Thursday, February 03, 2011

A Bit Is A Bit Is A Bit


When dictatorships want to control those who do not agree with them they control access to the Internet. When Canadian corporations want to control those who compete with them they control access to the Internet.

Most of world's economies are based on scarcity, the law of supply and demand, a system which creates most of our wealth and much of what passes for power.

Precious metals and rare earth minerals are worth a great deal more than other mined ores because they are not found in vast quantities. A frost in Florida increases the price of Orange juice.A massive salmon run decreases the cost of fish.

Fortunes can also be made by creating the impression that a scarcity exists. Vaults beneath the streets of Amsterdam hold hoards of diamonds which are carefully rationed out to maintain the value of existing stones.

OPEC turns the pipeline taps on and off to make sure their member nations make the greatest profit from their oil reserves.

Until the last couple of days it appeared that Canadian ISP's were about to make an impression of scarcity increase their already hefty bottom lines.

Supported by the CRTC, the nation's regulator of all things radio, TV, phone and internet, they had already begun rolling out Usage Based Billing, wherein the once "Unlimited" Cyber Buffet was going to be not only "throttled" to control how fast you could down or upload but also rationed so those who used more would be billed more.

To most people, this fit with the laws of supply and demand under which they have operated all their lives. If I want to download a movie from iTunes or Netflix, which amounts to about a Gigabyte and a half in Hi-Def, then I'm obviously using more bits than a guy who only goes online to email his grandma a joke every Sunday afternoon. Because as Bell Internet Honcho Marco Bibic says, "A bit is a bit is a bit."

A "bit" therefore has a price and the more bits you use, the more bits you should have to pay for. And with more and more people using the Internet for more and more things, more and more bits are flowing through the system.


One of our largest ISP's -- Shaw -- charges $47/month for a package that will deliver 100 Gb to your computer before additional charges are applied for downloading additional bits. That would make the Shaw price $0.47 per Gigabyte.

If a Shaw subscriber happens to go over that limit, they're charged $2.00 per additional Gb. The same as Bell but less than one half what Rogers has listed on its rate sheet.

But if "A bit is a bit is a bit" then this seems somewhat out of line.

Just how out of line becomes clear when you learn that it actually costs a Canadian ISP about $0.03 to deliver a Gigabyte to begin with.

Which means -- why is a Shaw subscriber already paying more than a 1000% mark-up on those first 100 Gb? And maybe more importantly, how have they managed to get away with charging for the billions of bits Canadians have been purchasing in advance for years -- but have never used?

I've often been out of the country for months at a time, faithfully paying my monthly internet bill while nothing is flowing through my ISP other than emails that couldn't add up to a single Gb if I were a Nigerian spammer.

Estimates are that the Internet usage paid for by Canadians but never actually used has given our larger ISPs a 5000% profit margin -- meaning they are earning 5000 times more than the actual difference between what it costs to operate the system and what they take home after those costs are paid.

No wonder these guys can buy entire TV networks (while arguing over how much that makes them owe content providers) and slap their logos over everything from hockey arenas to tennis tournaments.

How they've been able to do this comes down to another economic idiosyncrasy known as "Regulatory Capture". Regulatory Capture describes a system in which a cartel takes over the regulator of the industry concerned and distorts its policies to their advantage.

Does that image fit the CRTC all too well or just "mostly"?

From the first posts on this blog, I've been writing about how out of whack the television rulings of the CRTC have been with both its parliamentary mandate as a consumer watchdog and the needs of the vast majority who work within the industry.

Since 1999, when the CRTC took the side of broadcasters over the larger needs of those who made Canadian television, we have been an industry in decline.

Initially, we dropped from dozens of Canadian made TV series to a mere handful and in the decade since have never come close to returning to production levels that had not only sustained thousands but had begun to create a visible landscape of Canadian drama and comedy on television.

In all the years since, whether the issue has been genre protection, bundling of channels, local programming or the rampant foreign spending of our networks, the CRTC has always sided with the broadcasters to the detriment of artists, content providers and the general public.

Many in television have come to believe the CRTC is securely tucked in the broadcasters' pockets, knowing well before the dog-and-pony show of various rounds of hearings what their decisions will ultimately be.

Many in the mobile industry have felt the same way. So have those who either access the Internet through or operate the small ISPs who must piggyback the majors.

We all know the CRTC consistently follows the money, no matter how negative the impact is on anyone else.

As of this morning, it appears that the Federal government is poised to overturn the CRTC decision to allow Usage Based Billing. The reality is that the rising anger in the nation compels them to do it. Any political party supporting such corporate gouging of its citizens would deservedly be defeated at the polls.

Following on the heels of the overturning of a CRTC ruling last year which attempted to keep many of the same corporations which own ISPs from having to face competition from new and upstart mobile suppliers, it would finally appear that the powers that be have recognized that the CRTC has been compromised and needs to be either overhauled or eliminated.

And maybe it's time to go a little further.

Allowing consortiums from Spain to operate toll roads in Canada doesn't seem to have destroyed the country's transportation grid. Companies from the Emirates seem quite capable of managing our largest port without impinging on Canadian trade. Even an Egyptian based cell phone provider seems not to have prevented its Canadian subscribers from carrying on their businesses.

Maybe it's time for the Canadian TV and ISP monopolies to come to an end as well.

It's clear to everyone involved that the UBB issue only gained prominence because of the arrival of Netflix in Canada. More efficient computers and routers had already made "throttling" a non-issue (which still didn't stop the CRTC from ruling the will of their regulatory captors). But now, the TV and Video on demand arms of those same ISPs were threatened. What better way to fend off the competition than to price them out of the market?

There's a clear conflict of interest when a media owner, content provider and ISP are one and the same. It's a conflict American legislators realized half a century ago when they broke up the stranglehold Hollywood studios held over distribution and theatre ownership. The studios claimed Washington would kill Hollywood. What followed instead was one of the biggest booms in creativity and commerce that the film industry had ever seen.

Is it time that somebody said you can't own the TV Show, the network it runs on, the specialty networks it runs on after that as well as the ISP that prevents the public from accessing an alternative?

Has the moment arrived when ISPs and their cable companies no longer need protected turf and monopoly status? Aren't they now big enough and rich enough to compete with one another and give Canadians a real choice in who they buy from -- or maybe even loosen things up further so they can compete with an American company like Comcast who thinks nothing of offering their customers a basic 250 Gb/month at a cheaper monthly rate?

How is that even possible with 10x the population with many more streaming and podcasting options clogging the pipes? Or have Canadian ISPs and the CRTC been a little loose on those facts as well?

Is it maybe time we also took somebody like Marco Bibic at his word and declared that indeed "A bit is a bit is a bit"? Maybe we shouldn't have to pay for any bits we don't either download or uplink in any given month.

Imagine buying a tank of gas, driving around for a few days and then going back to fill up again. Does the gas station make you give back the gas you already purchased but haven't burned? Do they insist that you must buy another full tank? Do they charge a higher price for any extra gas you might want to take home for the lawnmower?


When it comes to buying gas, a liter is a liter is a liter. So if "A bit is a bit is a bit", then I need to be rebated what I haven't used each month or be allowed to carry it over to next month.

I'm sorry if that means that some exec at Rogers can't glad-hand Roger Federer over the shrimp tray or wave to the Sedin twins from his private box.

But if "a bit is a bit is a bit", then maybe the needs of those who conduct their business, their social lives, their financial dealings, their altruism, their political agendas and anything else that Canadians use the Internet to accomplish -- maybe they take precedence over a few corporations who got where they are not through innovation, invention or hard work, but from having the CRTC working with them against the consumer.


Anonymous said...

The CRTC defended its position yesterday by comparing internet usage to the use of electricity. This betrays a fundamental issue at the Commission which has come to think that TV is just another utility.

If I watch more TV or listen to more radio than you, do I have to pay more than you? Of course not, even if I am watching via Rogers cable. Media consumption, which is what downloading of movies is, is not something a regulator should be metering, maybe an audience research company, but not a government regulator.

Barry Kiefl

jimhenshaw said...

Good points -- and what's more -- how come I get to make all the local phone calls I want or watch all the TV I want without paying anymore when all those digital bits are coming and going on the same wire that is linking me to the Internet?