Wednesday, February 2, 2011

Usage-based Internet billing criticism translated

I stumbled across a recent call to action - complete with a useless online petition - to thwart an attempt to charge Canadian Internet users for the amount of bandwidth they use, instead of an all-access pass.

Here's the skinny: Bandwidth is a precious and limited resource, and some Internet users use more than others. Much like customers at a gas station often pump different amounts of fuel into their vehicles, Internet service providers intend to charge customers for how much strain they place on the system and send price signals, instead of the buffet restaurant plan they use now.

Opposing this plan, Jason Koblovsky writes:

...It took only a few complaints by Canadians to get [Federal Industry Minister Tony] Clement to act on census reform, 80,000 to let him know Canadians wouldn't settle for US style law suits on consumers for downloading music, and now we are at close to 190,000 signatures on a petition calling for an end to usage based billing, and Clement is taking a hands off approach to things right now. Are the Conservatives truly aware of the economic and political costs here of not acting on this? It’ll be much more than video game publishers threatening to pull out of Canada if we didn't reform copyright especially if Canadians don’t have meaningful access to the digital marketplace at a fair price
I added the emphasis on the word "fair" in order to ask, who determines what price is fair? I can't help but notice that the opposition to these "pay for what you use" systems always come from people who use a lot of bandwidth - World of Warcraft addicts, digital movie thieves and copyright opponents. Here's what they're really saying:
Please sign this useless online petition as many times as you can or else people like myself will have to pay for the amount of resources we use, while retired people who only log on to e-mail their grandchildren will no longer continue to pick up the tab for my hobby.
This is naked self-interest at play. The food world has both traditional pay-for-what-you-eat and buffet restaurants available, and single-rate plans should still be available to consumers, although I expect adverse selection will make them cost more than they do now. Shut-ins with huge digital libraries will end up paying more and market pressures should ensue that light users pay less.


  1. The largest protest I've seen is that ISP's want to double dip by charging users who use more bandwidth while simultaneously charging web content providers, like NetFlix, more for offering heavier content.

    Seems silly to me.

  2. I think you are completely missing the point here. It's become the Canadian neo conservative view that it's only pirates, and pimple nosed gamers that are consuming more bandwidth. It's precisely that ideology that has driven and will continue to drive a lot of future digital market investors out of Canada, and the reason why our current government has to be forced by both big business, and consumers to act on tech policy. We’re talking about access to the digital marketplace, and rising costs for consumers to participate in that marketplace. You don’t see a guy standing at the door at your local convenience store demanding you pay him before you walk through his doors to shop for food, do you?

    If those costs get to high, than there will be less participation in that market, which will cost Canadian jobs, potential investors and will have an impact on our ability to compete in this digital marketplace globally. The rise in bandwidth consumption has something to do with investors and the market moving towards a net only approach to business, commonly known as “the cloud”, not dudes who play WOW on a consistent basis. I strongly suggest you read more up on cloud computing and where the market is headed, which is towards way more bandwidth consumption both in business and in the consumer market. The cost of that bandwidth will have a direct impact on us economically at home, and have a direct impact on how investors look at us, when trying to bring new innovative market solutions to Canada.

    I’m not against bandwidth caps, although I think at this point in time they should mirror very closely to what the US telecom industry has implemented, along with the price they pay.

  3. If they want to charge for each kilobyte of data or cap it that's their business. I watch a lot of movies on netflix, if I were subject to a data usage charge my usage of the internet would plummet. If it got too out of hand I would discontinue the service entirely.

    It's their business what they do with their property, and what they charge for the services rendered via that property. I think it would cause ISP's more harm than good in the long run, but that's not really my concern, it's their shareholders concern.

  4. Jason, thank you for taking the time to come here and defend your position.

    I don't agree with your metaphor one bit:

    "You don’t see a guy standing at the door at your local convenience store demanding you pay him before you walk through his doors to shop for food, do you?"

    Perhaps, but I do see a guy at the gas station with his hand out for the fuel I used to get to the store, and I also have to pay (indirectly) for the public roads I use to get there. These things aren't free, and you are not untitled to an unlimited.

    And at the same convience store, if you want six sodas instand of two, they get to charge you more.

    As for this being the death of cloud computing - that really isn't something to be concerned about. The movement towards cloud computing depends on cheap bandwidth, so more expensive bandwidth means it will be held back. That's like saying expensive uranium holds back nuclear power - true, but that's reality.

    One reason to switch to cloud storage is storage space, instead of using hard drives it can be saved online. Why should the casual internet users have to pay for your storage space, or the storage space of businesses? Harddrives are a "substitute good" for cloud storage, and they are still a good system.

    As for it costing jobs - that's not an argument, it's an incomplete observation. We should never do something foolish because it will save or create jobs. This is an economic science blog, and I have written about this before. It's down to good old Frederic Bastiat's Seen and Unseen:

  5. As for double-dipping, I can see the emotional objection, but it makes sense. The real problem people think is that the telecoms will choose the "wrong" price and use oligarchy power to push prices too high.

    If that's what your worried about, Linux's Eric Raymond argues that Net Neutrality is not the way to go, and it just reinforces the power of the companies you want to stop:

  6. I'm not necessarily opposed to the current public/private concoction that has yielded the current infrastructure we have now. But that doesn't mean my opinion won't change as Telcos/government treatment of the internet changes.

    I haven't put too much thought into it yet, but I could sympathize with the view that the internet is a public good comparable to water. I don't mind if Telcos are subsidized as long as they're paying tribute to the public that's funded them through taxes.

    As long as the government is challenging the oligarchic power of the telcos by successfully advocating for increased, better, more affordable and neutral access, than I'm all hunky-dory. If Government becomes a pawn of the Telcos and service starts diminishing than it's time for reform and possibly privatization, but so far internet access is spreading and improving. When Gov. and Telco interests are aligned, it's bad-news-bears but I think the fact that both sides are fighting each other is a good sign.

    That said - it's worth paying attention to and I could quickly change my mind if circumstances change.

  7. @Michael

    Thanks for the reply. Sorry for the delay in getting back to you. I do have a new media and cloud background myself. Where I think we both agree is here:

    "As for this being the death of cloud computing - that really isn't something to be concerned about. The movement towards cloud computing depends on cheap bandwidth, so more expensive bandwidth means it will be held back."

    Cloud computing is not only just a means of storage it's a means of access. Access to digital products and services via web only, especially around multi-media (e.g. Netflix). The more expensive the bandwidth becomes, and the lower the caps are, the less Canadian consumers will buy in the digital marketplace. The less access to the digital marketplace, the less money is made and less opportunity to see return on investment. The less return on investment, the less attractive to investors, the less innovation, the less growth, and finally less Canadian jobs. This isn’t an incomplete observation, it’s how business and economics work.

    As I said in my response, I’m not against UBB on whole, I’m more or less against cap levels that are basically the lowest in the G8, and our net access is also is one of the most expensive compared to most of our trading partners. That already makes us uncompetitive and unattractive to investors in the cloud. I’m surprised Netflix had the guts to expand up here. Not everyone in new media sees Canada as a viable market right now. Netflix wanted to challenge that assumption, and here we are today debating UBB, and now Netflix is threatening to pull out.

    Whatever the case maybe on how we got to the point we are with our broadband, it needs to be fixed and prices competitive when compared to other trading partners in order for the Canadian consumer to ensure competitive access and choices in the digital marketplace. There’s no choice, it has to be done, or we lose out sustainably. A tremendous amount of Investors have already looked the other way on Canada. Jobs have already been lost due to this.

  8. Jason, I understand there are a lot of different components to cloud computing and I was making one. I agree with you that access will be superior to, say, USB Flash drives that someone physically lugs around with them.

    But when you talk about price controls, "saving jobs" and staying competitive in the internaitonal global marketplace, you are not talking about "how business and economics works." You are talking about how people assume it works.

    You study new media, where I study international trade, so if expertise needs to be mentioned you have entered "my realm."

    The book that really answers you is Pop Internationalism by Paul Krugman. International Trade is NOT about staying competitive in some kind of international arena, countries do not compete like Coke and Pepsi compete. It's a common view, but it is not one that survives familiarity with any economic research of the past 200 years.

    You are right to show some concern for productvity. That should be your focus, not on individual jobs (because net jobs can not be protected the way you advise). You are assuming Absolute Advantage is needed for Canadians to have jobs in this area, and you don't seem to be familiar with Comparative Advantage.

    What you're really supporting is a price control on bandwidth and you assume that doing so will have zero impact on the amount of bandwidth available in the future. Your side is convinced, as if by magic, that long-term bandwidth rates will be high and uncompetitive if the companies are allowed to charge what they want - as if competition will play no role. This is a dubious claim, and it's taken on faith. There is no hamburger price controls, and as a result cheap hamburgers are readily available. Making it illegal to sell them for more than a certain price, however, would limit the supply. That, Jason, is how economics works.

  9. First of all, there are no "sides" to this UBB issue. It's a done debate. Not only will Clement overturn the CRTC ruling, but the Industry Committee studying this ruling unanimously agree (meaning all political parties) that the CRTC has got it wrong here.

    I guess according to your theories on this due to the amount of investment the US has announced to expand broadband speeds and services and allow cheaper access to the net due to falling US international competition in this market, Canada should raise the price of broadband and ISP services and in doing so will remain competitive. I respect your opinions, but strongly disagree with your ideology, not only based on theory, but as someone who has personally seen Canadian companies move innovative digital services and jobs off shore due to the cost of bandwidth both in the consumer and business markets. Our law makers seem to also disagree with your ideology as well, and so does the SME business community.

  10. I really don't feel like defending strawman arguments that you are atributing to me. You assume that atleast one of the political parties will hit upon the truth in a given issue - that's a dangerous assumption. I feel comfortable disagreeing with them that the taxpayers need to give money to corporations, if that's what they are saying.

  11. @Michael

    "You assume that atleast one of the political parties will hit upon the truth in a given issue - that's a dangerous assumption."

    Strawman really..good one though...

    Unanimous positions against the CRTC's UBB decision by all political parties was openly admitted too in the hearing on Tuesday, and with released party positions to the UBB decision. It's not an assumption, it's more a matter of fact. I'm surprised at this response. I figured you to be following this issue more closely.

    As someone who follows politics daily, I have a very hard time believing that party positions would change on the CRTC decision(it would probably cost votes if it did), and even if it did, one party isn't enough to make the difference anyway. It's a dead issue.