not more hearings.  It is entirely possible that Bell would reapply for wholesale UBB, but with the government having spoken, the issue would likely be viewed in a new light without the baggage of the poorly reasoned earlier UBB decisions.  As I noted yesterday, there are alternatives to UBB such as bulk wholesale service that would allow for independent ISPs to offer more choice than just passing along Bell's caps (it should be the companies that propose this, not the government in an order to vary the decision). Rescinding the CRTC's UBB decisions is the right thing to do and an important first step in addressing the competition concerns in the Canadian market.

Full post as published by Michael Geist on February 02, 2011 (boomark / email).