Capped Broadband Broadens in Canada

Canada has recently been deemed by comScore to be the “most connected country in the world” when it comes to broadband internet penetration and usage. While this is no doubt an accolade to be proud of, the burden of carrying this heavy internet usage seems to be proving too much to handle for several of Canada’s broadband providers.

In 2009 both Bell Canada and Shaw, two of Canada’s largest broadband providers, sought permission from the Canadian Radio-television and Telecommunications Commission (CRTC) to introduce “usage-based billing”, whereby customers exceeding pre-defined monthly broadband usage limits will be subject to additional fees. In October 2010 the CRTC approved the request, and both Bell and Shaw have both announced they will begin enforcing usage-based billing in the coming months.

Critics point to usage-based billing as a way for Canada’s internet providers – who also typically offer cable or satellite services – to indirectly attack the increasing popularity of Netflix, iTunes and other web-based methods of viewing TV and movies. Defenders of usage-based billing point out providers can only provide a certain amount of bandwidth and performance for a given price, and need to find ways of capping or charging extra for “heavy users” to avoid delivering a degraded broadband experience to their average user.

The problem with usage-based billing, as it is being implemented by Bell and Shaw, isn’t so much the concept as much as the relatively low caps the companies are implementing. Proposed caps range from 25-60GB of data transfer (incoming and outgoing) per month for the companies’ most popular packages. While a minority of users may run into these usage limits today, the ever-increasing use of high-bandwidth, web-enabled services such as Voice over IP, Netflix, iTunes and online backup services like Mozy and Carbonite mean that a growing percentage of typical businesses and households will start running into these limits in the very near future.

Stateside, meanwhile, most internet providers continue to deliver uncapped broadband. Some providers, such as Verizon, even view offering uncapped service as a competitive advantage, as evidenced by the unlimited iPhone data plan the company is planning to announce tomorrow.

By allowing internet providers to introduce low-cap, usage-based billing has the CRTC jeopardized Canadian’s ability to embrace the latest web technologies? Will we see a drop in broadband adoption and use as a result? Will the internet providers that have decided against introducing usage-based billing (Telus, for one) see a surge in subscribers seeking cap-free internet access? Let me know what you think in the comments.