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Distributel Communications Limited
March 28, 2011
Introduction
10. This means that the Per User Usage Charges are not cost-based in any
way whatsoever. These charges are 100% profit.
2
As discussed below, in the case of a wholesale service, a competitor's traffic should be
measured in aggregate (i.e., across all or large groups of end users) and traffic-related usage
charges should be based on peak period usage in order to reflect actual costs incurred by the
incumbent to provision the network. This is something which the incumbents should be able to
do without difficulty since they routinely measure peak period demand in order to monitor and
plan their networks.
a) It is Bad Policy to Discourage Internet use
12. The purpose of the Per User Usage Charges is to discourage Internet
use. This goal was expressly acknowledged by the Commission in Decision
2010-255:
13. Canada is probably the only country in the world where the regulator
has a policy that deliberately aims to reduce Internet use by its citizens.
14. This is an extraordinary thing at a time when Canada and all of its major
trading partners are devising and implementing digital strategies intended to
give their citizens and businesses the best that modern communications has
to offer. The Commission's policy runs directly contrary to this goal since its
seeks to discourage Internet usage without there being any economic basis
for imposing such a limitation.
15. On this last point it is important to recognize that it is not the absolute
volume of traffic generated by a user that matters from a cost perspective
but rather the time period when the traffic is generated. Only peak period
usage imposes real network costs on the network operator since the
network must be built to meet peak period demand. During the rest of the
day, end user traffic does not impose any additional network costs.
16. The Per User Usage Charges approved by the Commission do not
recognize this fact. Instead, they impose charges which are economically
unjustified charges and which discourage usage at any time of the day. 3
18. Both of these consumers would cost the same to serve, but the second
consumer would face a staggering bill at the end of the month because of
the Per User Usage Charges. Indeed, the second consumer could avoid the
peak period altogether and still face an overwhelming bill. This makes no
sense.
19. Both consumers are being discouraged from using the Internet at any
time of the day. There is absolutely no justification for imposing such
charges and discouraging Internet usage in this way. Canadians should be
encouraged to embrace the Internet and all broadband services – not to live
in fear of going over an artificial and economically unsound usage limit.
20. Retail Internet services are not regulated and the incumbents are free
to charge for usage the way they see fit; however, the Commission's
3
The Per User Usage Charge approach approved by the Commission can be contrasted
with what is happening in the electricity market in Ontario where the government is spending
more than one billion dollars on its smart meters program in order to shape the electricity
demand curve away from peak hours. The economic Internet traffic management mechanism
approved by the Commission does not shift traffic away from the peak period and therefore
does not address the peak period traffic congestion problem.
decision to impose such charges on all service providers is bad policy for
Canada and for Canadians.
21. The Per User Usage Charges discourage usage and consequently
inhibit any type of innovation which relies on local broadband networks –
whether over the Internet or otherwise.
23. The recent entry into Canada of Netflix - the Internet video service –
provides a good example. Because of Per User Usage Charges a Canadian
consumer who wishes to use Netflix on a regular basis faces the prospect of
significant usage charges no matter when the consumer uses the Netflix
service. The consumer could watch Netflix videos during the quietest traffic
period of the day and still face high usage charges. This does not make
economic sense.
25. Per User Usage Charges also affect innovative services which do not
even touch the Internet. A video surveillance security service which used the
incumbents' local broadband networks would quickly become uneconomic
because of the high usage charges which would be applied – even though
the vast majority of the traffic would not occur during peak periods. And,
once again, the incumbents would not apply Per User Usage Charges to
their own security services. The anti-competitive aspect of the Per User
Usage Charges is obvious.
30. This cost-based approach makes basic economic sense and accords
with the requirements in the Telecommunications Act and the Policy
Direction that the Commission promote competition and rely on market
forces to the maximum extent possible. It also complies with the Policy
Direction's requirement that regulatory measures of an economic nature
should “neither deter economically efficient competitive entry into the market
nor promote economically inefficient entry”.
Conclusion
32. Distributel firmly disagrees with any application of the Per User Usage
Charges at the wholesale level. The Commission's decisions to approve
such charges are based on a seriously flawed policy which discourages
Internet use, inhibits broadband innovation, impairs competition and limits
consumer choice. It is a bad decision for Canada and for Canadians.
33. Any usage charges applicable at the wholesale level should be truly
reflective of costs and should apply to a wholesale customer's aggregate
traffic. This is the only way to ensure an economically rational wholesale
regime. It is also the only way to ensure that the wholesale regime complies
with the Policy Direction's requirement that regulatory measures of an
economic nature should “neither deter economically efficient competitive
entry into the market nor promote economically inefficient entry”.