The Canadian Telecom Saga

This post was co-authored with Matthew Zuk, who is currently articling with the firm. On January 25 of this year, the Canadian Radio-television and Telecommunications Commission (CRTC) released a controversial decision affirming the right of internet service providers (ISPs) to charge for internet services based on usage. Shortly after the decision's publication, individuals, consumer rights groups and small businesses embarked on a public campaign against the ruling. The CRTC is currently in the process of reconsidering the decision and cabinet has stated that it will overturn the ruling if the CRTC does not. For years, the largest ISPs have charged retail customers a set amount for basic internet usage while imposing additional fees for exceeding the amount of downloaded data allotted to each customer per month. In some cases, customers are charged overage penalties of between $1.50 to $2.50 per gigabyte for exceeding their download limits. One gigabyte is typically enough to download a full length movie, however the data size varies greatly among movies based on their length and quality. High definition films can be as large as four gigabytes. The large ISPs also lease access to their networks to smaller unaffiliated ISPs, many of which offer high or even unlimited data usage to their customers. The CRTC's decision permits large ISPs to charge these unaffiliated ISPs based on the amount of data they use, effectively requiring the unaffiliated ISPs to impose download caps on their own customers' internet usage. Almost immediately, a grassroots movement opposing the CRTC decision began to gain momentum, which to date has resulted in demonstrations and an online petition boasting nearly 50,000 signatures. By the end of February, frequent "Twitterer" and Industry Minister Tony Clement posted that he would examine the decision. Clement's calls for a review of the CRTC decision was echoed the following day by Prime Minister Stephen Harper. By the end of the first week of February, CRTC chairman Konrad von Finckenstein found himself in front of a parliamentary committee to explain the ruling. The CRTC has since decided to delay its decision and is seeking comments before reconsidering the ruling. Cabinet has insisted that it will exercise its statutory discretion to overturn the decision if the CRTC does not do so itself. Only a small percentage of Canadians currently exceed their download caps and an even smaller number of Canadians actually subscribe to an unlimited bandwidth internet service. However, the movement against the CRTC's ruling reflects Canadians' views on internet usage as well as their internet habits. Consumers and small businesses alike are concerned about the price of internet services as they come to rely more heavily on the web for both business and pleasure. Many businesses' websites now contain rich multimedia applications, and more and more people are downloading, uploading and streaming media, such as high definition video, in their homes. On one hand, consumers oppose the CRTC decision because they are concerned about their ability to freely enjoy the internet without worrying about the cost. Some argue that excess usage charges of $1.50 to $2.50 per gigabyte are disproportionately high compared to the delivery costs, which may be as low as cents per gigabyte. Others accuse the large incumbent service providers of merely trying to protect lucrative business interests in cable television and other services. On the other hand, the entrenched service providers argue that they need to be able to recoup the massive investment they made in Canada's telecommunications infrastructure and the need to expand and update it in the future. They also note that old pricing structures need to be overhauled to meet the steady increase in annual data usage. Their rationale is that there is no reason why the heaviest users should be subsidized by everyone else. Consumers and service providers alike now anxiously await the next chapter in the Canadian telecom saga to unfold. Beyond usage-based billing, a number of other issues capable of transforming the industry are coming up on the horizon. Ottawa has already announced that Canada's policy regarding foreign ownership in the telecommunications sector will be revamped (see post from November 12, 2010) and another wireless spectrum auction is anticipated to be held by 2012. The events of the last month have raised many questions about the delivery and cost of internet services as well as the future of the CRTC and its role as an independent body, insulated from politics. Needless to say, everyone will be reading the CRTC's next decision very carefully.

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