UBB, why it’s wrong as currently executed
I’m not against UBB. I think it’s a very reasonable way to charge for what will eventually be considered a utility. Like all the utilities we currently pay for, we often pay a connect/service fee and then a reasonable rate for resource being used. It’s actually a great model to use and this is why.
If you look at current UBB for utilities, the connect/service fee goes to various aspects of operating that utility. Usually maintaining the infastructure, improving infastructure, equipment given/leased to you, service and support and all the other aspects of managing that utility. It works particularly good in Canada because it allows a company to spread the cost of providing service to hard to reach areas out amongst a larger demographic. If you look at the utility rates these companies charge, it’s usually a fairly marginal markup on the costs. They do build some of the “service” related fees into that price at times, but generally it close to the “bulk” or “market rate” for the utility. (For an example, go digging here: SaskRateReview )
UBB does solve a problem ISP’s have faced for more than a decade (maybe even two). When you give unlimited, some people try to actually use it as such. You might say, why offer it if you were not prepared to service it. It’s a fair question that I’m sure some marketing departments would attempt to explain. The reality is that ISP’s have been playing the averages for ages now. It wasn’t until recently that the average consumption of bandwidth has been accelerating. A fair reaction to this is placing limits on packages at fixed prices. Many ISP’s adopted this ages ago, mostly because the infastructure was not designed to handle a few people with huge appetites for bandwidth.
There are two cruxes to the problem that I see here. One is the ISP’s claiming infrastructure can’t keep up with their customers growing demand. Funny, what were the big three spending their profits on all these years. Rogers, Shaw, and Bell have all recently (and historically for that matter) had very successful years. Apparently they didn’t think to spend any of that money on improving infrastructure to keep up with growing trends of more people using the internet and more people streaming media on the internet.
Second crux is that the ISP’s immediately when to what is an utility model, but didn’t switch to utility pricing. Many people have mentioned it before, but $1.50/GB is far to much to charge as a utility. Look at the price U.S. resales it at: SliceHost, Amazon and RackSpace. Between 30 cents and 10 cents? Surely, it must be more in Canada right? Nope, take a look at hosting pages and how much transfer they include: eHosting, Cirrus Tech and The Wire. All these companies host geographically in Canada. For whatever reason Canada covets the $/GB numbers, but the numbers are interesting regardless. eHosting is ~ $1.09/GB and that includes fully managed dedicate server (actual hardware) on the other end. Cirrus Tech includes 2,000GB a month for their hosting which works out to $0.095/GB. Again, that includes hosting on a machine. The Wire sells dedicated co-location with 1 Mbps connection for $129, which typically gives you ~300GB a month. $0.43/GB that includes rack space and power.
To be fair, some comparing hosting provider charges for bandwidth isn’t 100% fair. They are usually right on top of a few trunks and often negotiate peering agreements (if they are large enough to do so). So that’s the price when your at the doorstep. In theory, in a utility market where there is a service fee plus UBB, the cost of brining it to the door is either all in the service fee, or wrapped in to the metered rate. In either case, if the ISP’s in Canada are claiming it costs an order magnatude more to provide internet service to the door. You have to wonder why electrical companies are not going bankrupt left and right. They provide a far more reliable service to nearly EVERY possible place in Canada.
The solution is not clear at this point. These ISP’s clearly want to make money and there is nothing wrong with that. UBB, if done fairly, would not be putting us in this uproar we are in right now. It seems like most Canadians get that UBB is like moving to the utility model, but they also recognize the rate is not well connected to the costs. That’s something economics would usually fix over time, but perhaps the meddling of the CTRC and government is preventing such an event to take place. There are broader concerns that the big “three” are going to generally match that each other do as well. So if one does it and makes money, why not the rest of them. If that’s the case, perhaps government intervention is required to break those companies up into something smaller. Or, god help us, regular internet services as utilities (a last resort IMHO). What I do know is, the current UBB pricing is not reflecting a fair rate, something we should definitely be doing something about (preferable with your wallet and voice).
