Internet pricing ruling expected from CRTC

The future of internet pricing and competition in Canada is about to be determined by a ruling from the CRTC.

The Canadian Radio-Television and Telecommunications Commission is scheduled to release a decision at 4 p.m. Tuesday that will affect how small, independent internet service providers — and hence their customers — are charged by large internet service providers such as Bell.

Independent ISPs rent network access wholesale from companies such as Bell and Rogers in order to create and sell their own retail internet packages to their own customers. That is necessary because while smaller ISPs have their own connections to the internet, only the big companies have direct connections to people's homes — a part of the network known as "the last mile."

The controversy began when Bell proposed charging its wholesale customers according to the same usage-based caps that it had been using to charge its retail internet customers. Any usage over the cap would be hit with a hefty surcharge or "overage" fee of up to $2 per gigabyte. Bell argued that was necessary to make heavy users pay their fair share. It said customers of independent ISPs were responsible for a disproportionate amount of congestion on its network.

The CRTC approved the proposal in May 2010, despite small ISPs' argument that it would force them to create packages identical to Bell's, stifling competition and putting them out of business. Previously, many of them had offered unlimited internet use.

In January 2011, the CRTC confirmed that Bell could impose usage-based billing on its wholesale customers, but had to offer them a 15 per cent discount off the rates it charged its retail customers.

Groups representing internet users protested vociferously, worrying that the decision would drive up internet costs, especially at a time many internet users were starting to take advantage of new video streaming services such as Netflix that consume a lot of bandwidth. One Vancouver-based group, Open Media, collected hundreds of thousands of signatures as part of its "Stop the Meter" petition. A Montreal-based computer consultant filed a petition to the Governor in Council on Jan. 26, asking the government to overrule the CRTC's decision.

Days later, Prime Minister Stephen Harper requested a review of the decision. Industry minister Tony Clement subsequently told reporters on Feb. 3 that if the CRTC did not reverse its decision, the government would intervene.

A day later, CRTC chair Konrad von Finckenstein said the commission would review its decision.

The review generated thousands of submissions through an online public consultation and included several days of public hearings in July. The CRTC heard a number of new ideas for how retail internet should be priced:

• Bell made two proposals, the first, which included usage-based caps and overage surcharges, was met with harsh criticism. Its final proposal was that independent ISPs be charged 17.8 cents per gigabyte of usage.
• The Canadian Network Operators Consortium, which represents small ISPs, proposed a "95th percentile model," in which charges would be based on the measured peak network traffic travelling at the point where the independent ISP's network joins the network of wholesale network providers such as Bell.
• MTS Allstream, which buys wholesale network services from companies such as Bell in some areas and rents its network to independent ISPs in other areas, proposed that wholesale providers charge independent ISPs based on the capacity of the link between the wholesaler's network and the independent's network. The price includes the cost of upgrading other parts of the wholesale provider's network to accommodate traffic from the independent ISP for the next 10 years.