Canadian regulator reverses wholesale billing model, introduces predicted usage pricing

Following submissions from Bell Canada, Canadian regulator CRTC has reached a decision on how to price wholesale internet traffic. Initially Bell wanted – and got – a usage based model, to which the industry objected strongly, believing that such a move would drive prices up.

The new solution, announced earlier this week, works, because, according to CRTC chairman Konrad von Finckenstein "if we don’t make anybody happy then we have usually succeeded in finding the right balance."

The new wholesale billing model, which will come into effect on February 1, means that many Canadian ISPs will pay for what they think they need. This provides a riskier strategy for ISPs. If they buy too much capacity, they will leave ‘food on their plates,’ if they buy too little, customers will suffer with throttled speeds and possibly caps. This will also mean that ISPs will need to examine their business models to make sure that the numbers stack up, if they decide to continue with flat rate plans.

The CRTC believes the new rates will stimulate competition, ensuring that independent ISPs can choose between different wholesale providers on similar terms. This will allow more innovation at a retail level and give large telcos enough certainty to continue investing in their networks to meet future increases in internet traffic.

The new rules, according to von Finckenstein, will mean that "the rates that we put in place are generally lower than they are right now. Whether they will be passed on or not,” is up to the ISPs.

The result of this model being implemented will be that capacity planning will be an even more crucial part of an ISP’s business model. Because an ISP can buy bandwidth from any telco, an informal ‘market’ for bandwidth already exists. However, ISPs and smaller telcos may now need to invest in analytics and policy management tools.

This will allow them to better understand and predict the network capacity patterns and levels, as well as their customers’ usage patterns to be able to serve them without having to throttle the network at the end of a billing period. Although not ideal for all parties, the plan does provide an incentive for smaller ISPs to move away from flat rate plans and on towards value based pricing (CP: Infonetics – policy knits together BSS/OSS).