Behind the CRTC's review of usage-based billing

The CRTC's controversial decision this week to impose use-based billing on small service providers cast a spotlight on network access and competition among internet service providers.

The commissionruled in favourof Bell, which wanted to implement the billing system for independent service providers that use the company's networks. After an outcry from consumers and the federal government, CRTC chair Konrad von Finckensteinlater saidthe ruling would be reviewed.

Bell Canada has acomplex history with small internet service providers.

In 2005, the CRTC approved a Bell proposal known as gateway access service, or GAS, to provide competitors with access tothe company'sestablished network.Bell would provide smaller ISPs with a dedicated channel between a consumers home or business and Bell Canadas wire centres.

Since then, large service providers like Bell in the East and Telus in Western Canadahave beenmandated by the CRTC to provide some form of wholesale network access to competitors. Thecommissionsargumentisthat relatively new providers lack the financial and logistical capacity to build their own networks.

The CRTC'sposition also reflects the lack of competition Bell faced when it was building its network infrastructure. An absence of competing companies essentially guarantee a large customer base and madethebuilding of a new network by anyone else a risky venture.

Independent internet service providers, such asMTS Allstream and Primus, liked the gateway access service approach, since it allowed smalleror moredistant providers access to the biggest markets.

Under GAS, the smaller providerspay Bell aflat fee forcertain components that provide the final length of connection to customers. The fee is determined by the bandwidth consumed by users.

These components simply provide a connection between the independent providers and Bell. They don't include internet connectivity.Web access and other functionality, such as e-mail and voice-over-IP,are later implemented and sold by ISPs.

The smaller independent providers must also pay for transit across the networks owned by Bell or other incumbents. ISPs purchase a specific amount of bandwidth from Bell, andif their traffic capacity exceeds that, they must buy more. This means the transmission fee is determined in part by the volume of users and again, by the volume of data traffic.

Technical difficulties

In the years that followed the 2005 CRTC decision, revisions were made to thegateway access service.Bell upgraded its networks to provide higher speeds and in some cases askedthe CRTC toapprove higher associated rates. The new prices weregenerally accepted but often required compromises after complaints by the affected ISPs.

Concerns were raised in 2008 by the Canadian Associated of Internet Providers andothersthat Bell was "throttling" the connections of usersthat consumed the most bandwidth, often through peer-to-peer applications.

Bell privately provided the CRTC with evidence showing these high-usage customers were congestingitsnetworks and compromising the quality of service offered to other users. The CRTC eventually agreed and has not officially stopped Bell from continuing to shape traffic on the networks it sells to competitors.

More recently, Bell proposed a usage-based billing system be imposed to further ease the congestion created by users responsible for the most traffic on Bell networks.

Placing restrictions on the amount of bandwidth available monthly to users would decrease overall traffic but also make it impossible for independent providers to offer unlimited bandwidth caps one of their strongest selling points.

And it would mean that ISPs would pay anotherfee to Bell, on top of the access and transition fees,again determined by the amount of traffic created by their customers.

Following the billing proposal, MTS Allstream, a Manitoba-based service provider,suggested Bell adopt a service structure that would not penalize all ISPs using its networks when only one ISP is causing the congestion.

The suggestion wasn't accepted. Anddespite recommendations from competitors and the pleas of consumers, Bell's proposal won over the CRTC, whichthis week approved usage-based billing.

The backlash thatfollowed, includingpromised intervention by Industry Minister Tony Clement and Prime Minister Steven Harper, led the CRTC to announce a formal review of the ruling.