Industry Committee on Feb. 10th, 2011

[Serge Cardin, Bloc, Sherbrooke, QC]

So there is a period of time to allow your clients to adjust, and a period of time to review the decision.

Do you like that decision or not?

[Mirko Bibic]

We believe that the decision made by the CRTC a couple of weeks ago was entirely appropriate. Usage-based billing is the fairest way to bill users because it means that the heavier Internet users pay more. It is fair and appropriate. We were happy with the decision.

[Serge Cardin, Bloc, Sherbrooke, QC]

Do you think that the telecommunications sector is too highly regulated and that the CRTC should be careful not to overregulate?

[Mirko Bibic]

That's what we have always believed. The telecommunications sector is clearly overregulated. In 2006, an expert panel was asked by the government to examine regulations in Canada. In its report, the Telecommunications policy review panel, the expert panel, indicated that regulations in Canada were extremely cumbersome compared to other industrialized countries and that this was an impediment to the development of the telecommunications industry in Canada.

[Serge Cardin, Bloc, Sherbrooke, QC]

The notion of usage-based billing is very popular, particularly with regard to the environment. It's the user-payer, or polluter-payer principle. It is very compelling. It is hard not to be drawn in.

Like you, Mr. von Finckenstein said that those users who use less pay for the heaviest users. But that's also a myth. Many Conservatives have been wondering for quite some time now why you stopped offering unlimited plans.

[Mirko Bibic]

We stopped offering unlimited plans in 2006. You must understand that the demand for Internet services has increased dramatically. We must constantly invest to offer exceptional services to our clients and we must recover the costs of these investments. The most appropriate way to go about this is usage-based billing. It's the way to make sure that the heaviest users pay the most. Also, as I indicated at the beginning of my presentation, cable companies also have clients, wholesale Internet service providers. The cable commpanies have the authority, granted to them by the CRTC in 2000, to bill them using usage-based billing. It's a question of fairness.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Bibic.

Thank you very much, Monsieur Cardin.

Now on to Mr. Braid, for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

I have a cap that the chair adjudicates and it's called “five minutes”, so I'll move right into it.

Mr. Bibic, could you begin by explaining the purpose of the UBB model as it's applied to your retail customers? What outcomes is it intended to achieve?

[Mirko Bibic]

At a high level, what's going on is that obviously Internet users like to use the Internet and there's significant growth, as my Shaw colleagues pointed out in their opening statement, so we have to keep ahead of that growth.

As it happens, this morning we released our fourth quarter 2010 financial results. In there we indicated that we had capital investment of $860 million, which is up 34% year-over-year, to expand wireless and wireline broadband Internet capacity.

So the point is, Internet usage is growing. We have to keep up with that increased demand. We have to spend close to a billion dollars in three months alone in order to keep up with that demand. So now we take a step back and say that obviously we have to recover those costs, generate a return on that investment, and enough of a return that there's an incentive to keep investing, so that we can keep growing that capacity and go to new areas, build fibre networks, and give customers what they want.

The best way to do that, the most fair way to do that, is a usage-based billing model. We have a number of packages that cater to the light users, the medium users, and the heavy users, and those who are the really heavy users will pay more. That's only fair, and I think that's what the 97% or 98% of Canadians would judge as being fair.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

The smaller ISPs who have appeared before us, the third-party providers, as it were—and this sort of speaks to one of the fundamental issues and the concerns as part of this debate—are concerned that as the UBB model is applied to their wholesale relationship with you, it squeezes them out as competitors. It takes away one of their key competitive advantages, which is to differentiate their service from yours by offering unlimited Internet access.

How do you respond to that?

[Mirko Bibic]

I'm left confused by that allegation, to be perfectly frank with you.

This debate has been raging at the CRTC for about two years. Here is the submission of the Campaign for Democratic Media, which is actually the precursor to OpenMedia. Mr. Anderson was on. It's a thick document. They've put a lot of thought into this, and this doesn't even include the appendices. And this is what they say in it:

A customer that wishes to use more bandwidth in a given month can merely pay for it. In this respect, the impact on users is minimal. There is also a measure of fairness to pricing incentives, in that the user is getting the bandwidth they are paying for.

They go on to say:

Excess monthly usage charges are more reasonable in this respect because they target those users that actually produce the most traffic on a network.

And they say that “Excess monthly usage charges”, which are the ones we've imposed, “are also preferable to time of day fees with respect to customer control, because the user is able to ration their usage as needed over a given period of time.”

So I have a hard time squaring this, which is very recent with an allegation—

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

But they've come here and they've asked for base pricing plus markup.

In any event, let's move on to a next question and another issue.

Some suggest that Internet traffic congestion is a myth.

[Mirko Bibic]

Again, we've been dealing with this at the CRTC for a couple of years. We filed very detailed evidence with the CRTC on this issue.

Let me read from decision 2008-108: “...Bell Canada has established that there is congestion in its network during peak periods.”

Let me explain what that means. It's a vast network. We monitor this absolutely every day and every minute of the day. Where we see a hot spot or a hot zone where there is congestion, we deal with it right away. What we do is first and foremost build extra capacity—$860 million over the last three months. We traffic-shape during peak periods of the day. That means that for peer-to-peer traffic, which is a type of traffic that's absolutely the heaviest bandwidth of all, we shape that to make sure the regular user isn't crowded out of the Internet, and we try to price in a fair manner.

We stay ahead of the issue by making all these investments and managing them.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

When are the peak periods?

[Mirko Bibic]

The peak periods are the evening periods.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Bibic and Mr. Braid.

Now on to Mr. Masse for five minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Since it was the other day, I do want to acknowledge Bell's work on suicide prevention. That's a very important thing.

Now that we have that over with, we'll move on to the questions.

Just kidding.

I do want to know how much of your Internet traffic is business, and how much is customer and personal use.

[Jean Brazeau]

At Shaw, the most significant part of our traffic is residential traffic. We are just now getting into the business market. As I said, the vast majority of our traffic would be residential.

[Brian Masse, NDP, Windsor West, ON]

Do you have a percentage?

[Jean Brazeau]

I would venture it would probably be in the 75% to 80% range.

[Brian Masse, NDP, Windsor West, ON]

How about you, Mr. Bibic?

[Mirko Bibic]

During peak periods, certainly the vast majority of the traffic is residential, for obvious reasons. Businesses tend to no longer be in operation during evening periods.

As Shaw indicated, it's largely residential.

Off the top of my head, I don't have the split, but just to be clear, we have small-business Internet packages where there is no usage-based billing, and that's why this doesn't affect small businesses. As far as large enterprises are concerned, they have their own dedicated pipes or tunnels or channels, if you will. They buy massive amounts of bandwidth on separate networks, so to speak, and they buy what they need, and it's vast amounts.

[Brian Masse, NDP, Windsor West, ON]

When they do that, do they negotiate a preferred rate because they're buying in volume?

[Mirko Bibic]

They certainly buy what they need and we price accordingly.

[Brian Masse, NDP, Windsor West, ON]

This is one of the problems I have with this philosophy about the user pays who uses the most. If that's the case, why is it that a company can get a better rate than that of a residential person or a student who's actually doing streaming? Why wouldn't the same philosophy hold for the business sector as well as the residential sector? Why wouldn't you apply for the smaller business a rate that was preferred versus the volume being occupied by maybe a larger company that has that special agreement?