Posted by: Peter Carrescia | 03-02-2011

The CRTC and ‘Cable Cutting’

When Netflix launched in Canada late last year at the great price of $7.99/month I signed up immediately for the trial free month.  The fact that they had the first three seasons of Mad Men as part of the content sealed the deal.  I had been looking to start watching and now was my chance.  With a bit of free time on my hands, I got through the first couple season in 10 days or so.

It was Saturday morning and I was sleeping in after a late night of watching a few more Mad Men episodes when my daughter came into my bedroom.  “Dad, there’s a message from Rogers on the computer.  It says we’ve used up our data limit for the month”.  Until that time, I didn’t even know what my limit was (turns out it’s 60GB).  Well, that was the end of Netflix in my house until the next month!  Once I finished watching Mad Men I cancelled my subscription, having finished my experiment with Over-the-Top (OTT) video and thinking I was close to cutting out cable in my household – at least for the time being.

I was reminded of this the other day with the politicians getting involved in the Usage-Based-Billing decision by the CRTC here in Canada.  Thankfully we’re in election silly pre-season right now and with this issue gaining momentum the government could not ignore it and had to take the unusual step of taking a stand (how far we’ve come that Twitter is how I found out the line in the sand that our PM had drawn).

There was an interesting opinion piece in the Globe and Mail yesterday by Richard French, a professor at University of Ottawa and a past vice-chairman of the CRTC (see Second-guessing the CRTC comes at a price – it’s a great analysis).  In the piece, he makes the legitimate point that “…it seems hard to argue – as those who reject the ruling in effect do – that a minority of customers shouldn’t pay fees that reflect their heavy usage”.

Until my Netflix experience, I would have agreed with Prof. French and really had no sympathy for heavy bandwidth users.  The whole idea of broadband carriers throttling back their networks and charging over certain caps was actually fine with me.  I equated heavy home internet users with likely pirates, stealing music and movies, and felt there was nothing wrong with having those people pay.  And why should the majority of us, who use a small percentage of the total available bandwidth, subsidize the very few who use a lot?

My thinking on this has now evolved.  I don’t have much sympathy for those that use up lots of bandwidth acting as a hub for stolen content, but when bandwidth is increasingly used up on legitimate activity, and in the case of Canada, activity that often is in competition to services your broadband provider offers, there needs to be some protection for the consumer.

In the US, most broadband plans have much higher data caps than in Canada.  For example, Comcast’s is 250Gb and Verizon FIOS has no cap .   Assuming I used 250Gb in a month,  Comcast’s $30/month service would cost over $200 with a comparable Canadian service.  And what that means is that the coming television revolution (Netflix, Hulu, AppleTV, GoogleTV, etc) will never happen in Canada.  Once you factor in service subscription costs and then bandwidth costs, no one could afford to ‘cut the cable’.  Canada’s current television and broadband providers, whom are one and the same, have a vested interest in making sure that revolution doesn’t happen.

This is about much more than just metered Internet use.  This is about creating a competitive television playing field, just as the CRTC did with telecom deregulation years ago.  And as my last post stated (“Your Family Room and Innovation“), I believe firmly that this is the next big technology market.  It would be disappointing if we missed it.

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Responses

  1. Peter, as you know, I am currently living in the US with plans to move back to Canada. We are avid Netflix users – down here you get both speedy turnaround with mailing DVDs (typically 2 days from send to receive) and the choice of lots of streaming content. I estimate we stream about 16 hrs of Netflix content, but really don’t know what our total monthly data usage is. Living on a farm here, our broadband plan is 6 meg download and no caps from our service provider AT&T, at a cost of $38 per month.

    I am dismayed by the prospect of giving up these personal benefits moving back to Canada. From lack of good broadband access in rural areas, to punitive bandwidth caps and limited availability of content, it doesn’t seem very attractive. And that doesn’t begin to speak to the impact on business productivity and the inability to work from home.

    In watching the UBB discussion, the biggest disappointment for me is the CRTC’s lack of foresight. While I am okay with the prospect of usage based billing, they need to acknowledge future demands, not historical use. Stating that the average user uses 14 GB per month (and by extension a 25 GB cap should be sufficient) reminds me that in 1980 no one ever needed more than 64KB of memory.

  2. Hi Peter,

    I cancelled my cable, switched providers (to TekSavvy Cable), and purchased Netflix and in the spring will probably purchase a better OTA HD Antenna for the house. Our bill has reduced from over $300 to around $75. Some of the TV quality has gone done. Some of the choice has gone up. But generally I’m just happier with being able to watch TV on my devices (Wii, iPad, AppleTV, XBox 360, MacBook Air) where I am.

    I’m not expecting anyone to put up with the complexity that is my TV experience (my spouse is tolerating it for now – we’ll see how long that lasts). But the differences in service and availability with services like Comcast and FiOS and the changes to the content distribution with Netflix, Hulu, Boxee and others.

    I hope that as Canadians we aren’t regulated into the past generation of technology.

  3. I have just had the same experience Peter! Son bought himself a new xbox, asked if he could enable the Netflix trial….I reluctantly said yes and gave him my cc number and made him create a calendar entry to remember to cancel the trial….knowing our rogers bill level already (cable, HD, PVR, internet, home phone) I didn’t want another charge added. Then I experienced the fun of just grabbing a movie on netflix and started thinking hmmm maybe we will keep it. Then while on the road last week my son sent me a bbm saying “just got a message saying we were at 75% of our internet allowance”. WTF!!! For the first time ever, with non stop networked gaming in our home, 4 pc’s always on and always connected with 2 teenagers, I have tripped a limit on Rogers. Can you say “Rogers on demand competition”? Its pure and simple their way of preventing Netflix and other streaming services from riding their network.

  4. Hi Peter,

    Netflix alleviated your problem yesterday – by reducing the quality non discernibly it reduced the bandwidth required by 66%. Technology resolved the challenge and usage based billing still makes sense.

    I think the larger competitive issue and barrier to innovation will occur when the cableco ISP starts selectively treating traffic, under the disguise of traffic management, that competes with its own content. Lets wait and see.


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