Detail from roof of Brighton train station (rotated) – Aug 2013

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“Bell welcomes any competitor, but they should compete on a level playing field.” — George Cope, BCE/Bell Canada, August 2013

“I provide evidence [below] in support of the assertion that Bell gives itself undue preference. It does so by applying an application-specific economic Internet traffic management practice (ITMP) to its Mobile TV service, causing unreasonable disadvantage to competitors and harming consumer choice.” — Ben Klass, CRTC Part 1 Application, November 20, 2013

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November 25: I’ve added a number of edits and corrections to the running text below. My thanks to Ben Klass, J-F Mezei and Juris Silkans for their helpful suggestions.

Nov.25 – update #2. A formal request has come in already asking the Commission to transform Ben’s application into a full-blown public proceeding that would include a review of ITMPs put in place by both Rogers and Vidéotron, which apparently have the same idea as Bell about what’s meant by a “level” playing field. The request is from PIAC, the Public Interest Advocacy Centre. I’ve uploaded a zipped folder with both PIAC’s letter and Ben’s reply here.

This post is divided into two main parts (which may not be obvious to the untrained eye). Down to but not including Key elements of Ben’s complaint, you’ll find 3 sections: a) discussion of Ben’s application in general terms; b) an analogy based on the metered taxi cab as a familiar way to illustrate why Bell can’t treat different kinds of traffic differently to give itself a commercial advantage over competitors; and c) a bemoaning of the sad truth that very few people can bring themselves to care about this wonkish stuff, mostly because it’s so freaking hard to understand.

The second half – Key elements of Ben’s complaint – looks at his filing from the perspective of four underlying regulatory concepts. I have a dual purpose here: to clarify some of the muddier aspects of this process; and to talk a little about some of the past history and how we got to this juncture. The four concepts are:

a Part 1 Application

a new media broadcasting undertaking (NMBU)

data (or bit) caps

Internet traffic management practices (ITMPs)

These are all mentioned on the first page of Ben’s document. If you don’t know what he means by an “application-specific economic Internet traffic management practice,” you may find a glossary helpful.

Ben Klass is back and this time he means it

Last August, Ben grabbed some well-deserved attention with the open letter he addressed to Bell CEO George Cope. In his “I am Canadian” piece, Ben debunked point after absurd point in Cope’s post, which ran on the Bell site under the title “An open letter to all Canadians.” Cope was delivering another salvo in the incumbents’ wacky wireless war against the Harper government and its outrageous idea they should let Verizon enter our market to compete with the Big Three.

For all its merits, Ben’s open letter was an irritant Cope could afford to ignore with impunity (I don’t imagine folks in Bell’s C-suite have been working on their sense of irony since August; and funny how whenever an incumbent CEO insists on a level playing field, you can be darn sure he means exactly the opposite). But that was then, this is now, and Ben has turned up the heat on Bell, way up.

As has been noted widely on the Web the past few days, Ben filed a Part 1 Application with the Commission on Wednesday, essentially a formal complaint that Bell is in breach of both the Telecommunications Act and certain regulatory policies. Commission staff have accepted his filing and posted it on their site for comment. Depending on what happens in the next week or two, Ben’s application could be transformed into a public consultation involving all the wireless carriers. (If you want to read Ben for yourself, I’ve uploaded his application and cover letter to the Commission in a zipped folder here.)

Imagine if cabs charged 800% more for Asian, elderly or female passengers…

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The crux of Ben’s complaint: think of a marauding taxi cab

Consider this. You’re hailing a cab on a Toronto street (any Canadian city will do). You step up to the driver’s window and give him a destination. He announces he’ll be charging you eight times the metered rate. Huh? What happened to the rules? Ah, this cab line has its own rules, as does the only other cab line in Toronto. The metered fare is strictly for middle-aged white guys. If you’re of the female persuasion, too young, too old, a visible alien, poor, or in any way involved in public transit or ride-sharing… you’re shit outta luck.

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Ben’s charge: Bell is the taxi service that’s saying to anyone it doesn’t like (e.g. Netflix): too bad, sucker, you ride on the meter that charges 800% more than the meter for Mobile TV. The math is simple: for Bell TV, you get 5 gigs for $5/month. To watch video any other way, you pay Bell $40 for the same 5 gigs (barely 2 HD movies). Exactly what Bell and Rogers do on their wireline broadband. Dear sucker, you wanna watch Netflix, then have we got some data caps for you.

The taxi analogy is the best thing I can conjure with to capture the essence of Ben’s effort to protect consumers and 3rd-party competitors from the arrogant and probably illegal way Bell favors its own wireless TV service over all others. Bell is treating competitive video services exactly like my hypothetical taxi above. Or like a crooked bookkeeper: it has 2 meters, a cheap one for itself and and a much more expensive one for everybody else. Remember: smartphone owners hooked up to Bell Mobility are paying for, among other things, access to the public Internet, which means in turn access to both free video sources like YouTube and subscription-based sources like Netflix.

(Taxis carry meters because they have to charge “tariffed rates” – rates set by a licensing authority that must be applied to all passengers. Otherwise, we might open the door to unjust discrimination. Contrast that with “just” discrimination. If you attempt to get into a cab while you are, say, throwing up all the vodka tonics you just consumed, or brandishing a Glock 17, the driver will be perfectly within his rights to discriminate against you in refusing your business. Just like Bell can discriminate against you if you try to launch malware, kiddie porn or a distributed denial of service attack on its network – none of which has anything to do with your right to access the public Internet and watch video clips on YouTube.)

Complexities that stand in the way of keeping the Internet open

I introduced the taxi cabs for another reason. This stuff is incredibly hard to understand and even harder to explain in detail to anyone who isn’t a policy wonk. If you’ve been to this page before, you’ll have noticed one of my self-appointed missions is to document the hardships consumers suffer as a result of all the things they don’t know or understand about their broadband services, whether wireline or wireless. Some good survey research has shown that wireline broadbanders in both the US and Canada approach their service like a pig in a poke: the overwhelming majority have no idea how much “speed” they’re paying for, even as advertised by their ISP (see e.g. PIAC’s January 2013 study of Canadian attitudes to broadband advertising – pdf uploaded here).

But the problem doesn’t stop at consumer ignorance. The service providers and even the CRTC play a major role in undermining attempts to win redress for grievances of the kind Ben raises in his application. For their part, the carriers are all too happy to let their customers flounder in frustrated confusion, especially as penetration rates level off and future earnings depend increasingly on jacking up ARPU (average revenue per user).

And the Commission? Ironically, Ben’s application shows exactly what’s wrong with the system set up by the CRTC to police the provision of Internet access. The Commission has declined to do the policing itself, on an ex-ante basis, which is exactly what the big licensees like. Why? Because the regulator has left it to consumers to do all the work for them, on an ex-post basis. Consumers are left to: a) identify problems and potential abuses by their service provider; b) gather evidence to support their claim; c) wade through a great deal of regulatory policy to satisfy the Commission that they should entertain a complaint; and then d) take a huge amount of time, effort and 3rd-party advice to get a complaint in good enough shape not only for the Commission staff, but for the droves of lawyers any of the incumbents can throw at a troublemaker.

I can’t imagine there are more than a handful of people in the country with the brains, motivation, and knowledge of the issues, not to mention the time, to pull off what Ben has pulled off. And, like I say, that points to a problem the CRTC should be giving serious thought to: why calling out Bell on such egregiously bad behavior has been left in the hands of a few end-users instead of in the hands of the Commission’s own enforcement staff.

(J-F Mezei has pointed out to me that as an administrative tribunal, the Commission isn’t really set up to be a policeman; they are more like a judge in a dispute. Thus it’s the role of people like Ben and others to raise issues when they believe the rules have been broken – and then it’s the role of the CRTC to reach a finding on the alleged violation.)

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Key elements of Ben’s application

A “Part 1 Application”

Part 1 of what? Of the CRTC Rules of Practice and Procedure. Effective 2011, the Commission overhauled its procedures to bring them into line with the phenomenon known as digital convergence (or the “converged communications environment” as the CRTC says). Before that, the agency was a house divided, split down the middle between telecom on one side and broadcasting on the other. The uneasy relationship between these two sectors has created lots of policy and regulatory headaches, some of them directly relevant to the issues here.

Ottawa designed Part 1 applications to be very general in scope and subject-matter. The guidelines on how to file an application, on the other hand, are quite fussy, as you can see from what Justice Canada spells out on this page. For some perspective, compare Ben’s application to a high-profile complaint filed with the Commission in September by CNOC, the Canadian Network Operators Consortium, which represents the interests of our new entrant or “competitive” ISPs. It’s a request to the Commission to force the large cable operators to clean up the mess they’ve made of the wholesale side of high-speed cable. The abridged version of the main document in that application runs 76 pages and reflects a great deal of expensive legal work (an approach that Commission staff, who have to read all this material, are not necessarily in favor of). As far as I can tell, Commission staff have a great deal of discretion in how they deal with these filings. In any case, Ben’s work has passed muster with them. The guessing game now is whether the Commission will see Bell’s breach as worthy of a broader investigation.

NMBU – new media broadcasting undertaking

Speaking of convergence, the Commission decided back in 1999 to deal with the appearance of online content that looked in many cases just like TV. That raised a thorny issue. The Broadcasting Act spells out definitively what is meant by terms like “program” and “broadcasting.” And the statutory semantics told the Commission that many kinds of motion video on the Internet (with exceptions like personal messaging) were, legally speaking, as much television as a CBC-TV signal coming through a coaxial cable from Rogers and into your TV set.

So it seemed as though the Commission was obliged under the Act to regulate online video just like TV. But there was a workaround. It could still comply with its legal obligations and issue an exemption order, which would allow broadcast-like content to make an online home without having to adhere to all the rules that apply to real-world broadcasters in Canada (the May 1999 decision is archived here). Thus was born the regulatory bastard known as “new media broadcasting” and with it a class of content providers known as “new media broadcasting undertakings” – NMBUs!

Bell’s Mobility TV happens to be one such undertaking. As with other NMBUs, Bell doesn’t have to worry about requirements related e.g. to Canadian content, any more than does Netflix or YouTube. None of this means, however, that Bell can do whatever it likes, as Ben reminds us in this passage from his application:

“Given the status of NMBU Internet services, Bell Mobility is exempt from regulation under certain sections of the Broadcasting Act. However, this exemption is subject to a number of qualifications, most notably that Bell is prohibited from giving itself undue preference and that the CRTC retains the power to collect information when allegations of preference are registered” (my emphasis).*** Data caps

A topic I’ve written on way too frequently. In my October 29 post (Broadband data for Toronto: more bad news and getting worse), I argued that what really sucks about our broadband service isn’t so much lousy speed, as it is the data caps Canadians have to put up with. Whether called data caps, bit caps or bandwidth caps, they refer to the practice by ISPs of imposing a pre-determined limit on the amount of data (in gigabytes) a subscriber may transfer in any billing month, beyond which the subscriber is charged extra – a lot extra.

Caps have two ugly consequences: they discourage Canadians from using the Internet; and they add to the already overly-high cost of residential broadband service. Although the Commission didn’t invent the use of caps, the previous chairman, Konrad von Finckenstein, took Bell and the other incumbents at their word back in 2009, when they claimed caps were indispensable for managing the congestion on their local access networks.

Not only is Bell using a tool that has proven to have both anti-consumer and anti-competitive effects. On top of that, the way Bell is using caps a) is not justified or necessary as a means of managing traffic, on the evidence Ben presents; and b) clearly has the practical effect of not only discouraging use of the public Internet in general but also use of competing video services in particular.

One of the most fascinating end results of this regulator-sanctioned practice is that it violates a sacrosanct principle of the Harper regime: namely that, under a 2006 Cabinet Policy Direction, the Commission must regulate telecommunications in a way that maximizes reliance on “market forces.” (This order was a gift from Maxime Bernier during his tenure as Minister of Industry, and before his girlfriend turned out to have secret documents lying around the house. If you want to read this little document, which has sadly had a huge influence on telecom regulation, I’ve uploaded it here.) Apart from distorting rather than promoting the free market, it turns out the use of caps is also a technically lousy way to manage network congestion. Here is how Ben puts these two points:

“[para] 32. Data caps are meant to ‘discipline’ consumers’ use of the Internet. Due to the finite capacity of networks at any given time, ‘congestion’ is said to occur when ‘too many’ users attempt to access the Internet concurrently. In economic terms, data caps are an inefficient means by which WSPs [wireless service providers] artificially limit demand by restricting output. … The creation of artificial scarcity in such a way represents a distortion of market forces, albeit one that is purportedly necessary to ensure reliable service, assuming that congestion occurs past a certain threshold of concurrent Internet use. “[para] 33. The problem with static monthly data caps is that congestion is a highly dynamic, ephemeral phenomenon, particularly when it occurs on mobile wireless networks. Anyone who has attempted to access the Internet on their smartphone during an arena sporting event or concert intuitively knows this to be true. … Similarly, congestion may occur in one geographic location with no effect in others. The link between a monthly data cap and fleeting moments of localized congestion is tenuous at best.”*** ITMPs – Internet traffic management practices

The use of caps to manage Internet traffic is part of a larger CRTC framework first issued four years ago under the title Review of the Internet traffic management practices of Internet service providers (Telecom Regulatory Policy CRTC 2009-657). Here is an excellent example of a regulatory mechanism that has a profound effect on the way Canadians use the Internet, while being based on logic so arcane it would immediately put a normal, healthy person into a coma (I know this from extensive first-hand experience).

The problem with the ITMP framework is two-fold: it encourages ISPs to do the wrong things and it does so for entirely the wrong reasons. The ITMP framework was and still is largely a sop to the incumbents, who came to the Commission and lied through their teeth about their need for unusual measures to manage traffic – while demonizing so-called bandwidth hogs as the culprits whose behavior had to be reined in. The Commission responded by allowing the deployment of both technical ITMPs, like throttling your bandwidth if you were using “too much” of it; and economic ITMPs like data caps, which are deliberately not cost-based since discouraging use of the Internet requires punitive pricing – which is exactly what we’ve got in Canada.

Whereas Canadian ISPs are free to use economic ITMPs in the form of data caps on their networks, they are not allowed to do so on an application-specific basis. In other words, the CRTC’s rules provide explicitly that if an ISP caps any data on an access line, it is then obliged to cap all the data that travels across that line. It cannot pick and chose on the basis of an application-specific ITMP. This stipulation was intended by the Commission to prevent one particular kind of undue preference: the selective deployment of caps by an ISP that gives a preference to its own content or services, while making the services of competitors more expensive and thus less attractive to subscribers.

And that is exactly what Ben claims Bell is doing. Here’s how Ben relates this principle to the fact that Bell is charging its customers eight times more to view competing services (from Telus, CBC, Netflix, etc) than it is to view its own TV package (5 GB of Bell’s service costs $5; 5 GB of any other Internet video costs $40):

“[para] 59. To my knowledge, ‘undue preference’ in its statutory meaning and in the context of wireless communications refers to a situation in which a carrier charges different rates for services that have the same cost to the carrier, based solely or primarily on the ownership of those services. Unless Bell is forced to pay eight times more to transmit competing Internet data than it pays in underlying costs to transmit its own Mobile TV data, or its own service uses different spectrum resources than third party Internet traffic, then it is reasonable to conclude that the application-specific economic ITMP Bell Mobility applies to its own NMBU is unduly preferential, and by implication discriminates unjustly against Internet services not owned by Bell or BCE.

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My closing shot at data caps

Notwithstanding the excellent case Ben has made here, I think it’s important to leave a reminder that any use of data caps turns out to be anomalous and unusual once we compare Canada to the 33 other member countries of the OECD. My concern is that in the forthcoming debate, Bell might concede some ground on the use of caps in an unduly preferential way – while managing to hang on to the right to use them on their customers without any regulatory controls whatsoever relating to the size of caps; their relation to increasing speeds and decreasing burn rates; or to the cost to customers of exceeding them.

(The burn rate of a residential broadband access line is the amount of time it would take the end-user to reach her data cap if she used her line to download data at the maximum bandwidth achievable by that line all in one go. Thus, if you have a very fast line (say 50 Mbps or more) but a low cap (say 100 GB), then you will burn through your cap very quickly. This practice hands three freebies to the incumbents: they are able to manipulate your caps in a way that makes bandwidth a scarce resource; they can gouge subs for as much money as they see fit; and they can – and do – discourage your use of competing services like Netflix. In case you didn’t get the idea above, I believe allowing this practice to go unregulated is completely unacceptable.)

The graph below, from the most recent OECD data, shows how small the Cap Club is and how prominently Canada figures in that club – in the wireline sector only (in my previous version of this post, the implication was that the data covered wireless caps – which they don’t). The bars in dark blue at the top indicate the prevalence of explicit caps; in Canada’s case, the figure is 90%, i.e. in 18 of the 20 ISP services observed by the OECD, caps were found to be in place. You’ll notice that 19 of the 34 OECD countries are 100% cap-free on the wireline services included in the OECD’s sampling.

The data were current as of September 2012, but part of a general update issued by the OECD in July 2013. The original spreadsheet (5g) can be found at the OECD Broadband Portal.

D.E.