What the CRTC's Internet billing ruling really means to users

The face of the Canadian Internet is changing. And not necessarily for the better.

Last week’s ruling by the CRTC that determines how much major carriers can charge third-party Internet service providers for usage-based billing is spawning a growing consumer backlash.

An online petition against the ruling has attracted more than 200,000 names, and the Harper government, wary of attracting a black eye in advance of a possible election later this year, has asked for a review of the telecom regulator’s decision.

But what does it all mean to Canadian consumers?

In the near-term, not a whole lot. This latest decision directly affects only customers of third-party Internet providers, largely regional and local businesses that lack their own networks and instead use those provided by the major carriers under federally mandated wholesale agreements.

This piggyback arrangement had been put in place to encourage competition. The small players represent 4 per cent of the market, and up until last year largely differentiated themselves from the mainline carriers by offering their customers either unlimited access or higher-usage accounts between 200 and 250 gigabytes per month.

All that changed when the CRTC, acting on a complaint by Bell, ruled last year that mainline carriers could transition third-party ISPs away from unlimited and toward usage-based billing. The new framework, announced last week, allows major carriers to charge a set monthly fee for each ISP customer, and to enforce a set monthly usage limit.

If this limit is, for example, 60Gb, Bell is now allowed to charge a specific amount per gigabyte used beyond that limit. Last week’s decision allows top-tier carriers to charge third-party ISPs a 15 per cent discount on what they'd ordinarily charge their own residential customers.

The near-term change is most significant for customers of smaller players like TekSavvy, Execulink or Primus.

In the last week, many of them have advised their remaining unlimited plan and high-usage customers that they’re being converted over to usage-limited ones. TekSavvy, for example, is cutting users down from unlimited and 250Gb packages to 25Gb, or 60Gb in Quebec.

Although major ISPs had already transitioned most of their own customers away from unlimited plans, the latest CRTC decision will, if it stands, also lead to more restrictive rate plans and higher bills for equivalent use.

The long-term implications are clear for all Internet users of all ISPs, large and small: Rate caps will become much smaller and more visible, your bills will rise over the longer-term, and you’ll have to learn to monitor your usage more closely to avoid surprises at the end of the month.

Beyond higher bills and more restrictive access, the decision affects the ability of smaller ISPs to differentiate themselves in the market.

When the big carriers were tightening the screws on usage, the small players’ ability to offer unlimited packages was a draw for consumers who either needed the monthly capacity or simply wanted to use the Internet without worrying about overage charges.

While these smaller operations still offer locally provided technical support and a less corporate consumer experience, removing the price advantage will affect their ability to attract new customers. A weakened third-party ISP community could possibly result in fewer companies providing basic Internet access – which could in turn reduce competition further and push prices even higher.

The consumer revolt which had been building slowly since last year, took flight after the latest decision, and on Tuesday seemed to have finally scored some political points with the government’s request for a review.

If the CRTC decision is overturned, it wouldn’t be the first time the federal government has walked over its main telecom regulatory agency.

In October 2009, the CRTC turned down Globalive's application to provide wireless phone service in Canada, stating the company didn’t meet Canadian ownership requirements. The decision was later reversed by the Industry Minister Tony Clement and the company now operates under the WIND Mobile banner.

A possible government-ordered reversal of the CRTC's usage-based billing decision could give smaller operators some breathing room. But the larger issue of mainline ISPs wanting to cut down federally mandated concessions to piggybacking ISPs won’t go away.

Bell says it invested billions of dollars in its network, and it expects to recoup its investment one way or another. Bell’s shareholders expect a similar return, too, so it’s entirely likely that Bell – and other top-tier operators – will keep pushing for change even if the government squashes the CRTC’s usage-based billing decision.

As the clock ticks down to a possible federal election, what was once a largely ignored regulatory issue has suddenly become a fundamental issue that affects all Canadians. The outcome will determine how freely we use the Internet, and how much we pay for the privilege.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. carmilevy@yahoo.ca