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The second half of this article reads like it was written by Bell or Rogers. The problem with UBB is not caps, per se, but the fact that the caps were absurdly

by gamble 16y ago

The second half of this article reads like it was written by Bell or Rogers. The problem with UBB is not caps, per se, but the fact that the caps were absurdly small and overage fees grossly exceeded the cost of bandwidth. Not to mention that they were introduced at the same time as Netflix launched in Canada, and the providers' own TV-over-IP services were exempt. I dumped my $120/mo Bell Expressvu subscription last month in favor of Netflix and AppleTV. Why should I pay over a thousand dollars a year when I don't watch 98% of what it provides? UBB is just Bell saying 'screw you, we'll get that pound of flesh one way or another.'

noibl 16y ago
Very succinct analysis, thank you. Living in Australia, which has an entrenched monopoly cable co. and a steadily consolidating comms market, I find this whole story very relevant. Let this be a warning to anyone who thinks integrated media distribution and network infrastructure companies can self-regulate.
AgentConundrum 16y ago
The second half of this article reads like it was written by Bell or Rogers. Indeed. There were a few lines which particularly stood out to me as having been written by someone who doesn't really get the situation: > To encourage competition, major telecom operators that have spent heavily on infrastructure are required to lease bandwidth on their networks to small providers. I get that the system is maintained by these large companies, and I'm sure they have spent a lot on the infrastructure, but (and correct me if I'm wrong) I believe the system was built largely with taxpayer dollars, and it continues to be heavily subsidized by same. > Although critics say the CRTC ruling will lead to lower download limits and higher rates, major Internet service providers say usage-based billing based is fair because it means heavy users pay more than those who just surf the web and use email. There are two problems with this. First, internet isn't like electricity. Electricity must be generated at a cost, and those who consume more cost the generating company more (perhaps not directly, since unused electricity is simply lost, but at least indirectly by requiring higher generation to accommodate peak usage). With the internet, however, the lines are already laid and it's merely a matter of sending the information down the wire. There is almost no additional cost associated with higher usage (see next point). Second, the 'incremental cost" of bandwidth appears, from what I've read recently, to be somewhere around a penny per gigabyte, if any exists at all. Let's give the companies the benefit of the doubt and say that it's actually 2.5 cents per GB. Now let's give them a 100% markup to be nice. So now we're calling a "reasonable markup" on this service to have a price of 5 cents per GB. Bell wanted $2 per GB for folks who go over their limit. They wanted 40 times what I just gave as a reasonable number. Even if you want to use the most conservative estimate I found, which was the CEO of TekSavvy who said maybe it could get as high as 30 cents per GB, then Bell would still be asking us to pay 666% (<obvious joke here>) of the actual cost. That's one hell of a markup. Also, and again using the 30c/GB estimate, Bell's offer in Ontario of a 25GB limit would equate to a $7.50 cost? Anyone want to take a guess at how much the service actually is actually priced at? I'll give you a hint: it's not $7.50. Sorry for the rant, but I've been worried about this decision and I have a lot of pent up anger about it. It's nice that the government has actually stepped up to support the small, reasonable ISPs and the consumer.
- rfugger 16y ago
  I agree that the caps were low and the overage rates seemed high, but it's not actually about the incremental cost of delivering the next gigabyte, it's about the cost of building an infrastructure that can handle hundreds of thousands of people using Netflix all at once at peak capacity. That's an entirely different calculation. Also, at Bell you can buy 40GB extra for $5 if you pay in advance, which equals $0.125/GB. http://www.bell.ca/shopping/popups/personal/internet/usage_en.html http://www.bell.ca/shopping/popups/personal/internet/usage_e...
  - AgentConundrum 16y ago
    Absolutely, and I'll freely admit that I don't know how to calculate that. I made a major assumption in my last post, that I'll explain here: Most quotes I've heard recently put the cost of bandwidth at around 1-2c/GB. I assumed, quite possibly erroneously and I'll go hunting for the source in a moment to confirm/refute said assumption, that when TekSavvy's CEO said that a conservative estimate (read: "highest reasonable estimated price") of bandwidth could be 30c/GB, I was assuming that he was taking things like administrative costs and possibly infrastructure costs into consideration. I made this assumption because of the extreme disparity between the two cost points - 1c/GB from some versus 30c/GB from him. I realize that I didn't make this clear in my original post - I didn't even hint at it, actually - so I apologize for that. Also, when I just now checked my wording in my original post, I noticed that you edited your comment to include a back-of-the-napkin estimate of Bell's incremental cost of delivery to be around 13c/GB. In my opinion, this only strengthens my assumption, since I sincerely doubt Bell would provide additional bandwidth for less than cost. Looking at Bell's website right now, I see that their "Performance" plan in Ontario lists 6mbps speed with a 25GB cap for $31.95 per month. Using your calculation of cost of bandwidth being 13c/GB, this means that full utilization of the cap would cost them $3.25 per month, leaving $28.70 for administrative costs and upgrading. In a completely unfair comparison, I'll mention that Rogers charges me $6.95 per month (last I checked, anyway) as a usage fee/basic fee/system access fee. Let's nearly double that up to $12.72 (to make the next calculation easier) and call that the cost of doing business (tech support, paper pushing, general administration). This brings the total up to $15.97 a month, which is HALF of what Bell charges for this plan. Bell then gets to choose how much of their 100% profit they want to use to upgrade their network, and how much they want to use to give their CEO a raise. As far as the overage is concerned, let's note that when I called bandwidth costs 13c, that was on the assumption that Bell made no profit from their "insurance" option. Anyone who doesn't pay insurance gets to pay $2/GB, of which at least $1.87 is pure profit. Their overage would be 1538% of cost - a nice markup. Edit: I just noticed[1] that the true cost of this plan is actually $41.95, but they offer $5 off for the first twelve months and an additional $5/mo discount to be used towards their satellite service. I'm not going to bother doing more calculations, but I thought it was worth noting. [1] http://www.bell.ca/shopping/jsp/pageblock_styles/Pricing/flexPricing_detail.jsp?language=en&region=ON&FLEX_PRICING_SKU=DSLTIPONNewMassNCOPF10&CONTRACT_TERM_SKU=&FLEX_PRICING_CONTRACT_TYPE=rent&FLEX_PRICING_FREQUENCY=monthly&RESOURCENODE=InternetServices http://www.bell.ca/shopping/jsp/pageblock_styles/Pricing/fle... (I had to disable JavaScript to get that link. The JS-Enabled version requires you to drill down two links to get the full details to appear, so it was impossible to get a direct link to the JS-Enabled version of these details)
Cyndre 16y ago
I definatly agree, wrote an article about it already - http://adamdomoney.posterous.com/bandwidth-problem-metered-gouging http://adamdomoney.posterous.com/bandwidth-problem-metered-g... To sum it up - Extra bandwidth does cost money, but $2 a gig is outlandish. If the crtc is to be involved, it should be involved in regulating the price - maybe a $20 access fee and $.25 per gig.
ergo98 16y ago
Not to mention that they were introduced at the same time as Netflix launched in Canada, and the providers' own TV-over-IP services were exempt. Caps were in place on the vast majority of Canadian connections (meaning direct customers of Bell, Telus, Rogers, Cogeco, etc) long before Netflix came to Canada. The UBB decision impacted a very small number of customers on services like TekSavvy. Not saying it's right, but just want some context in there. Further, I hope you can appreciate how a provider's own internet services don't carry the same demands and costs as an outside source. Though perhaps they should be forced to allow Netflix to colocate a distribution server in each of their distribution points to deal with that.
- nuclear_eclipse 16y ago
  If I recall, Netflix already colocates their servers with ISPs in advantageous nodes all over the US, and we still have that count against our bandwidth usage while the providers services are still granted free passage...
- gamble 16y ago
  The UBB decision is separate, but the major providers have coincidentally decided to start enforcing the caps simultaneously. The two are linked since they can now charge whatever they want for bandwidth without worrying about competition.

by gamble 16y ago

noibl 16y ago

Very succinct analysis, thank you. Living in Australia, which has an entrenched monopoly cable co. and a steadily consolidating comms market, I find this whole story very relevant. Let this be a warning to anyone who thinks integrated media distribution and network infrastructure companies can self-regulate.

AgentConundrum 16y ago

The second half of this article reads like it was written by Bell or Rogers. Indeed. There were a few lines which particularly stood out to me as having been written by someone who doesn't really get the situation: > To encourage competition, major telecom operators that have spent heavily on infrastructure are required to lease bandwidth on their networks to small providers. I get that the system is maintained by these large companies, and I'm sure they have spent a lot on the infrastructure, but (and correct me if I'm wrong) I believe the system was built largely with taxpayer dollars, and it continues to be heavily subsidized by same. > Although critics say the CRTC ruling will lead to lower download limits and higher rates, major Internet service providers say usage-based billing based is fair because it means heavy users pay more than those who just surf the web and use email. There are two problems with this. First, internet isn't like electricity. Electricity must be generated at a cost, and those who consume more cost the generating company more (perhaps not directly, since unused electricity is simply lost, but at least indirectly by requiring higher generation to accommodate peak usage). With the internet, however, the lines are already laid and it's merely a matter of sending the information down the wire. There is almost no additional cost associated with higher usage (see next point). Second, the 'incremental cost" of bandwidth appears, from what I've read recently, to be somewhere around a penny per gigabyte, if any exists at all. Let's give the companies the benefit of the doubt and say that it's actually 2.5 cents per GB. Now let's give them a 100% markup to be nice. So now we're calling a "reasonable markup" on this service to have a price of 5 cents per GB. Bell wanted $2 per GB for folks who go over their limit. They wanted 40 times what I just gave as a reasonable number. Even if you want to use the most conservative estimate I found, which was the CEO of TekSavvy who said maybe it could get as high as 30 cents per GB, then Bell would still be asking us to pay 666% (<obvious joke here>) of the actual cost. That's one hell of a markup. Also, and again using the 30c/GB estimate, Bell's offer in Ontario of a 25GB limit would equate to a $7.50 cost? Anyone want to take a guess at how much the service actually is actually priced at? I'll give you a hint: it's not $7.50. Sorry for the rant, but I've been worried about this decision and I have a lot of pent up anger about it. It's nice that the government has actually stepped up to support the small, reasonable ISPs and the consumer.

rfugger 16y ago
I agree that the caps were low and the overage rates seemed high, but it's not actually about the incremental cost of delivering the next gigabyte, it's about the cost of building an infrastructure that can handle hundreds of thousands of people using Netflix all at once at peak capacity. That's an entirely different calculation. Also, at Bell you can buy 40GB extra for $5 if you pay in advance, which equals $0.125/GB. http://www.bell.ca/shopping/popups/personal/internet/usage_en.html http://www.bell.ca/shopping/popups/personal/internet/usage_e...
- AgentConundrum 16y ago
  Absolutely, and I'll freely admit that I don't know how to calculate that. I made a major assumption in my last post, that I'll explain here: Most quotes I've heard recently put the cost of bandwidth at around 1-2c/GB. I assumed, quite possibly erroneously and I'll go hunting for the source in a moment to confirm/refute said assumption, that when TekSavvy's CEO said that a conservative estimate (read: "highest reasonable estimated price") of bandwidth could be 30c/GB, I was assuming that he was taking things like administrative costs and possibly infrastructure costs into consideration. I made this assumption because of the extreme disparity between the two cost points - 1c/GB from some versus 30c/GB from him. I realize that I didn't make this clear in my original post - I didn't even hint at it, actually - so I apologize for that. Also, when I just now checked my wording in my original post, I noticed that you edited your comment to include a back-of-the-napkin estimate of Bell's incremental cost of delivery to be around 13c/GB. In my opinion, this only strengthens my assumption, since I sincerely doubt Bell would provide additional bandwidth for less than cost. Looking at Bell's website right now, I see that their "Performance" plan in Ontario lists 6mbps speed with a 25GB cap for $31.95 per month. Using your calculation of cost of bandwidth being 13c/GB, this means that full utilization of the cap would cost them $3.25 per month, leaving $28.70 for administrative costs and upgrading. In a completely unfair comparison, I'll mention that Rogers charges me $6.95 per month (last I checked, anyway) as a usage fee/basic fee/system access fee. Let's nearly double that up to $12.72 (to make the next calculation easier) and call that the cost of doing business (tech support, paper pushing, general administration). This brings the total up to $15.97 a month, which is HALF of what Bell charges for this plan. Bell then gets to choose how much of their 100% profit they want to use to upgrade their network, and how much they want to use to give their CEO a raise. As far as the overage is concerned, let's note that when I called bandwidth costs 13c, that was on the assumption that Bell made no profit from their "insurance" option. Anyone who doesn't pay insurance gets to pay $2/GB, of which at least $1.87 is pure profit. Their overage would be 1538% of cost - a nice markup. Edit: I just noticed[1] that the true cost of this plan is actually $41.95, but they offer $5 off for the first twelve months and an additional $5/mo discount to be used towards their satellite service. I'm not going to bother doing more calculations, but I thought it was worth noting. [1] http://www.bell.ca/shopping/jsp/pageblock_styles/Pricing/flexPricing_detail.jsp?language=en&region=ON&FLEX_PRICING_SKU=DSLTIPONNewMassNCOPF10&CONTRACT_TERM_SKU=&FLEX_PRICING_CONTRACT_TYPE=rent&FLEX_PRICING_FREQUENCY=monthly&RESOURCENODE=InternetServices http://www.bell.ca/shopping/jsp/pageblock_styles/Pricing/fle... (I had to disable JavaScript to get that link. The JS-Enabled version requires you to drill down two links to get the full details to appear, so it was impossible to get a direct link to the JS-Enabled version of these details)

Cyndre 16y ago

I definatly agree, wrote an article about it already - http://adamdomoney.posterous.com/bandwidth-problem-metered-gouging http://adamdomoney.posterous.com/bandwidth-problem-metered-g... To sum it up - Extra bandwidth does cost money, but $2 a gig is outlandish. If the crtc is to be involved, it should be involved in regulating the price - maybe a $20 access fee and $.25 per gig.

ergo98 16y ago

Not to mention that they were introduced at the same time as Netflix launched in Canada, and the providers' own TV-over-IP services were exempt. Caps were in place on the vast majority of Canadian connections (meaning direct customers of Bell, Telus, Rogers, Cogeco, etc) long before Netflix came to Canada. The UBB decision impacted a very small number of customers on services like TekSavvy. Not saying it's right, but just want some context in there. Further, I hope you can appreciate how a provider's own internet services don't carry the same demands and costs as an outside source. Though perhaps they should be forced to allow Netflix to colocate a distribution server in each of their distribution points to deal with that.

nuclear_eclipse 16y ago
If I recall, Netflix already colocates their servers with ISPs in advantageous nodes all over the US, and we still have that count against our bandwidth usage while the providers services are still granted free passage...
gamble 16y ago
The UBB decision is separate, but the major providers have coincidentally decided to start enforcing the caps simultaneously. The two are linked since they can now charge whatever they want for bandwidth without worrying about competition.