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Explaining confusion around Usage Based Billing

February 6th, 2011

Reading people’s tweets about this subject, I felt the need to clarify the situation around Usage Based Billing (UBB). There are people on the sidelines, who are saying things like “what’s so bad about UBB”. The same people also argue that companies such as Bell and Rogers have invested large amounts of dollars therefore they need to recoup their costs by implementing UBB. They appear to fear that if we don’t pay up our networks will get “clogged up” and will therefore end up with slow internet service.  This is simply propaganda in my opinion.

If providers such as Bell or Rogers choose to impose UBB on their customers, that is their business.

What the CRTC has allowed is for Bell & Rogers to impose the same UBB structure on their independent (indie) ISPs.  This is where it gets misinterpreted by a lot of people, and this is also the reason it will kill competition, which will in turn cause a set of negative chain reactions in the Information Technology sector in Canada.

I will use excerpts from Jean-François Mezei’s PDF document to illustrate these points, because I wouldn’t be able to explain it any better.  Anything you see in italics, comes from that document, non-italcs are my own words:

Indie ISPs  DO NOT  resell Bell’s Internet Service

Mirko Bibic, the chief of regulatory affairs stated during a media interview that ISPs were reselling a white label internet service provided by Bell. This image was repeated many times during interviews.  Bell is misleading lawmakers and the media in trying to portray this service as a turnkey internet solution where Bell provides the full internet connectivity and internet network management to the independent ISPs. This is not true.

FACT: ISPs buy and implement their own connectivity to the internet and
implement their own services, servers, routers and internet service
policies. Since they share no internet related infrastructure with
Bell Sympatico, there is no reason for Bell Sympatico policies to be imposed on
its competitors.

FACT: The independent service providers purchase from Bell, a CRTC
regulated telecommunication service (GAS)  that provides no
connection to the internet and uses a different protocol from the
Internet. This service provides a point to point data connection
between ISPs and their customers over the
monopoly telephone
infrastructure.

FACT: The data being carried is not owned nor managed by Bell and as
such, core common carrier principles apply: Bell Canada has no right
to inspect the user data without a warrant, and even less right to
modify any part of the user data. In this service, its duty is to carry
PPPoE frames between 2 points, not manage an internet TCPIP service.

FACT: ISPs purchase from Bell enough capacity to support the demand
generated by their customers.
Users cannot generate more bandwidth
than the ISP has paid for. If Bell sells a certain amount of capacity, it
must be able to provide it.

(And this last point relates to back in 2008 when Bell was accused of slowing down packets of competing Indie ISPs, but they were caught doing something worse )

FACT: Bell Canada does not “slow” packets down. At regular intervals, Bell
picks a packet and modifies a certain portion of the data (beyond the
envelope) to introduce sequencing errors. This is detected by the
computers at each end of link and disrupts the flow of packets as
retransmission of a series of packet is needed to restore data transfer.

For the technically inclined, there is nice diagram describing the architecture of an Internet Service Provider (ISP) and how it ties in to Bell on page 2 of Jean-François Mezei’s PDF document.

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Bandwidth Costs

AHSSPI (Aggregated High Speed Service Provider Interface) service uses Bell’s  core network to funnel end user packets from each BAS into fast links to the ISPs. The “pipes” at the narrow end of the funnel are currently limited to 1 giga bits per second (gbps). Additional capacity is obtained by purchasing multiple AHSSPI links. Each ISP  purchases sufficient AHSSPI capacity to handle the peak throughput demand of its customer base. Should an ISP not buy sufficient AHSSPI capacity, then the
bottleneck happens at the narrow end of the funnel, a portion of the network which only affects that ISP and has no impact on other ISPs or Bell Sympatico. If ISPs purchase sufficient capacity, Bell must ensure its network is able to deliver the services it has committed to selling.

Between the DSLAM and the  ISP, the network is owned by Bell. Adding capacity generally involves assigning an unused fibre pair and installing additional network cards. The incremental monthly costs are minimal, despite Bell getting significantly more revenue from ISPs.

The ISPs have their own block of IP addresses which they assign to their customers.  These IP addresses are identified by core internet routing servers as belonging to the ISP and not to Bell Canada.  Bell Canada has no right to manage internet packets which do not belong to its own network.

The ISPs are in charge of providing mail servers, spam filtering equipment, routing and connections to the internet. ISPs are also responsible for web hosting, access to NNTP, SMTP, DNS servers.  They define their own TCPIP policies, such as routing and/or port blocking.   These services are completely independent from those provided by Bell Canada and/or Bell Sympatico.

The Unlimited Connection

Each ISP purchases links from transit providers who have a point of presence in their city. ISPs can extend their own network, via dedicated links, to a larger city where they can choose from more transit providers. In large cities such as Toronto, there are enough transit providers to provide a very competitive field.  The ISP will buy sufficient capacity from one or more transit providers to meet the demand generated by its customers.  The selection of providers, and routing policies that manage multiple connections to the internet is all done by the ISP with no involvement from Bell Canada.

As an ISP’s customer base grows and/or average usage increases, the ISP will need to purchase additional AHSSPI capacity and additional internet transit capacity. ISPs that offer “unlimited” usage plans do so because they have found good internet transit plans and purchase sufficient AHSSPI capacity to provide good service at profitable levels. They are not doing this on Bell’s back. By choosing the right transit providers and keeping overhead costs low, an ISP can easily beat Bell Sympatico’s service levels and limits/restrictions.

Bell Canada has its own TCPIP-based internet-connected network with its own connections to various transit providers. In technical terms it is known as AS 577.  Bell also sells internet transit  to a number of corporations in Canada (notably the  banks). Few independent ISPs buy internet transit from Bell Canada because it is expensive.

ISPs such as TekSavvy have their own infrastructure, which have nothing to do with Bell or Rogers.  The only missing piece for them is basically a cable from their offices to the customer’s house, which is known as the “last mile”.  Since Bell and Rogers own all of these lines going into people’s houses, they naturally have a monopoly.  In order to foster healthy competition, the CRTC has ruled, some time ago, to force these companies to allow indie ISPs to rent out these “last mile” connections.  This allowed more consumer choice, spurring competition, and keeping prices at a reasonable level.

Conflict of Interest

Things start to heat up when you consider that Bell and Rogers are traditionally a telephone service and TV service.  Now that everything is moving toward the web (with extremely cheap calls on Skype and watching movies on Netflix) these companies are feeling threatened.  People are using the Internet more instead of buying cable TV packages and Bell telephone services.

Sufficiently threatened by “the internet” they feel the need to squeeze not only their own Internet Service customers, but also those of the competition such as TekSavvy.  What better way to do that than to ask the CRTC to allow Bell and Rogers to impose the same ludicrous caps and overage use prices onto the customers of competing ISPs.  And that is exactly what the CRTC has allowed them to do.

And so I believe the CRTC and bell use the average person’s lack of technical knowledge to their advantage to push their own agendas, to make people believe that UBB is the way to go.  There is a big difference between paying for a connection and paying for data that is received on that connection.

Internet service is NOT like a utility

A utility such as Hydro or Water provide a product which needs to be produced, or collected from somewhere.  It is then used up after it reaches the customer.  This clearly has a supply and demand model.  This does not apply to Internet service.  Bytes cannot be used up never to be used again.  Further, those bytes of information is given to them for free, and Bell wants to charge for each of those bytes coming into your house.  $1.99 for each GB to boot.

If an ISP chooses to rent let’s say a 15Mbps line from Bell, running from the ISP to your house, Bell should have no business how much data passes down that line in a month.  So long as Bell gets paid the maintenance cost every month (and maybe a little extra for profit)  But that number should be fixed.  There is no need to be charging per GB since the cost of maintenance for that line is the same, no matter if 1GB passes through it in a month or 200GB passes through.  (Remember that the ISP does not get their internet from Bell)

The Utility argument or even the congestion argument are all excuses used to impose a new fee so that companies such as Bell can gouge more money out of pockets of people who are already paying enough for cell phone services, TV, Hydro, taxes, you name it.  I firmly believe the issue boils down to the threat of the Internet wiping out the need for telephone service and TV service provided currently by Bell and Rogers.

And so these are the reasons UBB is wrong, unnecessary and gouging.  The CRTC and the Government Of Canada needs to swiftly strike down Usage Based Billing to protect our future in the Internet Age.

What can we do?

The CRTC wants to hear feedback from the public.  Please let them know that usage based billing can’t and should not be forced upon independent Internet Service Providers.

Internet , , , ,

  1. Ron J
    | #1

    Excellent article – I hope lots of people read it, particularly those in a position to make a change. Bell/Shaw are using network congestion as an excuse to implement UBB; and there is no network congestion – they simply want to protect their overpriced, commercial packed cable TV products from better, web-based services such as Netflix. With UBB, every Netflix movie will cost an additional $4 to $8, paid fully to the ISP! That is extremely anti-competitive.

    http://www.dslreports.com/shownews/Canadian-Caps-Arent-Economically-Justified-112535

  2. Sunny
    | #2

    Nice Post… The worst part of this is that the caps they are talking about is a way to reduce your internet usage so you can’t open your throttle to the max even for 1hr / day…. the situation is so classic of a monopoly in the market…

  3. solberger
    | #3

    Attempt number two:

    Here’s how you are wrong, please follow along carefully.

    You: If an ISP chooses to rent let’s say a 15Mbps line from Bell, running from the ISP to your house, Bell should have no business how much data passes down that line in a month.
    Me: How do you figure it’s not their business? They provide the line and route your packets. They can do whatever it is agreed to in the contract. It’s most certainly their business. You may not *want* it to be their business but that’s another question.

    You: So long as Bell gets paid the maintenance cost every month (and maybe a little extra for profit) But that number should be fixed.
    Me: Maintenance cost? As though that’s the only cost associated with your line?

    You: There is no need to be charging per GB since the cost of maintenance for that line is the same, no matter if 1GB passes through it in a month or 200GB passes through.
    Me: Really? The problem with that idea comes here:

    1] That 1GB goes through other lines. You do not have a dedicated and direct line to whereever you think you have. These other lines also have a limited bandwidth. If there are 20000 of you downloading 1GB a month. Then you need X amount of bandwidth on those lines. If there are 20000 of you downloading 200GB a month. Then you need X times 200. This means that the fellow downloading 200GB a month COSTS the company more MONEY than the fellow downloading 1GB a month due to the fact they need more costly infrastructure to support that.

    2] A dedicated unmetered connection costs hundreds of dollars a month. You will *never* have that for a consumer grade cost, or at least you will not for the foreseeable future.

    3] You have *up-to* a certain bandwidth. This means your connection speed is highly variable and dependent on the usage patterns of your neighbours. What do you think happens when your neighbours usage patterns goes up? Well that lowers your speeds, of course. What’s the remedy? Add more bandwidth. Does that cost money? Yes.

    You: A utility such as Hydro or Water provide a product which needs to be produced, or collected from somewhere. It is then used up after it reaches the customer. This clearly has a supply and demand model.
    Me: Irrelevant since most of the cost in delivering water (note the term delivering) has little to do with the cost of water. It has to do with the cost of treatment and delivery.

    You: This does not apply to Internet service. Bytes cannot be used up never to be used again.
    Me: Irrelevant since the cost of bytes is being used to pay for bandwidth. Just as the cost of water is being used to pay for pipe width.

    1] The usage patterns of water consumption dictate how big the pipes will be. More water sent over the pipe. Bigger pipes needed. More cost for implementation and maintenance.
    2] Amazingly, this still holds true for data pipes. More bandwidth sent over the pipe. Bigger pipes needed. More cost for implementation and maintenance.
    3] Of course, this does not include all of the other million costs associated with running a real company. Ie. labour costs, regulation compliance costs, building costs, etc, etc.
    4] If your company is in the business of supplying lines that supply the bandwidth and only needs to upgrade their lines based on bandwidth demand then it is certainly something that should be charged.

    Now. Let’s presume you actually want competition against Bell/Rogers/Shaw/Telus..

    How would you go about doing that?
    Let’s say I want to start stringing lines with cable and I get permission to do so. How am I going to string out a T3 (for example) and sell that to enough people to compete against them? I would *NEED* usage based billing! This is the *only* way forward. If you support abolishing UBB then you support *never* having competition on the physical level and damning Canada to this very same infrastructure for another 20 years.

  4. | #4

    I am answering to your comments in by putting my responses in bold:

    . . .That 1GB goes through other lines. You do not have a dedicated and direct line to whereever you think you have. These other lines also have a limited bandwidth. If there are 20000 of you downloading 1GB a month. Then you need X amount of bandwidth on those lines. If there are 20000 of you downloading 200GB a month. Then you need X times 200. This means that the fellow downloading 200GB a month COSTS the company more MONEY than the fellow downloading 1GB a month due to the fact they need more costly infrastructure to support that. . .

    Actually with DSL GAS service it is virtually a straight line between ISP and customer. You don’t share bandwidth with your neighbor, and likewise your neighbor can’t use your unused bandwidth. This is actually one of the major selling points DSL Internet Service Providers try to use to win over cable internet subscribers from Rogers. But that is also the reason DSL is distance sensitive, the further you are the slower the bandwidth since the weaker the signal becomes.

    . . .A dedicated metered connection costs hundreds of dollars a month. You will *never* have that for a consumer grade cost, or at least you will not for the foreseeable future. . .

    Explain how that is managed in other countries, and it IS economically feasible. TekSavvy, Acanac, Yak can do it. The only thing getting in their way right now is Bell attempting to block access to customers by charging overly high fees on their monopoly GAS connections. Do you have first hand industry knowledge that you can claim that it cannot be done? I do, it can be done. Again I quote: ISPs that offer “unlimited” usage plans do so because they have found good internet transit plans and purchase sufficient AHSSPI capacity to provide good service at profitable levels. They are not doing this on Bell’s back. By choosing the right transit providers and keeping overhead costs low, an ISP can easily beat Bell Sympatico’s service levels and limits/restrictions.

    . . .You have *up-to* a certain bandwidth. This means your connection speed is highly variable and dependent on the usage patterns of your neighbours. What do you think happens when your neighbours usage patterns goes up? Well that lowers your speeds, of course. What’s the remedy? Add more bandwidth. Does that cost money? Yes. . .

    Maybe if were talking about cable GAS service. But not Bell’s DSL, since it is a direct connection and bandwidth is not shared with your neighbor. If you are not downloading anything that bandwidth on the GAS (between you and your ISP) is essentially sitting idle unused, even if your neighbor is downloading 20GB/s.
    Again I quote the section under bandwidth:
    Each ISP purchases sufficient AHSSPI capacity to handle the peak throughput demand of its customer base. Should an ISP not buy sufficient AHSSPI capacity, then the
    bottleneck happens at the narrow end of the funnel, a portion of the network which only affects that ISP and has no impact on other ISPs or Bell Sympatico.

    . . .most of the cost in delivering water (note the term delivering) has little to do with the cost of water. It has to do with the cost of treatment and delivery. . .

    Traffic traveling through a GAS network has already been “treated” by the respective ISP.

    . . .since the cost of bytes is being used to pay for bandwidth. Just as the cost of water is being used to pay for pipe width. . .

    I agree with you that a lot of the cost of water goes towards paying for treatment, I should know, I work in the Hydro industry as an IT worker. Since when is there such a high ongoing cost for a water pipe itself? Once the infrastructure is built the cost of maintenance is miniscule, at least in the case of network hardware. Yes occasionally there are problems, pipes burst etc and there is a large expenditure for repair. But that cost spreads out over time. That’s like arguing that you need to charge rent by the number of people that live in a house. But even that analogy isn’t good because bytes traveling through a short distance between ISP and your house leaves almost no wear/tear on the hardware. The point is upkeep of a GAS connection between ISP and customer can be done using a fixed monthly agreed upon cost between Bell and third party ISP. Going as far as charging per byte is being greedy, but going as far as charging $1.99 per GB is plain gouging.

    Rocky Gaudrault: “TekSavvy has paid tens of millions of dollars to Bell, based on tariffs determined by the CRTC in a regulated framework no different from those applicable to gas or long distance services. TekSavvy “rides” on Bell’s system no more than do independent long distance providers. And that is frankly a comparison worth remembering. When the incumbent telcos controlled long distance, customers paid $1.50 per minute. With the entrance of competitors, customers now pay mere pennies. What Bell is trying to do with UBB is the equivalent to charging $1.50 per minute for long distance. Instead of caps and artificially high fees, the incumbent telcos should establish the real cost for bits, if material, and negotiate a fair “cost plus” tariff for those bits.”

    . . .The usage patterns of water consumption dictate how big the pipes will be. More water sent over the pipe. Bigger pipes needed. More cost for implementation and maintenance.
    Amazingly, this still holds true for data pipes. More bandwidth sent over the pipe. Bigger pipes needed. More cost for implementation and maintenance.
    Of course, this does not include all of the other million costs associated with running a real company. Ie. labour costs, regulation compliance costs, building costs, etc, etc.
    If your company is in the business of supplying lines that supply the bandwidth and only needs to upgrade their lines based on bandwidth demand then it is certainly something that should be charged. . .

    I quote Rocky Gaudrault: “Internet service is indeed an essential service, deserving of regulation to protect consumers, but that is where the analogy stops. Gas and electricity are resources that have an inherent value in and of themselves. A consumer pays not just for the delivery of those resources to the door, but for the substance of what is being delivered. The Bell system, on the other hand, is fundamentally just a pipe that carries bits of other people’s data, which incidentally is an inexhaustible resource. If we must adhere to the gas and electricity analogy, policymakers should seriously consider unbundling the Bell assets, separate the actual pipes from Bell’s other businesses (which otherwise stand to benefit greatly from anti-competitive measures like UBB), and let everyone access them based on the same, fairly determined tariff.”

    . . Now. Let’s presume you actually want competition against Bell/Rogers/Shaw/Telus

    How would you go about doing that?
    Let’s say I want to start stringing lines with cable and I get permission to do so. How am I going to string out a T3 (for example) and sell that to enough people to compete against them? I would *NEED* usage based billing! This is the *only* way forward. If you support abolishing UBB then you support *never* having competition on the physical level and damning Canada to this very same infrastructure for another 20 years. . .

    We need competition NOW, we can’t wait for 10 years for independent ISPs to build out their own GAS connections. With Usage Based Billing the competition will die out before they will ever get there. Remember that if you sign up for a third party ISP they will be forced to charge you $1.99 for every GB you go over your 25GB monthly limit, and that money does not go to the independent ISP so that they can keep building their network out. That money goes straight back to Bell because Bell is the one demanding these charges. Independent ISPs cannot compete with the likes of BELL and Rogers monopoly.

    I’ll re-empasize that UBB has nothing to do with so called “lack” of network capacity, “usage hogs”, maintenance costs or any of that.
    I’ll end it with Rocky Gaudrault who puts it this way:

    “Bell has much to gain from UBB, as it has a three-fold agenda:

    (1) it wants to make as much as it can on its existing infrastructure, deferring upgrades for as long as possible.

    (2) It wants to protect its ever-expanding content businesses, which are threatened by over-the-top services like Netflix.

    (3) It does not want to lose business to innovative and competitive companies like TekSavvy.”

  5. Shoosh
    | #5

    This article helped to clarify a lot of information. I’m not a very “techy” person so some of this stuff is over my head, but the article is explained in a way that even a lay person can get the gist of it.

    What it boils down to is now that more and more people are downloading not only movies, but TV shows as well (off the internet), and services like skype and google are offering insanely low phone rates, Bell and Rogers are desperate to survive. At least that’s the main thing I understood after reading this.

    Also, this article offers a great explination describing that internet congestion is just a myth. The big problem is that there are so many customers out there who don’t know enough about the internet and how it works, so they have no idea what is fact and what is fiction.

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