Net neutrality and the CRTC: what M. Blais needs to know (2)

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[This continues Monday’s post, which began the list of issues with 1) No neutrality, 2) No teeth, 3) No transparency.]

ITMP failing #4 – No congestion. To understand the CRTC’s ITMP policy, you have to understand the alleged problem for which it was the putative solution: traffic congestion. The incumbents pushed the congestion story relentlessly, until they finally convinced the Commission that Canada’s net neutrality framework had to address not opportunity or innovation or freedom of choice, but the problem engineers have in many walks of life – load-levelling.

The incumbents asked for the Commission’s help and got it, despite the fact they never offered any convincing empirical evidence that traffic congestion on their networks was getting out of hand. Never mind the convenient but entirely untrue fairy-tale that congestion was being caused by evil bandwidth hogs – a fairy-tale the prior CRTC chair swallowed hook, line and sinker. KvF stood by the incumbents’ version of the truth in the face of evidence that congestion occurs not because of individual anti-social behavior, but because of traffic peaks created by large numbers of users at certain times of the day – very much like vehicular traffic peaks on the 401 during rush hours.

When you begin a proceeding with the paramount goal of managing traffic congestion, it’s unlikely you’ll end up with a set of rules that benefits consumers. What would have steered the CRTC in a more consumer-oriented direction? Compare the parallel exercise that was going on at the FCC at around the same time.

On December 23, 2010, the FCC released a crucial and highly controversial document that was also intended to lay the foundations for a network neutrality régime: the Open Internet Report and Order (FCC 10-201: In the Matter of Preserving the Open Internet and Broadband Industry Practices, uploaded here). The FCC document makes the CRTC’s effort pale by comparison. One reason for this difference is sheer intellectual rigor. Here’s part of what I said in that connection last November:

The CRTC’s ITMP policy fills 23 pdf pages and contains 15 footnotes. The FCC’s Report and Order runs 194 pages and has 500 footnotes, some of which run 500 words apiece (not counting appendices and commissioner statements and dissents). I’m not saying sheer tonnage equals excellence. What I am saying is the CRTC seriously under-analyzed the issues, basing their work on demonstrably false assumptions about bandwidth hogs, congestion and consumer behaviors.

One can probably make a public interest argument to the effect that American lawyers have managed to make the issues aired by the FCC even more incomprehensible and out of reach than their Canadian counterparts. That said, let’s compare how each regulator sets up the issues in the opening paragraphs of their respective documents. CRTC 2009-657 begins thusly:

In this decision, the Commission sets out its determinations in the proceeding initiated by Telecom Public Notice 2008-19 regarding the use of Internet traffic management practices (ITMPs) by Internet service providers (ISPs). The Commission establishes a principled approach that appropriately balances the freedom of Canadians to use the Internet for various purposes with the legitimate interests of ISPs to manage the traffic thus generated on their networks, consistent with legislation, including privacy legislation.

The Commission then works its way through the four principles that guided its deliberations: transparency, innovation, clarity and competitive neutrality. I’ve already commented on some of the shortcomings of these principles, especially the absurd idea that mainstream ISP subscribers all understand their bills and adjust their market choices according to what they read on these bills. The preamble ends with this remark:

Finally, the Commission clarifies the circumstances in which an ITMP employed by an ISP would result in the carrier controlling the content or influencing the meaning or purpose of telecommunications. In these circumstances, the Commission’s prior approval would be required, pursuant to section 36 of the Act, but the Commission would not use the ITMP framework in its review, as the matter is not one of discrimination or preference.

In other words, the “vision” here is pretty much confined to technicalities. Let’s compare how the FCC worded its search for a better Internet:

PRESERVING THE FREE AND OPEN INTERNET

1. Today the Commission takes an important step to preserve the Internet as an open platform for innovation, investment, job creation, economic growth, competition, and free expression. To provide greater clarity and certainty regarding the continued freedom and openness of the Internet, we adopt three basic rules that are grounded in broadly accepted Internet norms, as well as our own prior decisions:

i. Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services;

ii. No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services; and

iii. No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic. […]

2. Just over a year ago, we launched a public process to determine whether and what actions might be necessary to preserve the characteristics that have allowed the Internet to grow into an indispensable platform supporting our nation’s economy and civic life, and to foster continued investment in the physical networks that enable the Internet. Since then, more than 100,000 commenters have provided written input. Commission staff held several public workshops and convened a Technological Advisory Process with experts from industry, academia, and consumer advocacy groups to collect their views regarding key technical issues related to Internet openness.

Of the many interesting things that jump off the page, I want to highlight one in particular. That’s the effort the FCC made in gathering a huge bank of opinions and factual evidence (which account for many of the footnotes and appendices). The CRTC holds so-called “public” hearings, then sits back and waits for the interested parties to arrive. The FCC, on the other hand,  leaves its ivory tower to hunt down helpers – which include both academics and advocacy groups, in an effort to balance the avalanche of material from the usual suspects.

In a word, the FCC did its homework and found the open Internet “faces real risks” (para 4).

ITMP failing #5 – No complaints. Although we looked at the problem of enforcement in the previous post, there’s a more fundamental issue with the ITMP framework that drew criticism from the get-go: tying enforcement to complaints made entirely at the initiative of consumers. That problem is all of a piece with the CRTC’s long-standing failure to carry out empirical research on the behaviors and attitudes of the millions of Canadians who use the Internet every day. It should, therefore, have come as little surprise that the Commission would adopt a post facto rather than ex ante procedure for identifying and punishing breaches of its guidelines. In plain English, the Commission decided to take no responsibility for policing its own rules. Instead, it counted on consumers to do their police work for them by filing complaints when they thought they were being abused.

Apart from the highly visible battle over Rogers’ throttling of World of Warcraft, almost two years went by without much sign of trouble – trouble as in the Commission getting complaints and acting on them. It turned out there were indeed complaints. For reasons I’ll never comprehend, the Commission decided it would be a good idea to make the public’s complaints about their ISPs unavailable to the public. The Commission was content to sit on its hands and do nothing – until Michael Geist jolted them out of their seats.

Last summer Michael filed an FOI request to be granted access to complaints that had been sitting on the books in Gatineau, some for many months without any apparent effort at resolution. This out-of-the-ordinary effort revealed the Commission had hidden away roughly three dozen consumer complaints. Michael’s July 8, 2011 post blowing the lid off this unacceptable behavior – Canada’s Net Neutrality Enforcement Failure – makes enlightening and very depressing reading. As Michael noted at the time:

Although the CRTC has not publicly disclosed details on net neutrality complaints and the resulting investigations, I recently filed an Access to Information request to learn more about what has been taking place behind the scenes. A review of hundreds of pages of documents discloses that virtually all major Canadian ISPs have been the target of complaints, but there have been few, if any, consequences arising from the complaints process.

You can put aside all the other subtleties lurking here about secrecy, bureaucratic lethargy, unfair market power and so on. The paramount problem lies in the absurd assumption that ordinary end-users could possibly police ISP behavior. Wake up and smell the coffee, Ottawa:

Ellis’s First Axiom of End-User Behavior: Mainstream Internet end-users have absolutely no idea how anything works; they never have and never will; and they are all utterly incapable of uncovering, documenting, explaining or complaining about technical ITMPs, ISP breaches of ITMP guidelines, or anything else the CRTC has foisted on the country in its regulation of the Internet.

We heard again and again from Jason Koblovsky last year that, instead of lifting a finger to help, the Commission insisted time and again that it needed more information from him and the CGO about Rogers’ behavior. Without the persistence of advocates like Jason and Michael, we’d be in an even worse mess than we are now.

ITMP failing #6 – No truth. Last month Pete Nowak posted item entitled Internet prices climbing with no end in sight. He cited a recent report from PricewaterhouseCoopers confirming just how expensive Internet pricing is getting in this country:

Internet access revenues at service providers jumped by 17.5% in 2011, largely thanks to tiered usage plans, the professional services firm says in a new report.

“Canada’s broadband fees were lower than those in the United States in 2007-09, but as a result of large increases during the past two years, the average Canadian broadband subscriber paid 3.9% more in 2011 than the average U.S. subscriber did,” the report says.

But wait, there’s more. The average Canadian internet user can expect their bill to rise to $45 in 2016, from $38.43 in 2011. That’s another 17% increase. Overall broadband access spending, meanwhile, will grow by 9.9%, or nearly double the 5.5% in the United States. Ouch.

Ouch indeed. But the situation on the ground, as journalists like to say, is far worse than even this news would leave you to believe. That news concerns the unregulated cash cow the CRTC handed to the incumbents as part of the policy that’s supposed to be at least in part a defence of consumer welfare. That would be data caps, which the CRTC says are transparent to end-users and consumer-friendly, because they put control in our hands, not those of the incumbent ISPs.

I beg to differ once again.

As we learned last year during the UBB fiasco, charges for usage over caps are not cost-based. If they were, they wouldn’t be punitive enough. Since retail rates are unregulated, the CRTC’s pious claim that it’s watching out for the public interest at the wholesale level is a dead letter. And inevitably, this ridiculous policy has turned into price-gouging.

We know thanks to Michael Geist’s 2011 UBB pricing study that Bell’s senior management was rejoicing two years ago about how caps have juiced their revenues. In a series of conference calls with analysts, Bell CEO George Cope was swooning over the extra cash being brought in by data caps. In November 2010, for example, Cope noted that “our residential services had an excellent revenue quarter from a data perspective, as well, with data revenue growth of 5%, driven principally by the bandwidth usage revenue being up 83% year-over-year.” 

Later in the same call, Cope linked increased Internet video demands with growing revenues – “as we see a growth in video usage on the internet, making sure we’re monetizing that for our shareholders through the bandwidth usage charges.” Translation: we’re milking all those suckers who think they’d rather be watching Netflix than CTV.

So, guess what Bell did last January to lock in that windfall created by the folks in Ottawa who are supposed to be looking out for us? Bell raised the maximum penalty for over-usage from $60 a month to $80 a month – an overnight increase of 33%. And that’s not all. At the same time, Bell decreased its data caps – i.e. lowered the threshold beyond which its subs get punished for wanting to be online too much.

Maybe you weren’t paying attention. Well, Phillip Dampier at Stop the Cap! was, as he reported on January 3 of this year:

Bell customers across Ontario and Quebec are noticing the limbo dance is back in vogue as Bell Canada lowers the bar on usage caps for its Fibe fiber to the neighborhood service and boosts the maximum overlimit fee to $80.

Late last week, Bell’s website published the new, lower usage caps for broadband customers:

Fibe 10 — 75GB 60GB (per month) (Quebec)

Fibe 12 — 50GB 40GB

Fibe 16 — 75GB 65GB (Ontario) 90GB 80GB (Quebec)

Fibe 25 — 125GB 100GB (Ontario) 100GB 90GB (Quebec)

The new rate card means Bell is price-gouging two ways. First, by raising the maximum over-use penalty. Second, by making its subs burn through their “allowance” 20-25% faster – which is known as the “burn rate.” Note well: this outrageous behavior is a direct result of the provisions created by the CRTC in its ITMP framework. It was not merely sanctioned but encouraged by the CRTC.

But wait! Breaking news from Rogers! And it’s even worse!

I just got word from Teresa Murphy that the broadband duopoly is alive and well in Eastern Canada – that woud be Bell and Rogers, helping each other collect economic rents from their subscribers (the polite economist’s expression for it), while the CRTC continues to pretend this market is “competitive.”

Teresa tells me that in a thread on DSLReports.com, the word is out that Rogers, not to be outdone by Bell, has doubled the maximum penalty for its subs – from $50 a month to $100 a month. Holy gigabyte, Batman!

What all this means is that potentially millions of Canadians will now enrich their greedy incumbent ISPs even further, by getting monthly bills that may double or even triple the “rack rate” for any given Internet access tier.

Dear M. Blais…

With all due respect, I invite the new CRTC chair and his minister to stand up in a public forum and explain to Canadians why they believe the current framework for “managing” broadband networks is in the public interest, and exactly what empirical evidence allows them to continue claiming that the Canadian broadband market is competitive enough to allow the incumbents to keep raising rates without any regulatory oversight.

D.E.