Wednesday, February 9, 2011

Why the US should be very worried about Canada's debate on Usage based billing

[In many ways Canada is seen as a test market for Internet business concepts that will eventually appear in the US.
Canada and the US have many similarities with respect to the makeup of the Internet market. Both countries’ Internet markets are largely controlled by a duopoly of cable and telephone companies. This ersatz competition between telephone and cable companies has given regulators and policy makers on both sides of the border the excuse that this supposed competitive market will solve all problems. More importantly both countries are also allowing major concentration of ownership between pipe and content providers. In the US it is the marriage of Comcast and NBC. In Canada it is Bell and CTV as well as Shaw and Global TV.
Much of the recent ballyhoo in Canada is about the huge difference in the size of caps between the two countries. In the US for example Comcast has a cap of 250 GB versus 25 GB typically available in Canada. I suspect service providers in the US will start lowering their caps now that the Comcast-NBC acquisition is completed, especially if they see the Canadian providers get away with such a strategy. All the service providers hate competition from the “over-the top” content providers like Netflix, Hulu, etc. If Canadian telcos and cablecos remain successful in their ability to impose low level caps on themselves and their competitors, you can be darn sure that US service providers will not be far behind. This will allow them to protect their investment in their recently acquisition of content providers. And you can be damn sure they will not impose usage “caps” on their own IPTV or digital cable service offerings – even though they are delivered using IP packets just like the Internet.
Now that Verizon has terminated FiOS there will no significant future build out of fiber last mile networks in the US. We are facing an increasing danger that the cable companies with their DOCSIS 3.0 will effectively become the monopoly service provider in North America.
Until we follow the example of Europe or Australia and move to structural separation of the underlying infrastructure I suspect we will continue to have battles with incumbents on creating a truly competitive Internet framework in North America. As Michael Geist points out in his article I think R&E networks can play an important catalyst role as we have seen in the US with Internet 2/UCAN initiative.
Two articles I highly recommend on this subject are:
Michael Geist’s ” The Usage Based Billing Consultations: What the CRTC and the Government Should Do Next”

Tim Wu’s “Paying so much for bandwidth, getting so little”
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