CRTC UBB Ruling - First Glance

In arriving at its UBB decision today, the CRTC had quite a few policy options at its disposal:

- Bell's revised proposal that independent ISPs be charged 17.8 cents per gigabyte of usage (instead of the overage fee of up to $2 per GB which was its initial proposal that met a lot of opposition)

- the Canadian Network Operators Consortium (which represents some of these smaller ISPs), whose "95th percentile" proposal calls for charges based on the measured peak network traffic travelling at the point where their networks join the network of the wholesale network providers (i.e., Bell Canada)

- a hybrid approach proposed by MTS Allstream, which calls for wholesale providers to charge independent ISPs based on the capacity of the link between their networks and independent ISP networks. The price includes the cost of upgrading other parts of the wholesale providers' networks to be able to meet traffic demands from the indy ISPs for the foreseeable future.

It is interesting to point out that MTS acts as both a wholesaler and a buyer of wholesale services, depending on the region... so it had a pretty good perspective from both sides of the fence. At a first glance, it looks like the CRTC opted for a variant of that third option, which is to bill for Internet services based on capacity (i.e. speed or throughput of the network), not on usage (i.e. volume of data going through the network).

In other words, small ISPs will have to pay for the size of the pipe, not the volume of data flowing through that pipe. Of course, this is a "Canadian" solution. Bell and wholesalers get a way to charge more if they provide faster Internet services, which allows them to upgrade their infrastructure to deliver even faster Internet service. On the other hand, smaller ISPs won't have to pay based on how much data their customers use in a given period of time.

The key question going forward is how will these independent ISPs plan out their Internet service needs and what will the SLAs (Service Level Agreements) call for? Throughputs at the peak busy hour is one way to measure the speed of service, but those can be tricky and that method does involve some over-engineering of the network (i.e. during off-peak hours, the speeds could be higher). So, as a smaller ISP, do you buy Internet services to meet that peak demand, and incur more upfront cost, or buy to meet the baseline demand, and have enough resources to "rent the spike"? Some will choose the former (resulting in extra costs for the end-users), while others the latter (which results in more or less the same costs), but worse (slower) performance. Then again, it will be hard to measure this lower performance since some users of services like Teksavvy were already being "throttled down" by providers such as Bell.

One thing for sure: as a result of this ruling, there will be more demand for policy infrastructure (from vendors such as Tekelec (which bought Camiant) and Amdocs (which recently acquired Canadian-based Bridgewater)) that could be leveraged for many purposes including "demand shaping", among others. End-users will stick to what's cheap - and follow the "theory of rational expectations".