Bloomberg News

BCE, Rogers Win Right to Charge Internet Wholesalers Per Usage

November 16, 2011

Nov. 16 (Bloomberg) -- BCE Inc., Rogers Communications Inc. and other Canadian telecommunications companies won approval yesterday to begin charging smaller Internet service providers per-use fees they say will ease network congestion and reflect investment costs.

Canada’s telecommunications regulator ruled the country’s largest cable and phone companies will be able to bill smaller providers based on the network capacity they use.

The Gatineau, Quebec-based Canadian Radio-television and Telecommunications Commission said it will allow large operators to sell network capacity at fixed amounts measured in units of 100 megabytes per second. The regulator, which also set rates that will be effective Feb. 1, rejected a traffic-volume-based billing approach favored by the big companies.

“While we would have preferred the CRTC to accept our proposal, its decision does at least ensure that we can now charge our ISP customers for the network capacity they consume,” Mirko Bibic, BCE’s senior vice-president, regulatory and government affairs, said in an e-mail.

BCE and other major telephone and cable companies already have usage-based billing for their retail Internet customers, and sought to impose the same pricing system on smaller service providers who resell bandwidth from their networks.

Under the ruling, independent service providers will have to buy from the large companies the amount of capacity they need to serve their own customers. The big firms can also continue to charge independents a flat rate for wholesale access, regardless of the amount of bandwidth used.

‘Many Options’

“Our aim is to foster a marketplace in which Canadians have as many options as possible for their Internet services,” CRTC Chairman Konrad von Finckenstein said in a statement.

BCE’s Bibic said the decision gives independent service providers, or ISPs, flexibility to set retail prices as they choose.

“This is not the model we proposed to the CRTC but I think we could live and work within the model,” Ken Engelhart, Rogers Communications Inc. head of regulatory affairs said in a interview yesterday. Engelhart also said he is “baffled” that the CRTC said Rogers can charge ISPs only C$1,251 ($1,226) per 100 megabytes while BCE can charge C$2,213. Engelhart said such a gap is “implausible” based on the service the two rivals provide, and Toronto-based Rogers will discuss it with the CRTC.

TekSavvy, a Chatham, Ontario-based ISP, was broadly critical of the CRTC decision in a statement on its website, saying the rates adopted by the CRTC are too high and will increase cost of Internet use for Canadian consumers.

Netflix Arrival

Growing opposition to usage-based billing coincided with last year’s entrance of Netflix Inc. into the Canadian market. Netflix, based in Los Gatos, California, began offering a package that let customers download unlimited movies for about C$8 a month.

Major Canadian telecommunications companies offer their own movie download services through cable or satellite television, competing directly with Netflix’s Internet service.

The CRTC ruled Jan. 25 that the phone and cable companies could charge Internet service providers using the same per-use formula as their own retail customers, with a 15 percent discount. The government overruled that decision and requested the regulator review its policy.

Netflix Chief Executive Officer Reed Hastings has said the imposition of per-use billing threatened to slow its expansion in Canada.

Network Congestion

The major operators argued the use of flat-rate billing led to congestion on their networks, particularly during peak periods.

The ruling also allows large operators to charge ISPs a fee for each customer that has access to the Internet.

Industry Minister Christian Paradis said in a statement posted on his website that the government would “study the CRTC’s decision carefully to ensure that it meets our objectives of encouraging competition and network investment and enabling consumer choice.”

Charlie Angus, a lawmaker and spokesman on “digital issues” with the main opposition New Democratic Party, called the ruling “a good first step,” and said in an e-mailed statement the government should do more to stop “unfair billing practices and bandwidth caps.”

--Editors: Paul Badertscher, John Simpson

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net


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