in Telephony

Could Usage-Based Billing work?

In my last post, I talked about why Internet usage-based-billing (UBB) is detrimental to both content producers and consumers. But my friend Davison raised an excellent question: could UBB work if the price was right?

After some deliberation, I would have to say yes, with some caveats. The argument in favour of UBB is about fairness: those who use more bandwidth should have to pay for it. Most rational people would agree that this method of billing has its merits. After all, that’s how we’re billed for electricity and gas; why shouldn’t it be the same for bandwidth? And don’t corporations pay for bandwidth this way already?

In general, I agree that usage-based billing is actually suitable for consumers. However, I quickly reasoned myself down into a regulatory regime I’m not sure the CRTC or the FCC would be willing to take on. Let me explain:

  1. In order for UBB to be workable, the rates per megabyte or gigabyte would have to be kept reasonable. As I mentioned, many major content producers pay a CDN somewhere around of $0.10/GB to deliver their data to the end-user’s ISP. There’s no excuse for an incumbent telco to charge dollars-per-gigabyte rates to consumers.
  2. In order to keep rates reasonable, they would have to be regulated. This would ensure that the rates are representative of the true cost of buying and distributing bandwidth.
  3. Finally, in order for us to regulate bandwidth costs, as a society we’d have to accept that Internet access is an essential service worthy of regulation — and that we’re willing to invest in a regulatory organization, probably one that just regulates the Internet — to maintain this level of accessibility and fairness.

Sadly, the current political climate doesn’t bode well for radical policy changes like this. I don’t just mean that the Conservative Party in Canada is unlikely to enact a regulatory regime that increases taxes and the size of government. I mean that in this era, politicians from any party seem reluctant to advocate for a public vision on anything, much less Internet policy in Canada. Picture this: If we were having a discussion about Usage-Based Electricity because the hydro-electric system was in private hands and they were charging us $500/kWh, would any politician today advocate for the creation of a public utilities commission?

So, in summary, I do think that UBB is workable for consumers. But the policy framework needed to make it fly is not likely to emerge any time soon.

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  1. In order to keep rates reasonable, they would have to be regulated.

    Why couldn't a proper competitive environment do that instead? When the telephone network/prices were regulated, the prices almost never went down. It wasn't until the shackles were removed that the prices plummeted. The indie ISPs are trying to do this, but they're being sharked by the monopolies of the last mile. If the last mile was made more competitive (or perhaps forced into a co-operative mode) you'd be able to let the companies compete on value to the consumers.