OpenMedia.ca, which spearheaded the public uproar over usage based billing earlier this year, launched a Vote Internet campaign that quickly attracted political support. The campaign asks candidates to be pro-Internet, which includes standing up for an open and accessible Internet and stopping the “pay meter on the Internet.” While this predictably raises claims of retail price regulation, addressing concerns about retail UBB need not involve a return to regulatory approvals over retail pricing of Internet services.

I’ve argued that UBB is fundamentally a competition problem and that addressing the competition concerns (which OpenMedia also supports) will address many of the concerns. Increased competition takes time, however, and in the meantime there are legitimate concerns about the use of UBB in Canada at the retail level given the approaches in other countries and the pricing far above costs. In addition to discussing those issues, my UBB paper makes a modest proposal for addressing retail UBB that includes greater transparency and a reasonableness standard. The proposal – which I’ve called the creation of Internet Billing Usage Management Practices or IBUMPs – is explained below.

Given the CRTC’s longstanding forbearance of retail Internet services, addressing retail UBB represents a more challenging regulatory and policy issue. While some have advocated for the elimination of UBB at the retail level, there is little political support for directly intervening in the pricing choices of retail ISP services. The optimal method for addressing retail UBB is a robust competitive environment in which it is consumer ability to switch providers in the event they are dissatisfied with UBB that serves as the primary safeguard against unreasonable UBB practices.

In many respects, the current debate resembles the early battle over net neutrality in Canada. Indeed, substitute the words video streaming, Netflix, and heavy users for peer-to-peer, BitTorrent, and file sharers and the discussion points are virtually identical.

Net neutrality advocates maintained that fears about traffic shaping practices and preferential treatment of incumbent ISP content were the product of an uncompetitive marketplace that required regulatory intervention. Incumbent ISPs argued that there was no need for CRTC involvement since a market-oriented approach was sufficient to address any public concerns.

The CRTC ultimately adopted guidelines that ensured that Internet traffic management is not a free-for-all. It rejected arguments that the market would ensure ISPs provide adequate disclosure on how they manage their networks. Instead, it mandated full disclosure of traffic management practices, including information on when they occur, which applications are affected, and their impact on Internet speeds. Moreover, it adopted a new test to determine reasonable traffic management practices. Where a consumer complains, ISPs are now required to describe their practices, demonstrate their necessity, and establish that they discriminate as little as possible.



a. IBUMPs â€“ Transparency and Disclosure

Given the current competition concerns and the fears that the UBB could be used for uncompetitive purposes, the CRTC should consider new guidelines for retail UBB – Internet Billing Usage Management Practices (IBUMPs) – expanding on the CRTC’s Internet Traffic Management Practice guidelines.

Much like the ITMPs, the IBUMPs would include a comprehensive transparency requirement so that consumers can better understand the limits of their service and reliably track their monthly Internet usage. While ISPs already provide some tracking tools, they have proven unreliable with admissions that there have been errors. The CRTC’s ITMP decision appears to adopt the position that monthly usage bills provide sufficient transparency to Canadian consumers. Yet the incumbent ISPs have also sowed some marketplace confusion with marketing that breeds consumer uncertainty about what their data plans actually provide in practice.

Marketing materials often overstate the benefits of data plans by citing unusually compressed and shorter MP3 music or video files to suggest that consumers can download far more than is likely to be the case. Similarly, discussions often conflate streaming video with downloaded video, leaving consumers with the mistaken impression that they can access hundreds of hours of video each month. This claim may only be true for low-definition streaming, not for downloaded video from various commercial services.

If UBB is to remain part of the retail Internet access landscape, the transparency and public disclosures must improve. The CRTC should adopt similar requirements as those found with ITMPs to ensure that consumers are better informed about the benefits and limits of their capped services.

b. IBUMPs â€“ Reasonableness

Much like the ITMPs, greater transparency and disclosures are a necessary but not sufficient step to address current concerns. The ITMP process also led to guidelines designed to ensure that ISP traffic management practices are reasonable. The CRTC’s basic test for acceptable ITMPs was as follows:

When an ISP is responding to a complaint regarding an ITMP it has implemented, it will use the ITMP framework. In doing so, the ISP shall:



Describe the ITMP being employed, as well as the need for it and its purpose and effect, and identify whether or not the ITMP results in discrimination or preference.



In the case of an ITMP that results in any degree of discrimination or preference:



demonstrate that the ITMP is designed to address the need and achieve the purpose and effect in question, and nothing else;

establish that the ITMP results in discrimination or preference as little as reasonably possible;

demonstrate that any harm to a secondary ISP, end-user, or any other person is as little as reasonably possible; and

explain why, in the case of a technical ITMP, network investment or economic approaches alone would not reasonably address the need and effectively achieve the same purpose as the ITMP.

The ITMP second-level analysis is limited to instances of discrimination or preference. Although UBB may raise discrimination or preference issues, particularly for competing video products, many UBB plans do not. Applied to the issue of retail UBB, the establishment of an IBUMP policy would would ensure that retail UBB is reasonable in light of network congestion concerns and marketplace conditions. It could include the following four conditions.

First, CRTC approval for UBB has long been focused on addressing network congestion. Indeed, incumbent ISPs now argue that the use of UBB is related to congestion concerns and the need for fairness among all subscribers. In the case of a complaint about UBB retail practices, ISPs should be required to demonstrate that the UBB approach is designed to address specific network congestion concerns.

Second, the UBB model should be the least restrictive possible to achieve its intended goals. Much like ITMPs, this may mean giving consumers the option for accounts that are rate-limited after a certain monthly cap is reached instead of imposing overage charges (as noted above, many ISPs around the world have adopted this approach).

Third, if the ISP has implemented traffic shaping or other technical measures, it should be required to demonstrate why those approaches alone would not reasonably address the same network congestion concerns. This requirement is a mirror image of the ITMP requirement that envisions ISPs relying on network investment or economic ITMPs (ie. UBB) rather than technical ITMPs such as traffic shaping. If traffic shaping is in place, ISPs should be required to explain why that has not adequately addressed the network congestion concerns.

Fourth, while the CRTC should not engage in reviews of the retail pricing or size of monthly data caps, it should, under certain circumstances, be entitled to examine overage charges should ISPs use this economic model (as noted above, many ISPs around the world rate limit rather than impose overage charges). The review of overage charges would only occur in local markets where both the cable and DSL provider employ UBB, thus leaving consumers with limited non-UBB alternatives. In such instances, the CRTC should review overage charges to allow for a reasonable profit but establish safeguards against price gouging in light of actual ISP costs.

The IBUMP approach would provide additional guidance the CRTC neglected to provide in the ITMP decision. That decision recognized that guidance on reasonable traffic management practices could co-exist with a largely unregulated retail Internet services market. The same decision left economic ITMPs largely unregulated, effectively giving the Commission’s blessing to UBB. Given recent marketplace developments, it is increasingly clear that was a mistake. Much like the ITMP decision, the Commission should not dictate pricing models, but it should ensure that pricing models are transparent and that those premised on addressing network congestion do so in the least restrictive manner possible.