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UBB is Dead. Long Live UBB

By Michael Geist

Yesterday was the deadline for parties to the CRTC's hearing into usage based billing to submit their comments. Bell stole the show by dropping its wholesale UBB proposal and substituting it with a new acronym - Aggregated Volume Pricing (AVP) - that should allow independent ISPs to retain some flexibility when it comes to their Internet service plans. The headlines rightly note that this is a significant backtrack for Bell. Just over two months ago, Bell wrote to the Commission to urge it to grant final approval to wholesale UBB, arguing "the implementation of the Companies' wholesale UBB has already been delayed for far too long." Of course, that was before UBB became a political firestorm and Industry Minister Tony Clement made it clear he would not approve the Bell proposal as it then was. 

Bell obviously saw the writing on the wall and has come back with a plan that allows independent ISPs to purchase 1 TB of data for $200 with an overage charge of 29.5 cents per GB.  The aggregation of independent ISP subscriber traffic means that those ISPs can choose to offer whatever plans they like - unlimited, capped, or variations thereof - simply by purchasing aggregated data from Bell under the tariff. The aggregated pricing model was proposed by several people (even I figured it out in my first long UBB post on February 1st) and is certainly better than the wholesale UBB approach it replaces.

Notwithstanding the proposed improvement on wholesale terms, this represents only a small part of the broader UBB issue.


It only applies to the wholesale services as Bell's retail pricing remains unchanged. In other words, those cheering a 29.5 cent/GB overage charge should note that this is the wholesale price for the independent ISPs. The retail overage pricing, which can run as high as $5/GB, remains unchanged for now. In fact, all the concerns with retail UBB that affect the overwhelming majority of Canadian Internet users remains the same. As I argued in my piece on what to do next, addressing the wholesale issue is a necessary but not sufficient condition to dealing with the broader competition concerns in the Canadian market. Independent ISPs have functioned without wholesale UBB for years, yet have failed to make a serious dent in the dominance of the incumbent cable and DSL providers.

I will have more to say about what to do next in a paper and a series of posts coming out later this week. In the meantime, my primary takeaway from Bell's backtrack is to note how it affirms that there are two paths to keeping dominant market players from taking advantage of their position to the detriment of consumers and smaller businesses. The first is competition - with enough competition, dominant players become less dominant and are forced to respond with better pricing and services. The second - which arises in the absence of such competition - is regulatory or political pressure. 

Bell's backtrack, which is entirely the result of political and public pressure (the independent ISPs were powerless and the regulator approved the wholesale UBB approach), is a reminder that Canada still does not have a sufficiently competitive environment to effect change. Instead, Canada still needs regulatory or political pressure to help foster a more competitive outcome. Relying on market forces may be the preferred approach, but at the present time there should be little doubt that market forces alone (particularly an artificially restricted market without foreign competitors) will not provide Canada with globally competitive Internet services and pricing.

Full post as published by Michael Geist on March 29, 2011 (boomark / email).