Once again, Tony Clement contemplates assuming a consumer-crusader role and interfering with the CRTC as it exercises its mandate from Parliament to regulate communications in Canada. This time it is whether Cabinet should over-rule the commission's order regarding fees for internet services. It's a clash between major internet service providers (Bell, Telus, Rogers) and a few small internet service re-sellers over how users should be charged for bandwidth on the 'net. The majors want a variation of pay-by-usage (the more you use the more you pay) while the minors want to offer unlimited bandwidth for one flat-rate fee.
The Harper government is stepping into a contentious debate over just how much Canadians should pay for Internet service, as Industry Minister Tony Clement says he will review a federal regulator’s decision that will raise prices for consumers and businesses.
link: Ottawa enters dispute over higher Internet fees - The Globe and Mail
A bit of background; the internet is built on a series of worldwide servers (computers) connected by fibre-optic cables, satellite and other radio transmission and copper wire to homes and businesses and, increasingly, handheld wireless devices. In Canada, almost all the transmission network was built by the telephone companies and the descendants of the railway-owned telegraph companies (think CN/CP Telegraph which morphed into Cantel and was eventually assumed by Rogers). The final link to customers' homes rested exclusively with the telephone companies whose wires were used to make the dial-up connections with which some of us were introduced to on-line services. The telcos later were joined by the cable-tv carriers who had also invested a huge amount of money to string a second set of copper wires/cables through urban communities to homes and offices. There was a subsequent overlay of wireless connections for smartphones and portable computers and, again, it was a network built by the telephone and cable companies. All the transmission towers and satellite connections and the cables that connect those towers were installed by telephone and cable companies. It's why, to this day, the largest and busiest internet servers are located close to the railway lines and the right-of-ways where those fibre-optic cables could be laid-down at lowest cost.
The issue at hand is bandwidth; that is the capacity of the network to carry the bits and bytes of data and how many of those bits and bytes users are sending. Back in the nascent days of the internet, the system had much greater capacity/bandwidth than users needed. It was like a 16-lane highway used by 2 or 3 cars and a truck every few hours, because there was very little we could do on the internet beyond sending simple-text emails. The world wide web was accessible only to those proficient in writing computer code to connect to files stored in other locations. Dial-up technology was slow so it was impossible to use up the capacity of the fibre-optic links, to fill the highway. It led to users thinking of the capacity/bandwidth as unlimited because it was difficult to think that we could ever fill the highway. A fun way to perceive this is to look at photos of the Queen Elizabeth Way (Toronto to Fort Eire and the US border highway, for those 'from away') in 1939; how could it ever be filled? Like the QEW, we are managing to fill the internet, to use all that capacity that once appeared unlimited.
Having so much capacity, the cable and telcos offered to sell access on a wholesale basis to third-parties, as well as selling access to the internet to retail customers (i.e. households and business end-users) . Re-sellers bought surplus capacity (which it seemed was unlimited) at a deep-discount and resold it to end-users after having made a small investment in a billing system to collect payment from those end-users. The re-sellers didn't have to lay cables, build transmission towers or launch satellites and they invested nothing in research and development to improve the network.
Somewhere along the line, the regulator intervened and ordered the telcos and cable companies to give access to their networks at wholesale rates to the re-sellers and also to allow those resellers to connect to users via that "last mile" of wire the ending in homes and apartments and offices. That's the wire the telcos and cable companies installed at such great expense. It all worked relatively well as long as there was seemingly unlimited surplus capacity. But it was a model based on government protectionism rather than the law of supply and demand in the marketplace.
As the internet revved-up to high-speed (led by the cable companies' investments) however, the major carriers wisely foresaw a need to charge for access to the internet based on how much subscribers used it. There were different rates initially for home and business use and, later, fees were tiered; if you used x-amount you paid y-dollars, if you used 2x-amount you paid more, maybe 1.5x. The objective was simple and, most importantly, fair; the people who used the internet the most should pay the most.
The re-sellers saw a potential marketing advantage in offering unlimited, flat-rate access to subscribers using the cheap, surplus capacity/bandwidth the regulator had ordered the telcos and cable companies to give them.
So we arrive in the second decade of the 21st century and the internet is so busy it is on the verge of becoming clogged. Without the billions of dollars spent on research and expanding the physical network, it would have collapsed already. But the re-sellers have continued to treat the internet as unlimited and free, protected as they are by government regulation.
In a cautious move, the CRTC has decided that the major carriers, Bell, Telus, Rogers et al, can begin to charge the resellers according to how much capacity/bandwidth they use. The telcos are still required to sell access and to sell it at a discount.
That's not enough for the re-sellers who have benefited from a no-risk business strategy and so they are appealing to Tony Clement to continue to allow them their free-ride. Not free maybe, but guaranteed very low-cost. For a conservative, free-market oriented government to condone such protectionism might seem odd, except that ministers like Tony Clement will do anything to appear to be populists, consumers' best friend. And there are a few hundred thousand consumers and voters across the country who have enjoyed deeply-discounted internet access who aren't happy that it may end; that they may have to pay for what they use just as they have to pay for their electricity and natural gas and water.
I have never been a fan of Bell Canada. I've suffered abuse from its customer service department as much as anyone else living in Ontario or Québec. Rogers is a company that is difficult to love. I can imagine that other Canadians feel the same way about Telus or another local carrier.
In this case however, my empathies are entirely with the telephone and cable companies and their subscribers. I would go so far as to say the CRTC should end the requirement that internet re-sellers be given access at discount rates. Let the re-sellers bid for access and bandwidth and let their subscribers pay for what they use just as millions of Canadians have been doing all along.
The consumer advantage in ending protectionism is that all-users share the cost of building and operating the network. This has to be preferable to the current situation where Rogers and Bell customers subsidize the small minority who use the discounters. If I were Bell, I would be contemplating an advertising campaign encouraging subscribers to write Clement making this very argument and demanding he end the protectionism.
It is false to argue the protectionist system in place now is necessary to ensure competition and safeguard fair pricing. The system was put in place when it could have been argued that phone companies enjoyed a monopoly with regards to internet access. That argument has since been rendered untrue. Canadians have a choice whether to access the internet via their phone company, their cable-tv company, their wireless company or even a satellite carrier. In fact there is ample competition for a country of out geography and demographic.
The best thing Clement could do for consumers would be to call for an end to government regulation of internet carriers completely. It't time for the government to tell the re-sellers to take a walk in the snow and contemplate a business strategy that isn't predicated on protectionism. That would show the government is really on the side of consumers.
