Bell Canada Admits Usage-Based Billing About "Monetizing Bandwidth"

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Bell Canada Enterprises CEO George Cope tells shareholders that it's "making sure" to "monetize" the increased bandwidth usage associated with the rise in online video services, but in a hearing about the practice the Honorable Dan McTeague asks what happens when the 1% of heavy users becomes 50% or 100%, and whether or not the overage fees have any bearing to the actual costs of delivering the so-called "extra" bandwidth.

Usage-based billing has always been pushed publicly by ISPs in the name of promoting "fairness" among subscribers, but privately major Canadian telco Bell Canada has told shareholders it's a way to "monetize bandwidth."

ISPs are concerned with what's referred to as ARPU – average revenue per user – and they're always looking for ways to increase that figure. The growth in popularity of video services like Netflix or Vudu have given them an opportunity to profit from the associated rise in bandwidth usage vis a vis usage-based billing.

Bell Canada Enterprises CEO George Cope, in remarks made during last August's second quarter conference call, said that BCE's "data revenue growth was 3.8% for our Residential Services business, particularly driven through an increase in Internet ARPU of 3.3%. And interesting, almost all that increase now coming from usage-

based billing as the demand for Internet use explodes through the use of video services, and we're continuing to see an increase in the revenue per customer."

Notice the glaring absence of a mention of any offset in the increased costs it claims are associated with the rise in video streaming data usage. Revenue per customer is up, and three months later Cope even admits that usage-based billing revenue is up 83% from the year before.

In last November's third quarter conference call Cope says that "our residential services had an excellent revenue quarter from a data perspective, as well, with data revenue growth of 5%, driven principally by the bandwidth usage revenue being up 83% year-over-year."

If anybody out there still thinks usage-based billing is all about "fairness" his later comments made during that same call should put that idea to rest.

"The second piece of driving ARPU is, obviously, as we see a growth in video usage on the internet, making sure we're monetizing that for our shareholders through the bandwidth usage charges, is a second contributor to that growth," he said.

Usage-based billing didn't gain too much notoriety until early last month when data caps and usage-based billing rolled out nationwide even for non-Bell Canada customers. It came as a result of last November's approval by the Canadian Radio-television and Telecommunications Commission (CRTC) of Bell Canada's request to implement usage-based billing for its Gateway Access Services (GAS) customers,

Upon learning of the news, however outraged Canadian citizens pressured the govt into reviewing the CRTC's decision in order to, in the words of Canada's Minister of Industry, Tony Clement, "ensure that competition, innovation and consumers were all fairly considered."

During the review of that decision, Bell Canada, as pointed out by Canadian law professor Dr. Michael Geist, reiterated the word "fairness" some seven times.

"What is at issue and what we do not believe has been fully addressed as part of your meetings thus far are several fundamental questions related to fairness," Mirko Bibic, Bell Canada's Senior Vice-President for Regulatory and Government Affairs, told Parliament's Standing Committee on Industry, Science and Technology.

"All customers should be treated in the same way, and usage-based billing is the fair way to price Internet use," he said. "Simply put, the heaviest users should pay more than those who use less."

He adds his disbelief that "usage-based billing will stifle growth," but ignores the reality that increasing bandwidth costs discourages the use of online services just as increasing the price of gasoline discourages the use of an automobile. The problem becomes more pronounced if Internet users choose to stream or Blu-Ray video content.

Right now, for example, as pointed out by the Honorable Dan McTeague, Bell Canada says usage-based billing only affects 1% of users, but what happens when the number rises?

"The concern I have is that we are looking at more like a 5% to 10% situation," he said in questioning if Bell Canada's 1% figure is even accurate. "In two years, that number could be more like 50%, and 100% within five years."

As for usage-based billing's relationship to actual costs incurred by Bell Canada, McTeague also takes Bibic to task.

"If you understand the levels of increase in the number of connectivities and people using the Internet, and the quality and richness of that Internet, how is it possible that you can come here today and defend a charge over 25 gigabytes when it has no bearing on the actual cost that your company has to incur in order to provide that service?" he asks.

Bibic continues to talk about "fairness" in usage in relation to other subscribers, but continues to duck questions about whether overage fees have anything to do with recouping the alleged increased costs they incur.

Moreover, I think it's safe to say that usage-based billing really is, as was made clear to shareholders, all about "monetizing bandwidth." The only problem is that bandwidth is the streets and highways of the Internet that data flows upon, and usage-based billing creates financial disincentives to travel on it.

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