The second day of the CRTC hearing on usage based billing left the Commission with three fairly divergent views on Canadian networks, traffic management, and the wholesale tariff (coverage from the Globe, Cartt.ca, Wire Report). While Bell focused on network congestion in its presentation on the first day, the cable providers and independent ISPs provided a much different perspective, focusing instead on incentives to invest (cable) and competition (independent ISPs).

While the cable and independent ISPs provided most of the substantive debate, the much-anticipated appearance of Open Media garnered the most fireworks. Open Media (and CIPPIC) were told that much of their submission was outside the scope of the proceeding, since it focused on retail UBB and the Commission had already rejected extending the hearing to cover those issues. Instead, it faced questions about its membership, funding, and self-interest as well as shocking questions from new CRTC Commissioner Tom Pentefountas, who asked “I am trying to find out what is undemocratic about the system we have right now ‘allowing a few companies to control the Internet access market would be irresponsible and undemocratic’.” The question came in the context of questions that suggested independent ISPs were tremendously profitable without needing to invest in networks. While many Commissioners have asked informed, tough questions over the first two days of all sides, that line of questioning is precisely the sort that generates public skepticism about the CRTC.

Once Open Media was done, the floor was open to lengthy sessions with both the cable companies (Rogers, Videotron, and Cogeco) and independent ISPs. The cable companies provided a well organized opening presentation that avoided the focus on network congestion (the word congestion was barely mentioned) and instead emphasized the complexity of networks, the differences between cable networks and Bell’s network, and the need for policies to encourage ongoing investment.

The discussion included several interesting revelations, including cable’s view that there is no bandwidth crisis (the issue for cable is paying for usage) and the claim that heavy users may be more difficult to manage than light users, since the network can better handle spikes in traffic but slow steady use presents challenges. The cable companies were asked why independent ISPs rarely use their TPIA service and while they responded that it was a function of history with cable primarily focused on residential service, Professor Catherine Middleton provides a far more convincing review of the barriers cable erected to stop independent ISPs from using their networks.

Perhaps the most important issue was cable’s proposal for a bundled wholesale tariff that includes a usage component. The cable companies argued that a usage component would foster greater usage, an argument that clearly did not convince some commissioners (particularly Molnar). The proposal also served as one of the most notable differences between cable and the independent ISPs, who appeared as the Canadian Network Operators Consortium. CNOC argued for a “building block approach” to the wholesale tariff that would allow for maximum innovation and flexibility. They noted that their approach would allow for new service plans (perhaps offering fast speeds and small caps or large caps and slow speeds – combinations not typically found with the incumbent providers) and greater consumer choice.

CNOC also addressed a number of misconceptions about independent ISPs, emphasizing the investment they make in their networks (arguing that greater profits will lead to greater investment, known as the ladder theory), the dangers of an unregulated space that would quickly resort to duopoly market behaviour, and acknowledging how unworkable cable TPIA was for many years.

CNOC also made a point of challenging claims of carrier network costs, arguing that “once a network is built and paid for, there is almost no cost to move Internet and other broadband traffic across it.” While that might sound controversial, it is consistent with a comment from Commissioner Molnar on the first day, who noted “we all, I think, can hopefully agree that there is no marginal cost to using the network when you are not causing augmentation.” (augmentation is a reference to needing to augment the network due to congestion). Bell said it agreed with the statement.

The hearing continues today with Primus, Distributel, Shaw, and the Public Interest Advocacy Centre.