Tubes and Television: The Usage-Based Billing Debate

For those that missed the usage-based billing (UBB) controversy, here’s the thirty second rundown:

  • Because of the natural monopoly nature of telecommunications service, Bell is required to sell use of its internet services to small Internet service providers (ISPs) who then resell the service to consumers
  • A few years ago, Bell and Rogers began introducing monthly internet usage caps, generally ranging from 25GB to 75GB of data
  • Small ISPs have consistently offered plans with larger caps (200GB) or no caps
  • The CRTC recently announced that small ISPs would be forced to introduce much lower caps and begin charging customers for excessive data usage
  • Over 450, 000 Canadians signed an online petition against that decision
  • The Government of Canada announced the decision would be reviewed and almost certainly overturned

Now we’re arguing over what happens next. Konrad von Finckenstein–head of the CRTC and owner of the most awesome non-Bond villain name in the world–says that Canada still needs to find a way to “discipline the use of the Internet.” The argument from Bell that led to the CRTC’s original decision was that a small number of customers were using excessive amounts of their network capacity and negatively affecting the network. Leonard Waverman of the Globe and Mail invokes the famous 80/20 rule to assert that 20 percent of customers use 80 percent of network capacity. Putting aside the fact that his 20 percent figure seems unlikely, since small ISPs only have 6 percent market share, there is a serious problem with Waverman–and Bell’s–argument.

The major problem is that–to continue the trend of ludicrous analogies that inevitably appear in any technology related debate–there isn’t a big pile of internet that we’re using up. There are no internet mines. Arguments in favour of UBB rely on some sort of exhaustibility of internet capacity. Waverman argues that internet billing should be the same as other utilities, but these comparisons are inappropriate; we meter water because there is a finite supply of water in the aquifer. We meter electricity because it takes actual finite resources to produce electricity. Internet service doesn’t work like this.

What matters for internet service provision isn’t a stock of resources, but a flow. The crucial investments that internet service providers make are in throughput capacity: how much information can be carried per second. As much as people mocked Ted Stevens for describing the internet as a “series of tubes,” it’s actually not such a bad way to think about it. The limitations of internet service come from the size of the tubes, not from whatever is on the other end of the tubes.

Given this fact, it seems a little strange to me that we’re talking about overall usage caps. If anything, shouldn’t we be talking about limiting the internet speed that people receive? Continuing the pipes analogy, Bell has a single large pipe that goes into each apartment building and suburb, which then splits into smaller pipes for each house or apartment. The claim is that the “internet hogs” are using too much capacity and affecting other customers’ service. But doesn’t that necessarily mean that Bell has oversold the size of their smaller pipes to houses and apartments compared to the size of the big pipe that services everyone? A simplified example for those that prefer numbers to pipes: the connection going into a development can carry 1,000 megabits of information per second (1000 mpbs). Bell then sells 10mbps internet connections to 200 houses. In theory, this doesn’t really work out (200 x 10 = 1000?). However, in practice, it probably does work out; not everyone is using their capacity at the same time, and Bell can safely “oversell” their capacity.

Bell probably has some sophisticated algorithms to determine how much they can oversell capacity. So if the complaints from Bell can be taken at face value, they simply need to rework their algorithms and oversell less. Perhaps Bell shouldn’t be offering new 25mbps lines if only a few people can actually use that capacity at the same time. Perhaps Bell shouldn’t be offering high-definition television for multiple simultaneous channels over internet connections.

Of course, the real story probably has nothing to do with internet capacity and has everything to do with new internet services competing with traditional TV. I pay $8 per month to Netflix, which lets me legally stream TV and movies online, and I pay about $150 per season to the NBA, which lets me legally stream every single NBA game online. With these two services, I don’t really need to pay $50+ per month for cable or satellite. That’s understandably scary for Bell; it affects their core business model.

We probably need to have a discussion about the policies which allow the television and film industries to succeed in the digital age, but if we do, we should have that discussion explicitly, rather than hiding behind fabricated “internet hogs.”

– By Brent Barron

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One response to “Tubes and Television: The Usage-Based Billing Debate

  1. Pingback: Tubes For All: The Usage-Based Billing Debate Modified « Public Policy and Governance Review·

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