Canada’s Biggest Rip-Off: Broadband Internet
Netflix Chief Content Officer Ted Sarandos slammed Canada’s Internet Service Providers (ISPs) last week, calling the rates we’re charged “almost a human rights violation.”
Sarandos is referring to the high prices and low bandwidth caps imposed by Canada’s “big four” ISPs: Bell, Shaw, Telus and Rogers. If consumers exceed these bandwidth caps imposed by these ISPs, they are forced to pay an overage amount of several dollars per gigabyte.
The poor state of broadband internet has already prompted Netflix to lower the quality of streaming in Canada.
“The problem is [Canada has] almost Third World access to the Internet”
Ted Sarandos, Netflix Chief Content Officer
Where we as Canadian consumers are getting ripped is in the markup the ISPs are imposing on this bandwidth. In an interview with the Vancouver Sun last year, David Buffett, chief executive of Radiant Communications Inc, stated “the cost associated with transmission and switching on a modern network is a non-issue — less than five cents per gigabyte and dropping fast.”
Canadian ISPs, then, are looking to mark up their bandwidth costs by 3,900%. CNN called the 900% markup of movie theater popcorn America’s Biggest Rip-off; at 3,900% markups, there’s little doubt Canadian ISPs are guilty of pulling off Canada’s biggest rip-off.
A customer of mine leased a high-quality connection to the internet for, from memory, a thousand dollars per month. It had a total capacity, in bits per second over a month, that was almost exactly what customers can buy from one of the big-four ISPs for home connections.
If, however, the company had one of those connections, the “excess data” fees would be on the order of a million dollars per month (!)
A thousand-to-one difference in price for what is supposedly the same thing makes me suspicious. In the proverbial free market, one would expect the prices to converge toward one another.
When I worked for Canada’s first major ISP, the prices were much closer together, and roughly commensurate with the number of bits per second the connections could carry. Until the big four added bandwidth caps and excess data fees, that used to be true of them as well.
My old employer had a business model that easily paid for all the capacity they needed, which makes the big four’s massive recent increase in price all the more startling.
–dave
During the CRTC hearings on what the large telcos are allowed to charge smaller, independent ISPs for bandwidth, the point was made (very convincingly, in my opinion) that bandwidth caps are less about limiting the amount of data being transferred in a month than they are about behavior modification.
It’s not the amount of data flowing over the network in a month that matters. What costs ISPs money is the amount of data flowing over the network during peak hours ie. the maximum amount that will be flowing through the network at any given time. One person watching 100 hours of Netflix over the span of a month, at 2am, doesn’t really cost the ISPs money. What costs money is 10 people all trying to watch Netflix at 7pm, because the network has to be upgraded to handle that much traffic at one time.
So bandwidth caps aren’t really about capping your usage over a month; they’re about discouraging all downloading, at all times, so that traffic during peak hours will fall.
Or so goes the argument, anyways.
Two thoughts:
1. “behaviour modification” is a good way to put it. Wouldn’t the ISPs rather have you watching TV the old-fashioned way and buying their movie packages and PPV movies rather than streaming Netflix and other online entertainment?
2. I’m always skeptical about claims about how much a gigabyte of data costs. There’s a strong incentive for Netflix to quote the cost of an incremental gigabyte (virtually free) as opposed to the all-in cost which includes the cost of the infrastructure. Its a little like claiming your airline ticket is horribly overpriced because the plane is going to fly to your destination anyway and it costs next to nothing to fly one more passenger.