While technology analysts have differing opinions about the Canadian Radio-television and Telecommunications Commission’s decision to allow Bell Canada to bill its customers based upon how much they download each month, one independent service provider believes it could sound the death knell for real competition in the emerging industry of Internet-delivered TV.
In May, the CRTC agreed to allow Bell to introduce the new billing method in an effort to reduce network congestion caused by heavy downloading.
An apparent big win financially for Bell, the federal broadcast regulator’s decision came with one major condition: that the company move all of its retail customers off unlimited downloading plans before applying usage-based billing to the smaller Internet service providers that pay for access to its network to offer their own services.
Bell is appealing the CRTC decision, claiming it favours cable Internet providers that face no such restriction.
Industry observers are split as to whether the CRTC provision is a major barrier or simply a speed bump. On the one hand, technology analyst Mark Goldberg says a smart independent Internet service provider could stall Bell
indefinitely by simply paying one or more unlimited downloading plan holders to stubbornly hang onto their service. But other observers have said Bell could phase out its unlimited service packages simply by telling customers it’s no longer selling them.
So why is the CRTC ruling bad news for Internet-delivered TV? Quite simply, it’s because of the high price per gigabyte the CRTC has allowed Bell to charge retail customers as well as wholesalers, says Rocky Gaudrault, CEO of TekSavvy Solutions Inc., a Chatham, Ont.-based Internet service provider that wants to launch web-based TV.
Under the plan approved by the CRTC, Bell can charge wholesalers like TekSavvy a flat fee for connecting to its network as well as for a set monthly usage limit per customer. Above that monthly downloading cap, consumers will be charged per gigabyte, depending on the speed of their connections.
Those users with the fastest connection rate of five megabits per second will have a monthly allotment of 60 gigabytes, beyond which Bell will charge $1.12 per gigabyte to a maximum of $22.50.
If a customer uses more than 300 gigabytes a month, Bell will also be able to implement an additional charge of 75 cents per gigabyte. (Currently, few consumers suck up more than 60 gigabytes of data per month, but that amount could easily be surpassed if Internet TV ever became a popular form of entertainment.)
According to Gaudrault, the new pricing scheme will eliminate Internet TV as a low-cost option for consumers and essentially leave the field to the cable and telecommunications companies if they choose to pursue it.
“Let’s say [a household] uses two televisions and they use six or seven hours a day of television, they could easily [have] another 60 or 100 gigs, so you could have another $100, $200 bill. All of a sudden, the economics . . . go out the window.”
For Gaudrault, setting a price per gigabyte at 75 cents to $1.12 flies in the face of the incredibly low wholesale costs - “the real-world costs” - that companies like his now pay. Currently, that amount is often less than three cents per gigabyte.
Gaudrault says the CRTC ruling was well-intentioned but argues it ignores the rapidly changing technological landscape and the ways in which consumers may end up viewing content in the not-so-distant future.
“What will happen then is you will end up essentially with two players in the marketplace doing television only, and companies like ours would be charged a premium for even attempting to do television.”
Industry observers have been similarly skeptical about how motivated existing players are in promoting the widespread acceptance of Internet TV.
The cable companies have made massive investments in their fixed networks while Bell has to worry about cannibalizing subscribers to its Bell TV satellite network, which has its greatest acceptance in areas with limited cable availability.
But after about five years of talking about launching so-called Internet-based TV, the telecommunications giant said last month it will introduce the service this summer in two cable company strongholds, Toronto and Montreal.
Bell president and CEO George Cope told a Toronto business audience the rollout of the service would likely make Bell the largest television provider in Canada by 2015.
Right now, it has 1.9 million television customers mainly through the satellite service, while Shaw Communications Inc. is the leading provider with 3.2 million subscribers made up of 2.3 million cable users and the remainder on the Shaw Direct satellite system.
