The CRTC hearing on wholesale usage based billing opened yesterday with Bell leading off in front of a packed room (coverage from the Globe Quebecor , and Wire Report ). By the time lunch rolled around, it was clear that claims that usage based billing practices are a response to network congestion is a myth (it was also clear that Bell is happy to peddle fantasies such as claims there is nothing to stop independent ISPs from taking 20% of the Canadian market and that consumers have no problem with UBB). I wrote specifically about UBB and network congestion in this post earlier this year in which I cast doubt on the connection between the two.

Bell opened by focusing specifically on network congestion. Its opening remarks emphasized the existence of network congestion, the contribution to congestion by wholesale ISPs, and that IPTV does not contribute to congestion. It also provided a chart of the Bell Internet network, noting that congestion occurs in the portion of the network that aggregates traffic from both Bell customers and customers from independent ISPs (thereby again confirming that there is no congestion issue in the so-called last mile nor once the traffic hits the backbone network and the public Internet). Bell’s emphasis on network congestion is not surprising since the CRTC approach to network management – both net neutrality (technical Internet traffic management practices) and UBB (economic ITMPs) has been premised on dealing with congestion concerns. If the proposed solutions do not address congestion problems, the rationale behind the regulatory framework falls apart. Given the lack of robust competition in some Canadian markets, this suggests that the regulator should be playing a far more active role in addressing UBB.

Once the questioning began, the claims associated with congestion quickly unravelled.

CRTC Chair Konrad von Finckenstein asked why – if Bell was facing network congestion – sister company Bell Aliant has not implemented UBB. Bell argued that Bell Aliant “supported” UBB, but acknowledged that competitive forces and marketplace conditions in Atlantic Canada were such that UBB is currently not needed. Of course, von Finckenstein didn’t need to look at Bell Aliant as his example – Bell itself employs different caps in Ontario and Quebec given the different competition from Videotron and Rogers. Their approach isn’t a function of congestion, but rather competition. In fact, when Bell was asked whether it planned to keep data caps for its retail customers, it responded that it did, subject to “competitive dynamics.” The effects of competition was further confirmed when Telus appeared as it noted that it doesn’t use UBB, it isn’t a pressing issue, and that competition with Shaw has led to far more generous plans than those found in other parts of the country.

Discussion on the lack of a link between congestion and UBB continued as Commissioners Molnar and Denton asked why Bell was promoting a plan that involves aggregate usage rather than peak usage. Molnar noted that aggregate usage is not linked to congestion and that it appeared to simply create incentives to reduce Internet use more generally. Bell agreed, leaving Molnar to respond that this was a problem since it reduced Internet use with no benefit to addressing congestion. Denton continued on the same theme, asking why the CRTC would want to try to reduce Internet use other than in an effort to address congestion.

Add Bell’s acknowledgement that its pricing is not a function of actual costs but rather the market and the conclusion is that all elements of UBB – use of caps, pricing, and size of caps – are a function of the regional marketplace dynamics, not congestion concerns. Moreover, the Commissioners seemed to understand why this issue is so troubling, with Molnar emphasizing the dangers of a policy that discourages Internet use and Denton linking UBB to cloud computing and the fears that caps would harm that emerging industry. The question and answer period made for a good first day, though tough questions undoubtedly lie ahead for all the participants, including Open Media, which appears today.