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Bell's 'Throttling' Plan a Threat to a Competitive Net

By Michael Geist

My weekly technology law column (Toronto Star version, Vancouver Sun version, Ottawa Citizen version, homepage version) focuses on the competition concerns raised by Bell's throttling plans.  I begin by noting that the CRTC has long acknowledged that Canadians enjoy limited competition for high-speed Internet services.  In response, it has supported independent ISPs by requiring incumbents like Bell to provide wholesale broadband Internet service at regulated rates. While it is difficult to price-compete - the Bell wholesale pricing creates an effective minimum price - independent ISPs such as Chatham-based Teksavvy and Ottawa’s National Capital Freenet have carved a niche in the Canadian market through attention to customer service, innovative bundling approaches, targeted network investments, and community ownership.

Last week, this important piece of the Canadian Internet connectivity puzzle learned that its future viability has been put at risk due to Bell's plans to "throttle" its wholesale services. Last year, Bell began installing "deep packet inspection" capabilities into its network.  The DPI capabilities - which allow ISPs to identify the type of content that runs on their networks - did not go unnoticed by the independent ISPs since DPI is also used to "throttle" Internet content by scaling back the amount of bandwidth allocated to particular applications.

While Bell employed these throttling technologies with their own Sympatico customers, some independent ISPs sought assurances that it would not be applied to the wholesale services.  Sources advise that Bell responded positively that its plans were limited to its own customers, consistent with its 2003 assurance to the CRTC that it would only engage in limiting bandwidth for wholesale services "in cases of troubleshooting or to protect the network infrastructure from congestion resulting from malfunctioning or mis-configured equipment or malicious hacking."

Notwithstanding those commitments, earlier this month Internet chat boards began to buzz with rumours of throttling among independent ISPs.  A Google Maps mashup was created, documenting instances of reduced bandwidth that stretched across the province.  Late Friday, John Sweeney, Bell’s Senior Vice-President of Carrier Services, sent a letter to the independent ISPs acknowledging that it has implemented bandwidth management from 4:30 pm to 2:00 am for its wholesale customers.  Sweeney admitted that peer-to-peer applications will not work as fast during this period, but argued that "a majority of end users will experience an increased level of satisfaction."

While much of the initial commentary has focused on the implications for consumer rights, that discussion misses the more important aspect of this story, namely that Bell’s plans undermine the Internet’s competitive landscape by raising three competition concerns.

The effect on ISP competition, particularly in Ontario and Quebec, points to the first competition issue.  Simply put, wholesale level throttling lessens the ability for independent ISPs to differentiate their services and therefore compete in the marketplace. Indeed, critics argue that this is intentional since Bell's decision to throttle its own residential customers enabled the independent ISPs to attract dissatisfied subscribers and gobble up market share.  By throttling everyone, Bell may be trying to recapture those lost customers.

The second competition concern is the effect on ISP services such as the secure virtual private networks used by companies and video streaming employed by many broadcasters.  With DPI and throttling in place, Bell may soon be positioned to implement premium pricing for services that business currently takes for granted, thereby raising costs and cutting independent ISPs out of the picture.

The third competition concern brings a cultural dimension to the issue.  The major ISPs claim that throttling is needed to ensure better quality of service to all customers, yet it also has a significant effect on the video marketplace.  Cable and satellite companies have begun to sell new video on demand services to consumers, which compete directly with video distributed over the Internet. For example, last week the CBC used BitTorrent to distribute one of its programs, yet some subscribers reported that the episode took hours to download.  The slow speeds were no accident.  Rather, they were a direct result of ISPs limiting available bandwidth, something they do not do for their own video services.

These obvious conflicts point to the glaring need for action from Canada’s competition and broadcaster regulators.  Recent regulatory attention to the issue in the United States has paved the way for commitments to treat content equally.  Canadians deserve - and should demand - nothing less.

Full post as published by Michael Geist on April 01, 2008 (boomark / email).