Les Bonnes Choses

I'll keep this short -- I have to, because you might be a Canadian reading this in a month's time when the CRTC's ruling kicks in, leveling the playing field so that the country's major internet service providers can finally compete with the small market providers who are obliged to lease the lines running into your house from the big ISPs. Why this arrangement? Well, can you imagine if signing up for service from a different company required them to dig up the road leading out of your subdivision to run some cable into your basement? Right. So they're stuck with the lines owned by the big companies that were laid down when your neighbourhood was but a collection of plots. Up until now, the little guys competed on the basis of price, typically offering unlimited downloading for a fairly low price. That's pretty much their only option, because they don't have control over the network and therefore can't compete on service. But now, these smaller ISPs are compelled to offer the same metered usage plans offered by the big companies from whom they lease the lines over which they would like to provide your service. Now they do get a 15 percent wholesale discount, which means they pay $0.85 to lease $1 of bandwidth from Rogers/Bell/Your Regional 700lb gorilla. The problem is, those 15 cents? That represents the profit margin for these guys. If they want to compete on price, it comes right out of those fifteen cents. So unless I am missing something, the CRTC has effectively imposed a maximum profit margin for small ISPs.

In general, the more of something you use, the more you have to pay for it. And on that level, usage-based pricing makes sense. The 700lb gorillas all offer plans with meager bandwidth quotas; if you use more than your quota, you have to pay more. That would be reasonable, except the overage fees can be pretty high. Rogers, for example charges up to $5/GB for their lowest tier service (their highest tier service, incidentally, caps out at 175GB/mo for $100, which is about 66% of the monthly quota I enjoy with Comcast for which I pay less than half as much). If you subscribe to their highest tier, they will only charge you $0.50/GB for going over your limit. I tried to find information about what the actual cost is for Rogers to send 1GB of data to your house, but it turns out that these companies treat this information as a trade secret. Where's wikileaks when you need them?

If we assume that Rogers is at least breaking even at $0.50/GB (I've read estimates that the actual cost is more like $0.03), then the $5/GB they charge their lowest tier customers is a 1000% profit. How come they're not capped at a fifteen percent profit margin like the little guys?