Usage-Based Billing’s raison-d’être is to

put an economic penalty on adopting

alternative communication and media
services and making sure that Bell is able
to still get revenue from users who
decided to drop their service. It also
unfairly targets users who are not the
cause of Bell’s augmenting operating
costs.

2011-77 UBB
Comments
Why Usage-Based Billing is
detrimental for everyone
except the incumbents
 Page 1

This document is a response to the on usage-

based billing. I’ve written this document to express my concerns about the forced implementation of
usage-based billing onto third-party providers and its repercussions on the Canadian public.

Table of Contents
Definitions ........................................................................................................................................... 2
Usage-Based Billing ........................................................................................................................ 2
Gigabyte .......................................................................................................................................... 2
Bell’s Arguments ................................................................................................................................. 3
Bell’s Operating Costs ..................................................................................................................... 3
How users affect “peak usage” .................................................................................................... 3
Wrong Users Targeted .................................................................................................................... 3
Usage-Based Billing Doesn’t Address Congestion .......................................................................... 4
CRTC’s Arguments ............................................................................................................................. 5
Internet Service Should Not Be Compared To Utilities .................................................................... 5
Usage-Based Billing Does Not Introduce Fairness .......................................................................... 5
Usage-Based Billing Impedes on Independents’ Advantage ........................................................... 6
Impact on Consumers & Market .......................................................................................................... 7
No Incentive to Innovate .................................................................................................................. 7
Death of Alternative Communication and Multimedia Services in Canada ...................................... 7
Businesses Are Affected by Usage-Based Billing ............................................................................ 7
Higher Education Cost ..................................................................................................................... 8
Lower Canadian Footprint ............................................................................................................... 8
Conclusion .......................................................................................................................................... 9
TL;DR (Too Long; Didn’t Read) ....................................................................................................... 9

Andrew Moore, Wolf Microsystems | 514-776-8778

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Definitions

(UBB) is a billing method which bills customers based on the amount of data
they consume in a month. Internet users first pay a flat fee with gives them access to a connection of
a given speed plus a monthly allotment. If they consume more data than their allotment allows, they
get charged a penalty per gigabyte extra (rounded up).

The gigabyte (GB) is a unit of measurement for digital data. It is a multiple of the atomic unit byte. It
represents 1,073,741,824 bytes under the IEC measurement (1,000,000,000 under SI, Internet
Service Providers typically use the IEC binary unit). 1 gigabyte is roughly one hour of HD video
(720p).

Andrew Moore, Wolf Microsystems | 514-776-8778

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Bell’s Arguments
Bell argues that Usage-Based Billing on a wholesale level is necessary due to the following:

1. Increased Internet use by “heavy users” cause network congestion, which in turns increase
operating costs as it forces Bell to upgrade their infrastructure.
2. “Heavy users” with unlimited internet plans are being subsidized by normal users which do
not consume large amounts of data.
3. Usage-Based penalties will force “heavy users” to rethink their usage patterns, will make
them accountable for their impact on the network and will ultimately reduce network
congestion
4. “Heavy users” represent a minority of Internet users.
5. Most “heavy users” are on independent Internet Service Providers as Bell doesn’t offer
unlimited plans.

Unfortunately, Bell failed to provide independently verified proof that there is indeed congestion on
their network and that so-called “heavy users” are responsible for it. In fact, Bell’s reasons for
implementing Usage-Based Billing on a wholesale level are completely based on a fallacy. Only
point 4 and 5 are actually verified and valid.

Bell’s operating costs are not linked linearly to usage. Bell’s operating costs are linked to “peak
usage”, the aggregate usage of network users during time of the day where most are using the
service.

If the network can easily handle peak time usage, costs per gigabytes are at its lowest. When the
network requires upgrades, costs sharply raises, then slowly lowers back till the upgrades are
completed and the network can handle the peak usage again.

Network congestion occurs when the network cannot properly handle peak usage; when too many
bytes are being transferred on the network at a given time.

How users affect “peak usage”

Individual users have little to no effect on “peak usage”. “Peak usage” occurs because there are a
large numbers of users using a service at the same time.

Therefore, the minority of users consuming a large amounts of data balanced across the month have
little to no impact on network congestion. Their speed limit prevents them from impacting the
network in any negative way.

However, the majority of users who consume small amount of data usually consume that during
peak hours. Collectively, these users represent
and are responsible for higher network costs.

Usage-Based Billing unfairly penalizes so-called “bandwidth hogs” which do not truly have an
important impact on Bell’s network.

Andrew Moore, Wolf Microsystems | 514-776-8778

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In a network with Bell’s capacity, the small amount of “heavy users” cannot have a large impact on
network congestion due to their connection speeds. To have network congestion on a network
where clients are limited in speed, you need a large proportion of users consuming data at the same
time.

Casual Internet users are the ones usually using their connections only during peak times and
collectively are the ones raising Bell’s operating costs.

Since Usage-Based Billing penalizes users based on the amount they consume and not the time
they consume the data, it will be in fact
.

Let’s compare Bell’s network to Montreal’s Champlain Bridge. The Champlain Bridge is a bridge that
allows citizens living on the south shore of Montreal to access the island.

Congestion occurs when too many cars are using the bridge at the same time. Usually, congestion
time occurs around “rush hour”, because that’s when it is convenient for drivers to cross the bridge.
“I have to get to the office by 8 AM so I take the bridge at 7:15 AM.” If Transport Quebec would
decide tomorrow to impose a “cap” on how far a car can travel in a month before paying surcharges,
it would have little effect on the congestion. A distance cap would not change the convenience of
using the bridge at rush hour. It would however limit other travels and unfairly penalize drivers who,
while using the bridge multiple times a day, do so outside of rush hour times as well and has a
negligible impact on congestion.

Bell’s network is no different. Imposing a “cap” on data consumption does nothing to remove the
convenience of using the Internet at peak times. “I’m at the office all day. I like to surf the web after
supper because that’s the only time I can.” Therefore, it has no impact on network congestion and
unfairly penalizes users which have nothing to do with higher operating costs.

Andrew Moore, Wolf Microsystems | 514-776-8778

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CRTC’s Arguments
The CRTC’s arguments for supporting Usage-Based Billing are as follows:

1. The Internet is no different than other utilities such as electricity and natural gas.
2. Usage-Based Billing is a question of fundamental fairness; those who pay more should use
more.
3. Usage-Based Billing does not impede on the independents’ ability to innovate.

The CRTC is completely wrong on all counts and took a wrongful decision when accepting Bell’s
submission to impose Usage-Based Billing on a wholesale level.

Electricity and gas, unlike bandwidth, has to be produced. The production of it has a specific,
quantifiable cost. Once it is consumed, it is no longer available. More needs to be produced.
Electricity and gas has an intrinsic value.

Bandwidth on the other hand, does not. Once used, bandwidth comes back. There are costs related
to building and maintaining the infrastructure to support it. However, it is not a scarce resource, nor
is it available only in limited quantity. Bandwidth can be produced infinitely.

Therefore, it is completely illogical to compare bandwidth to a resource which is available only in

limited quantities. Internet Services should not be priced as utilities.

Usage-Based Billing as brought forth by Bell cannot be qualified as fair. Bell’s pricing scheme would
mean that users would have to pay even if they did not use the service. Also, Bell’s UBB unfairly
penalize users which do not contribute to their higher costs.

It is illogical to consider Usage-Based Billing fair when customers living in two different provinces are
treated so drastically different. For the same base fee, customers in Ontario would be getting less
than half the monthly allocation of a customer living in Quebec.

Let me repeat that:

Also, independent Internet Service Providers are already paying Bell based on the bandwidth
consumed by their customers. AHSSPI links must be purchased from Bell by the independents’ in
order to accommodate their customers’ usage. Why should independents’ pay twice for usage?

Also, Usage-Based Billing allows Bell to charge by the gigabyte. This is always rounded up. The
atomic unit of a gigabyte is a byte and represents roughly 1 billionth of a Gigabyte. How can it be fair
for Bell to charge for a full gigabyte when the user may have consumed only 1 billionth of it? We are
far from the one sixtieth used in the mobile industry when dealing with phone calls.

There is no way this can be considered a fair pricing scheme. Usage-Based Billing is a transaction
model where only one party benefits from it: the incumbent Bell.

Andrew Moore, Wolf Microsystems | 514-776-8778

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Independent ISPs’ already have a low profit margin. Forcing them to pay based on the amounts of
bytes consumed by their customers (when they already pay for the amounts of bits per seconds
transferred) and forcing Bell’s caps onto them only forces them to adopt the same packages that Bell
offers, at a slightly discounted rate.

This completely removes the independents’ ability to compete on the market. With UBB
implemented, the market will simply consist of incumbents’ plans and the same plans offered by
independents’ at a slightly lower rate.

Andrew Moore, Wolf Microsystems | 514-776-8778

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Impact on Consumers & Market

The implementation of Usage-Based Billing will have highly detrimental effects on the Canadian
public and on the available market choices. It is not only a question of costs to consumers.

Forcing Usage-Based Billing on the independents’ greatly limits the amount of competition in the
communication sector. Lower competition means that the consumer has little to no power if he is
dissatisfied his service. His choices are now limited in many regional markets to Bell’s plans and the
independents’ plans which are slightly discounted.

If the consumer has no choice and is forced to accept the plans offered to him by the incumbent, the
incumbent has absolutely no incentive to innovate. This leads to lower quality service at a higher
price.

Also, incumbents were able to lower the quality of their service the past few years because
consumers were generally not aware that alternatives were available. The recent debate on UBB
opened the eyes of many Canadians and showed them that there are cheaper, better alternatives
out there.

Bell’s true motivation behind implementing Usage-Based Billing on a wholesale level is to prevent
the Canadian consumer to replace traditional home entertainment services and phone services with
newer, online-based services such as Netflix (video-on-demand) and Skype (VoIP). These
alternative services usually offer better services for a fraction of the price.

By putting an economical penalty on using services which consumes a lot of data, Bell forces
consumers to revaluate the viability of using these services as a replacement for traditional services
which Bell offers.

If these services are no longer viable for Canadian users, this effectively removes a large part of
Bell’s competition in these sectors and again, largely benefits Bell at the expense of the consumer.

Canada can say goodbye to services such as Dropbox (cloud storage), Grooveshark (on-demand-
music), Last.fm (online radio), MSDN (Microsoft’s application delivery service for developers), Netflix
(on-demand-video), OnLive (on-demand gaming), Skype (VoIP), Steam (online game store), Xbox
Live (online gaming), etc…

Businesses will be affected by the implementation of Usage-Based Billing. If there customers at

home are no longer able to use their products due to higher fees, this will mean reduced sales.

Let’s take the example of Steam. Steam is an American company which allows computer users to
purchase and receive their games digitally. Most computer games today weighs in at around 10
gigabytes. 10 gigabytes represents almost half of the allotment allowed by Bell in Ontario. As you
can see, it’s hard for the customer to use that service in this situation.

Andrew Moore, Wolf Microsystems | 514-776-8778

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Any business in Canada similarly offering their product will be affected in the exact same way. It is a
hidden cost for the customer, and one that can be quite costly (usage may be limited, the amount
you can pay isn’t).

Students today are required to use the Internet. They use it to retrieve their course materials, submit
assignments, do research, watch lessons for online courses, and more. For them, usage-based
penalties will greatly add to their already heavy financial burden.

Independent content produces in Canada will be forced to revaluate the viability of uploading their
works on websites such as DeviantArt, Flickr and YouTube (especially YouTube, HD video can be
quite “heavy”). This of course will have the effect of reducing the availability of Canadian-produced
content on the web, therefore reducing the chances that talent might be discovered.

Andrew Moore, Wolf Microsystems | 514-776-8778

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Conclusion
Both Bell and the CRTC argue that Usage-Based Billing is required to stop congestion and make
sure that “heavy users” pay fairly for their usage. However, as demonstrated, Usage-Based Billing
does exactly the opposite. It unfairly targets users who do not significantly contribute to network
congestion. The minority of users gets penalized for congestion caused by the majority who use
Bell’s network during peak time.

Usage-Based Billing, when forced on the independents’, makes the independents’ pay twice for their
customers’ usage, eliminates consumer choice in all types of services, leading to increased prices
across the board. This in turn increases the cost of education, stifles innovation and reduces the
availability of Canadian content on the web.

Usage-Based Billing cannot be considered as a valid method of pricing wholesale Internet Services.
Wholesale Internet Services needs to be priced on a cost-based basis, with a reasonable mark-up
so that the incumbents can still make a little profit.

Usage-Based Billing:


o Makes “heavy users” pay for the higher operating costs caused by “light users”
consuming data during peak hours
o Does not contribute at all to reducing congestion

o Cannot be justified by the idea that the Internet is like a utility. Utilities have a
production cost and a limited use. Bandwidth doesn’t.
o Doesn’t introduce fairness
o Impedes on the independents’ ability to compete
 Reduces competition and limits consumer’s influence on the market
 Drives prices up for services in all sectors
 Limits access to cloud based services
 Stifles innovation
 Increases education cost and the financial burden of students
 Reduces Canadian content availability on the web

Andrew Moore, Wolf Microsystems | 514-776-8778