From music downloads to streaming videos, data backups to online classes and video conferences, usage based billing (UBB) has the potential for skyrocketing the cost of Internet service for individual and business users, according to opponents of the billing method.
Last March, the Canadian Radio-television and Telecommunications Commission (CRTC) approved Bell Canada’s request to bill its retail and wholesale Internet customers based on how much they download each month. Under the ruling, Bell will charge wholesale Internet service providers (ISPs) a flat fee for connecting to its network and set a monthly usage limit per customer. Beyond that limit, users will be charged per gigabyte, depending on the speed of the connection.
Fast connections of five megabits per second (mbps) will have a monthly allotment of 60 GBs. Beyond that Bell will charge $1.25 per GB up to a maximum of $22.50. If the user’s consumption is in excess of 300 GB per month, Bell will also implement an additional 75 cents per GB charge.
Small firms wary of cash grab trend
“This is just a giant cash grab,” said Thomas Gofton, CEO of Synn Studios Inc., a small online video outfit based in Guelph, Ontario.
The studio, which employs about 20 people, provides videography services for live events and corporate commercials but also depends on revenue from a growing subscription-based clientele for its streaming video series of science fiction content aimed a viewers between 12 and 30+ years of age.
Synn Studios gets its Internet service from another online telecom incumbent Rogers Communications Inc., which currently employs a UBB-payment scheme.
“All of the ISP providers are of a sorts, evil, but I feel Rogers is the lesser. Once again an opinion. I Am simply hoping that Rogers does not subscribe to the 25 GB mark that Bell is leading with,” he says. A large piece of Synn Studios’ business relies of streaming video, a bandwidth-intensive service.
Many of the studio’s customers are also likely to start seeing larger Internet bills, he said. “Some might decide to cut back on viewing.”
“If it comes down to that, we’ll have to find a way around it – either find a way to bring bandwidth down or find another provider,” said Gofton.
Some users definitely will get hit by big Internet bills, according to Alex Gault, vice-president of marketing and sales for Calgary-based online video company MoboVivo Inc.
The company licences and distributes television shows,movies and music for delivery on portable devices such as Its clients are broadcasters and TV producers that use “white labeled” MoboVivo technology that allow them to stream video to a wide host of devices such as Apple TV, laptops, iPods Nintendo Wii, XBox, iPhone, Sony PSP, and now the iPad.
“This pricing method targets the Internet power users. This could be individuals that stream a lot of video beyond their allotted caps or home businesses and SMBs that rely on the Internet,” he said.
UBB, however, will have little or no effect on MoboVivo said Gault. “Our cloud provider is Amazon which is based in the U.S. Our content is all stored and streamed from their servers there.”
Metered billing will not be an issue for MoboVivo, but it might be for customers of the company’s clients, he said.
Bell‘s broadside against Internet wholesalers
UBB is a broadside strike against Internet wholesalers, according to Rocky Gaudrault, president of Chatham, Ont.-based TekSavvy, a small provider that buys Internet connection at wholesale price from Bell and other large ISPs then resells Internet service at a discount to customers..
TekSavvy and small ISPs were previously able to offer Internet connections with no caps on the amount of data customers can download in a month. But with the UBB price structure, independent ISPs are now required to charge customers an additional fee for every GB of data they consume that exceeds an arbitrary preset monthly limit, said Gaudrault.
Even though the CRTC gave small ISPs like TekSavvy a 15 per cent discount this month the new fees are going to hurt, according to Gaudrault.
“Like our customers, and Canadian Internet users everywhere, we are not happy with this new development,” said Gaudrault.
“A dollar plus for extra usage is absolutely atrocious – it is in the thousands of multiples beyond what the costs are for Bell,” he said.
Beyond independent ISPs, UBB will also impact numerous organizations dependent on data streaming, according to the TekSavvy executive. “This is going to choke competition and investment in Canada.”
He said an example often cited in media is Netflix, the U.S-based TV program and movie streaming company which recently began operations in Canada.
Gaudrault said UBB will eat away at business models employed by Netflix and similar Canadian companies and possibly scare away their customers.
For instance, Netflix users pay $8 a month for as many movies and TV shows they can download. “But watching content through Netflix can easily eat up one to two GB of data in a hour depending on the quality of video stream,” said Gaudrault.
Taking into account that some lower-end high speed Internet plans offered by Canada’s incumbent ISPs provide for only 25 GB of downloading for a month (equivalent to about 12 hours of Netflix viewing), a user can easily exceed download limits said Gaudrault.
But it’s not only streaming video and online game companies and their customers that will be squeezed by UBB he said.
Even small businesses that need to back up company data to the cloud will be dinged, Gaudrault said. Many start-ups and SMBs he explained tend to sign up for low-capacity Internet accounts of use their personal Internet accounts because of budget constraints.
If such a business were to back up 1 GB of data/day that would amount to about 30 GB/month or about 5 GB over the typical 25 GB/month downloading low end downloading cap of large ISPs. “That would mean an additional $10/month expense,” said Gaudrault.
And still, he added, this does not take into account the other ways that small businesses and consumers use up bandwidth. “You still have to consider that users also consume data while Web surfing, checking email and playing online games.”
Other businesses that will be affected are small business and home offices use the Internet to send and download architectural or engineering designs or video; companies that make use of video conferencing with remote workers and clients and event colleges that provide online education.
“Four hours of video conferencing or online classes can eat about 60 GB,” said Gaudrault.
After both Liberal and NDP parties have assailed the CRTC ruling, federal minister of Industry Tony Clement recently said the Conservative Party-led government would review the UBB pricing regime.
“The minister said he would take another look at it. Hopefully the resulting decision will be favourable for us and consumers,” said Gaudrault.
Nestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.