How to Unsuck Canada’s Internet – creating the right incentives

This week at the Mesh conference in Toronto (where I’ll be talking Open Data) the always thoughtful Jesse Brown, of TVO’s Search Engine will be running a session title How to Unsuck Canada’s Internet.

As part of the lead up to the session he asked me if I could write him a sentence or two about my thoughts on how to unsuck our internet. In his words:

The idea is to take a practical approach to fixing Canada's lousyInternet (policies/infrastructure/open data/culture- interpret the
suck as you will).

So my first thought is that we should prevent anyone who owns any telecommunications infrastructure from owning content. Period. Delivery mechanisms should compete with delivery mechanisms and content should compete with content. But don’t let them mix, cause it screws up all the incentives.

A second thought would be to allocate the freed up broadcast spectrum to new internet providers (which is really what all the cell phone providers are about to become anyways). I’m actually deeply confident that we may be 5 years away from this problem becoming moot in the main urban areas. Once our internet access is freed from cables and the last mile, then all bets are off. That won’t help rural areas, but it may end up transforming urban access and costs. Just like cities clustered around seaports and key places nodes along trade networks, cities (and workers) will cluster around better telecommunication access.

But the longer thought comes from some reflections over the timely recent release of OpenMedia.ca/CIPPIC’s second submission to the CRTC’s proceedings on usage-based billing (UBB) which I think is actually fairly aligned with the piece I wrote back in February on titled Why the CRTC was right about User Based Billing (please read the piece and the comments below before freaking out).

Here, I think our goal shouldn’t be punitive (that will only encourage the telco’s to do “just enough” to comply. What we need to do is get the incentives right (which is, again, why they shouldn’t be allowed to own content, but I digress).

An important part of getting the incentives right is understanding what the actual constraints on internet access. One of the main problems is that people often get confused about what is scarce and what is abundant when talking about the internet. I think what everyone realizes is that content is abundant. There are probably over a trillion websites out there, billions of videos and god knows what else. There is no scarcity there.

This is why any description of access that uses an image like the one below will, in my mind, fail.

Charging per byte shouldn’t be permitted if the pipe has infinite capacity (or at least it wouldn’t make sense in a truly competitive market). What should happen is that companies would be able to charge the cost of the infrastructure plus a reasonable rate of return.

But while the pipe may have infinite capacity over time, at any given moment it does not. The issue isn’t about how many bytes you consume, it’s about the capacity to deliver those bytes in a given moment when you have lots of competing users. This is why it isn’t the “where the data is coming from/going to” that matters, but rather how much of it is in the pipe at a given moment. What matters is not the cable, but the it’s cross section.

A cable that is empty or only at 40% capacity should deliver rip-roaring internet to anyone who wants it. My understanding is that the problem is when the cable is at 100% or more capacity. Then users start crowding each other out and performance (for everyone) suffers.

Indeed this is where the OpenMeida/CIPPIC document left me confused. On the one hand they correctly argue that the internet’s content is not a limited resource (such as natural gas). But they seem to be arguing that the network capacity is not a finite resource (sections 21 and 22) while at the same time accepting that there may be constraints on capacity during peak hours (sections 27 and 30 where they seem to accept that off peak users should not be subsidizing peak time users and again in the conclusion where they state “As noted in far greater detail above, ISP provisioning costs are driven primarily by peak period usage.” If you have peak period usage then, by definition, you have scarcity). The last two points seem to be in conflict. The network capacity cannot be both infinite and constrained during peak hours? Can it?

Now, it may be that there is more network capacity in Canada then there is demand – even at peak times – at which point, any modicum of sympathy I might have felt for the telcos disappears immediately. However, if there is a peak consumption period that does stress the network’s capacity, I’d be relatively comfortable adopting a pricing mechanism that allocates the “scarce” amount of broadband pie. Maybe there are users – especially many BitTorrenters – whose activities are not time sensitive. Having a system in place that encourages them to bittorrent during off-peak hours would create a network that was better utilized.

So the OpenMedia piece seems to be open to the idea of peak usage pricing (which was what I was getting at in my UBB piece) so I think we are actually aligned (which is good since I like the people at OpenMedia.ca).

The question is, does this create the right incentives for the telco’s to invest more in capacity? My hope would be yes, that competition would cause users to migrate to networks that provided high speeds and competitive low and/or peak usage time fees. But I’m open to the possibility that it wouldn’t. It’s a complicated problem and I don’t pretend to think that I’ve solved it in one blog post. Just trying to work it though in my head.

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Andrew Krzmarzick

Great graphics to support this post, David. Right now, I think most ISPs created tiered pricing based on speed, not usage. If you charged based on usage, pricing would more closely resemble the current rates structures for mobile phones. This tiered approach to pricing for the Internet based on usage might even create opportunities for better access by citizens with fewer resources if you could create an entry-level price point that does not compromise quality / speed of connection.