discussion of tariff proposals for incremental usage and

Discussion of Tariff Proposals for Incremental Usage and of Investment in Wireline Networks

CRTC 2011-77

Report presented to Netflix, Inc.

CRTC Telecom Notice of Consultation 2011-77 REPLY COMMENTS

Review of billing practices for wholesale residential high-speed access services

April 29, 2011

11-38 Place du Commerce, Suite 529, Verdun QC H3E 1T8 CANADA / 514-288-6555 / [email protected] www.LYA.com

®

Discussion of Tariff Proposals for Incremental Usage and of Investment in Wireline Networks –

CRTC 2011-77 Report prepared for Netflix Inc. – April 29, 2011

CRTC TNC 2011-77 LEMAY-YATES ASSOCIATES INC.

Page i

Table of Contents

1 EXECUTIVE SUMMARY ................................................................................................................... 1

2 BELL’S AVP PROPOSAL – COST ANALYSIS AND COMPARISONS ....................................................... 5 2.1 BACKGROUND AND APPROACH ............................................................................................................... 5 2.2 OVERVIEW OF BELL’S AVP PROPOSAL OF MARCH 28, 2011 ....................................................................... 6 2.3 BELL’S HYPOTHETICAL AVP EXAMPLE – SMALL INDEPENDENT ISPS WOULD PAY MORE THAN UNDER THE TN7181 PROPOSAL .................................................................................................................................................... 8 2.4 AVP WILL OFTEN BE MORE EXPENSIVE… PARTICULARLY FOR VERY HIGH USAGE ............................................. 10 2.5 PREPAID AVP RATE FOR WHOLESALE GAS USAGE IS HIGHER THAN BELL’S PREPAID RETAIL INTERNET USAGE RATE 13

3 CANADA-‐US NETWORK INVESTMENT COMPARISON ..................................................................... 16

4 NOTES ON SANDVINE COMMENTS ................................................................................................ 20




Page ii

List of Tables

Table 1 –Bell AVP Scenario – users and usage distribution ............................................................ 8 Table 2 – AVP Proposal – Bell example – Cost of Legacy Usage .................................................. 9 Table 3 – Costing using four approaches for various usage scenarios ........................................... 12 Table 4 – Bell Canada Post paid and Prepaid Usage Price Comparison ........................................ 14 Table 5 – Canada-US Overall Capex Intensity Comparison 2006-2010 ....................................... 18 Table 6 – Canada-US Wireline Networks Capex Intensity Comparison 2006-2010 ..................... 18




Page 1

1 Executive Summary This Report provides initial comments on Bell Canada’s proposal to add a GAS tariff item for

“Aggregated Volume Pricing” (AVP) and a comparative discussion of the investment being made

by Bell Canada in its wireline networks compared to other carriers over the last 5 years. In

addition, comments on Sandvine’s cost estimate for Internet traffic delivery are also provided.

GAS – Gateway Access Service – is a wholesale service that Bell provides to small independent

Internet Service Providers (ISPs) that provides broadband access through Bell’s local network

cloud. In 2009 Bell proposed adding an incremental per GB charge for usage incurred by the

small independent ISP’s customers above a certain amount. This proposal – in Bell Tariff Notice

7181 (TN7181) – is now proposed to be replaced by AVP and instead of paying a price per GB

for incremental usage per customer above a certain threshold, the small independent ISP would

pay a total amount based on all traffic carried.

The Bell Canada proposal and Sandvine’s cost estimate were both submitted as part of their

respective March 28, 2011 interventions in the CRTC’s Telecom Notice of Consultation CRTC

2011-77 – Review of billing practices for wholesale residential high-speed access services.

This Report was developed independently by Lemay-Yates Associates Inc. (LYA) to provide

input to Netflix for its Reply Comments in the CRTC 2011-77 proceeding.

The key findings from our analysis of the March 28, 2011 comments are, focusing on the

evidence submitted by Bell Canada and Sandvine are:




Page 2

• Bell provides a hypothetical example to show how AVP would work. Bell’s example

results in a relatively small amount of usage that would be chargeable. But under the

former TN7181 proposal, the small independent ISP would have paid nothing additional

for the level of usage that Bell assumed. In Bell’s hypothetical example, under the AVP

proposal, the small independent ISP would be paying for usage, whereas under TN7181 it

would not. So while the new AVP rate per GB is lower than the rate per GB was under

TN7181, the way the total charge is calculated can result in the small independent ISP

paying more.

• LYA analyzed Bell’s AVP proposal considering a number of different usage scenarios. In

lower usage scenarios (e.g. with an average of 24 Gb per user per month), the AVP

proposal would not result in incremental charges to the small independent ISP. The same

profile applied to the previous TN7181 approach would also not have resulted in

incremental charges. On the other hand, as usage increases, the cost associated with AVP

in total is greater that what would have been anticipated under TN7181. This is the case

with the scenario with an average monthly usage of 41.25 GB described by Bell in its

March 28 comments. And for very high usage – 250 GB per month – the AVP cost in

total would be even greater than using retail-minus rates, since the legacy retail rate for

incremental usage is capped at $60 per month per end customer.

• In the AVP proposal, Bell’s rates for prepaid usage would be higher at wholesale for GAS

than they are for prepaid retail Internet. Bell is proposing to charge 20 cents per GB for

prepaid usage (in units of 1 TB) as part of GAS AVP but only charges its retail residential

Internet customers 12.5 cents per GB when they choose to subscribe to prepaid Internet

usage.




Page 3

• One justification used by a number of parties in favor of adding usage-based wholesale

rates is that increasing Internet capacity requires significant new capital investment. LYA

compared the reported capital investment profile of a number of Canadian and US carriers

to provide input on this point. While carriers do not report capital investment specific to

providing local Internet capacity, we can highlight that in the case of Bell Canada, its

overall capital expenditures as well as capital expenditures dedicated to its wireline

networks are well within, and even below, industry averages over the last 5 years. It does

not appear that Bell Canada is incurring any out-of-the-ordinary capital expenditures to

provide incremental Internet bandwidth based on this analysis. When focusing on capital

intensity for wireline networks only, Bell Canada’s 5-year average is significantly lower

than its peers and competitors in Canada. TELUS comes in at 25% compared to 18% for

Bell, 26% for Shaw and 25% for Rogers, although on a declining trend in 2009 and 2010.

• Sandvine submitted the results of a modeling exercise that appears to be intended to

reflect an estimate of the total cost associated with Internet connectivity. It arrives at a

figure of $0.17 per GB. However, the CRTC 2011-77 proceeding is only focused on the

possible addition of a usage component to the connectivity in the local access “cloud”, as

proposed notably by Bell Canada in its initial filing of changes to its GAS Tariff in

TN7181. Bell Canada’s GAS Tariff does not include Internet connectivity.

• Overall, Sandvine’s cost estimate is not set out in enough detail to provide guidance to the

CRTC on the question of a usage component as part of Bell’s GAS services. If Sandvine’s

$0.17 per GB is intended to reflect Internet delivery in total, then small independent ISP’s

already pay considerably more than this for the GAS portion of the network. On the other

hand, if Sandvine’s estimate is intended to reflect the cost of local delivery of incremental

Internet capacity then, it has included many irrelevant cost items.




Page 4

• Sandvine also suggests that small independent ISPs should subscribe to a tiered plan with

“top-up” options available based on “premium cost-plus pricing”. Sandvine does not

propose what the premium “top-up” rate would be, but based on this wording, it would

likely be greater than the rate in the tiered plan of $0.17 per GB plus a profit margin. It is

noteworthy that Bell’s own “top-up” plan for retail Internet customers provides for

prepaid “top-ups” at a rate of only $0.125 per GB.

It should be kept in mind that the discussion points provided herein are based on a initial reviews

of the Bell Canada and Sandvine comments, based on information previously developed by LYA

and based on the information that was put on the public record by Bell and Sandvine. It is our

understanding that additional information will be placed on the public record including responses

to interrogatories as well as additional inputs that may be provided at the upcoming oral hearing.

LYA reserves the right to add or modify its current analyses when additional information is

placed on the public record, if required, as per the consultation process outlined by CRTC in its

April 13 Letter.1

1 CRTC Letter, Follow up to Telecom Regulatory Policy CRTC 2010-632 (TRP 2010-632), Wholesale high-speed access services proceeding and TNC 2011-77 proceeding – Process issues, April 13, 2011




Page 5

2 Bell’s AVP Proposal – Cost analysis and comparisons 2.1 Background and approach

In its Comments of March 28, 2011, Bell Canada, et al. (“The Companies”) proposed to change

the approach previously proposed for the GAS Tariff to be based on “aggregated volume pricing”

(AVP).

GAS – Gateway Access Service – is a wholesale service that Bell provides to small independent

Internet Service Providers (ISPs) that provides broadband access through Bell’s local network

cloud. In 2009 Bell proposed adding an incremental per GB charge for usage incurred by the

small independent ISP’s customers above a certain amount. This proposal – in Bell Tariff Notice

7181 (TN7181) – is now proposed to be replaced by AVP and instead of paying a price per GB

for incremental usage per customer above a certain threshold, the small independent ISP would

pay a total amount based on all traffic carried.

To reflect the idea that existing access rates for Legacy service – 2 Mbps and 5 Mbps access

connections over Bell’s DSL lines – included an assumption of usage, a credit for this is

subtracted from the total usage in order to determine the total dollar amount to be charged to the

small independent ISP.

In the case of GAS FTTN – i.e. for non-Legacy “fiber to the node” – Bell has re-filed its Tariff

Notice to exclude usage from the fixed access cost, and thus GAS FTTN users would pay the

new AVP rate on all usage, with no credit.




Page 6

Our approach in this section is to provide an initial review of Bell’s AVP proposal, focusing on

three areas:

1. A comparison of the usage charge to the paid by a small independent ISP between the

new AVP proposal and the previously proposed TN7181 approach,

2. The impact of the new AVP proposal compared to TN7181 for high incremental usage

scenarios, and,

3. AVP introduces a price for prepaid wholesale GAS usage charge. LYA has compared this

wholesale prepaid-usage charge on a per-GB basis with Bell’s retail rate for residential

Internet customers or added prepaid usage for a complete Internet service.

Note: the analysis in this section refers only to the Legacy services, which were analyzed

previously in LYA’s Report prepared for Netflix and filed as part of Netflix Comments in CRTC

2011-77 on March 28, 2011.2

2.2 Overview of Bell’s AVP proposal of March 28, 2011

Bell’s AVP proposal for residential Internet GAS can be summarized as follows:3

2 See “The cost of incremental Internet transit bandwidth in the local access cloud”, Lemay-Yates Associates Inc., report prepared for Netflix Inc., submitted with comments in CRTC 2011-77, March 28, 2011 3 Bell Canada – Comments in CRTC 2011-77, March 28, 2011, Paragraphs 67, 68, 70 and Footnote 21




Page 7

• GAS (both legacy and FTTN) would be composed of two components: a flat-rated access

fee by speed and the AVP. The AVP can be pre-purchased only in blocks of single

Terabytes (TB) and unused portions do not carry over to future months.

• The rate for a single TB would be $200 (which effectively approximates a rate of $0.195

per GB) per month.

• If the small independent ISP's total aggregate monthly traffic volume exceeds the level of

TBs it pre-purchases for a given month, it will be charged $0.295 per GB for any extra

GB required to accommodate the overall usage of all its end-users that month.

• Other GAS charges – the flat-rated access fee by speed, installation, dry loop, service

charge and the Aggregated High Speed Service Provider Interface (AHSSPI) – continue

to apply. The AVP approach does not change the existing GAS Access monthly rate paid

by small independent ISPs.

Of note in this proposal is that, unlike the previous GAS tariff or previous proposed changes to

the tariff, the small independent ISP can pre-purchase usage that is expected to be needed per

month. Bell does not specify if pre-purchasing is mandatory nor if there is a contract term

requirement.




Page 8

2.3 Bell’s hypothetical AVP example – small independent ISPs would pay more than under

the TN7181 proposal

In its Comments, Bell presents one hypothetical example of how AVP would work. The users,

usage profile and usage distribution assumed by Bell is shown below.

Table 1 –Bell AVP Scenario – users and usage distribution

For Legacy services, as noted above, Bell applies a credit of 16.6 GB for a 2 Mbps user and 42.1

GB for a 5 Mbps user, not explained in detail, but intended to reflect the usage that Bell included

in the basic fixed access rates in the GAS Tariff.




Page 9

Table 2 – AVP Proposal – Bell example – Cost of Legacy Usage

As shown above Bell calculates that the chargeable amount of Legacy usage would be 460 GB.

In Bell’s example, however, the small independent ISP was assumed to have prepaid for 8 TB of

usage for both legacy and FTTN customers. Thus on this basis, a portion of the prepaid TB as

well as the chargeable usage after the credits is reflective of what the small independent ISP

actually would pay in total for the Legacy usage. This is summarized above, applying a portion of




Page 10

the prepaid charges to reflect the chargeable legacy usage as a % of the total chargeable usage –

in this case 5%.

The combination of the prepaid portion allocated to Legacy and the chargeable Legacy usage

results in an average cost per GB for the purchased Legacy usage of 24.4 cents, in Bell’s example

equating to a total of $214.

While $214 is not a large number, Bell’s example results in only a relatively small amount of

usage that is chargeable. And under the previous TN7181 proposal, the small independent ISP

would have paid nothing for the level of usage that Bell assumed. Under the TN7181 proposal,

each 2 Mbps user would have been allowed 20 GB per month and each 5 Mbps user would have

been allowed 60 GB before additional usage charges were to be added. Instead of paying $0 for

additional Legacy usage under TN7181, the small independent ISP under AVP would pay $214.

Thus in Bell’s example, under the AVP proposal the small independent ISP would be paying for

usage, whereas under TN7181 it would not. So while the AVP rate per GB is lower than the rate

per GB was under TN7181, the way the total is calculated would result in the small independent

ISP paying more.

2.4 AVP will often be more expensive… particularly for very high usage

In the LYA report prepared for Netflix submitted in its March 28, 2011 Comments, a number of

usage scenarios were developed to illustrate the costs underlying the local access network – paid

for via the GAS Tariff. For illustrative purposes, these subscriber and usage scenarios can be

used to estimate the total payable by the small independent ISP under the AVP proposal and

contrast that to other wholesale proposals or retail rates.




Page 11

For comparison of usage scenarios, the following costing methods focusing on Legacy usage are

considered:

• Bell’s AVP proposal, as discussed above, including prepaid TB’s at $200 per TB as well

as an incremental charge per GB of 29.5 cents, charged on GB after a Legacy service

credit.

• Bell’s TN7181, as modified by CRTC 2011-255, in which there was a proposed charge

per GB for usage over specific thresholds - $1.50 for 2 Mbps users and $1.125 per GB for

5 Mbps users, charged for usage over 20 or 60 GB, respectively, up to a maximum of

$22.50 per customer per month up to 300 GB total.

• Comparison to a retail-minus approach as proposed in CRTC 2011-44 – 15% off of retail,

in this case the rate of $2.50 per GB Bell uses for postpaid Internet usage, capped at $60

per month per customer. Note the retail rate includes an entire Internet service, whereas

the wholesale figures are GAS-only.

• Comparison to the lowest retail rate, proxied by Bell Canada’s “usage insurance” rate.

This rate applies to legacy retail customers who want to prepay for anticipated additional

usage at the rate of 12.5 cents per GB. This is similar conceptually to the small

independent ISP prepaying for TB of aggregated usage, however as with other retail rates

the usage insurance retail service provided includes the entire Internet service and not just

GAS.




Page 12

For a variety of usage scenarios – starting with the one presented by Bell in its Comments – the

following table shows the amount that would result considering the four approaches to costing.

While in the LYA report, the usage was considered to be all for Legacy, in the table below, the

usage is prorated to Legacy and FTTN users using the profile example from the Bell Comments.

The cost figures shown for each scenario are the resultant costs for the Legacy usage only.

Table 3 – Costing using four approaches for various usage scenarios

In lower usage scenarios – notably using the typical usage of 24 GB that LYA had estimated

based on CRTC statistics and included in its previous Report for the Netflix Comments – the

AVP proposal would not result in incremental charges to the small independent ISP. The same

profile applied to the TN7181 approach would also not have resulted in incremental charges.

On the other hand, as usage increases, the cost associated with AVP in total is greater that what

would have been anticipated under TN7181. And for very high usage – 250 GB per month – the




Page 13

AVP cost would be even greater than the retail-minus rates, since the legacy retail rates cap the

cost at $60 per customer per month.

Since AVP also incorporates the possibility of pre-paid usage a comparison with the pre-paid

retail usage rate is also provided. In all cases of high usage – 60, 125 or 250 GB per month – the

AVP cost in total for GAS usage only would be 65% to 160% higher than the retail rate for

prepaid usage.

2.5 Prepaid AVP rate for wholesale GAS usage is higher than Bell’s prepaid retail Internet

usage rate

At the retail level, Bell offers two ways for customers to pay for incremental Internet usage. It

can be done by paying for GB in excess of the usage included in the customer’s monthly service

package or by prepaying for additional usage.

For the “Essential” (500 kbps), “Essential Plus” (2 Mbps) and “Performance” (6 or 7 Mbps)

legacy services, additional GB’s on the basis of paying for actual usage – i.e. postpaid – are

charged at a rate of $2.50 per GB.

On the other hand, if a Bell retail customer wishes to pay for additional capacity in advance – i.e.

prepay – then the charge per GB is much lower.




Page 14

For an additional $5 per month, paid in advance as part of a monthly subscription, the retail

customer can use 40 GB more than the amount of usage included in the service package. This

equates to 12.5 cents per GB. The same rate applies to larger amounts of prepaid usage.4

The following table compares the post-paid and prepaid usage charges for wholesale (based on

the proposals for GAS in TN7181 and AVP) and retail Internet, keeping in mind that the

wholesale rates are for GAS-only whereas the retail rates are for a complete Internet service.

Table 4 – Bell Canada Post paid and Prepaid Usage Price Comparison

On a postpaid basis – i.e. where the customer or a small independent ISP pays for incremental

usage based on actual consumption – the wholesale GAS rate as previously proposed in TN7181

is 45% to 60% of the retail Internet rate for incremental consumption. This rate is at least less

than retail, but would likely leave the small independent ISP with little or no margin, since there

is more to an Internet service than just the GAS portion.

4 Bell refers to this as “Usage Insurance” – this option is part of the monthly subscription and cancellable with 30 days notice.




Page 15

Now in the new AVP proposal, Bell’s rates for prepaid usage would be higher at wholesale for

GAS than they are for retail Internet in total. Bell is proposing to charge 20 cents per GB for

prepaid usage (in units of 1 TB) but only charges its retail customers 12.5 cents per GB for

prepaid usage.




Page 16

3 Canada-US network investment comparison A number of comments submitted to the CRTC in the context of this consultation mention the

high level of capital investment in broadband networks. LYA highlights that our assessment of

the cost of delivering incremental Internet capacity to end subscribers as part of Bell Canada’s

wholesale Gateway Access Services (GAS) Tariff does not include backbone Internet

connectivity, which is not part of the Bell GAS tariff and is thus purchased separately by small

independent ISPs, nor does it cover the cost of the physical local loop, which is recovered by

another element of the GAS tariff.

However, to address the issue of overall network investment, we have developed herein a

comparison of in-year network investment expressed in terms of capital intensity – capital

expenditures expressed as a percentage of revenues – from 2006 to 2010, for a number of

Canadian telcos and cablecos as well as a few US carriers as a point of comparison.

Carriers do not disclose network investment specifically for the purpose of providing only

broadband Internet access services to consumers, to businesses or to their wholesale clients.

However, carriers disclose their total capital intensity as well as capital expenditures related to

wireline networks, to serve both business and residential customers. This total investment in

wireline networks is thus directed at providing a variety of services including telephony, data

communications services, IPTV and cable distribution services as well as Internet services, for

local access as well as intercity transport. While we do not dispute that significant capital

investment is dedicated each year to enhance the wireline networks of all types of carriers and to

increase capacity, we focus here on comparing Bell Canada with its peers on the capital intensity

metric to assess if its capital intensity is higher than that reported by other carriers. The reason for




Page 17

the focus on Bell Canada is that it is the key provider of local broadband access to small

independent ISPs.

The following two Tables present the results of this analysis.5 The first Table compares overall

capex intensity between Bell Canada, Rogers Communications, TELUS, Shaw, Videotron,

Verizon, AT&T and Comcast. The second Table focuses on a comparison of wireline networks

only capex intensity. The difference between the two tables relates to capital investment in

mobile networks, in broadcasting and in satellite services, according to the respective operations

of each carrier. The comparison focused on wireline networks only capex intensity provides the

closest publicly available metric to compare capital investment in wireline broadband access

networks.

5 All sources of information for these two Tables were obtained directly from the public carrier results from 2006 to 2010 inclusively. LYA calculated the capital intensity metric when required based on publicly reported data on capital expenditures and revenues.




Page 18

Table 5 – Canada-US Overall Capex Intensity Comparison 2006-2010

Table 6 – Canada-US Wireline Networks Capex Intensity Comparison 2006-2010




Page 19

The key findings from this comparison are:

• Bell Canada consistently reported among the lowest overall capital intensity of the top 5

Canadian carriers included in this comparison and its 5-year average at 16.3% is the

lowest reported. Bell Canada’s overall capital intensity is in the same range as that

reported by Verizon and AT&T in the US with 5-year averages at 17.6% and 15.5%

respectively.

• When focusing on capital intensity for wireline networks only, Bell Canada’s 5-year

average is significantly lower than its peers and competitors in Canada. TELUS comes in

at 25% compared to 18% for Bell, 26% for Shaw, 25% for Rogers, although on a

declining trend in 2009 and 2010.

• Canadian carriers typically outspend their US counterparts in terms of capital intensity or

relative capital expenditures, especially for wireline networks. However, the numbers

reported by Verizon highlight the impact of its deployment of fiber to the home

technologies, coming in above 20% for a number of years.

Thus, although publicly available information does not enable us to comment on the Bell

Canada capital investment specific to providing local delivery of Internet capacity, we can

highlight that Bell’s overall capital expenditures as well as capital expenditures dedicated to

its wireline networks are well within and even below industry averages over the last 5 years.

It does not appear that Bell Canada is incurring any extraordinary capital expenditures to

provide incremental Internet bandwidth based on this analysis, even though Bell Canada is a

key provider of local broadband Internet access to small independent ISPs.




Page 20

4 Notes on Sandvine comments In Sandvine’s Comments of March 28, 2011, it provides a “UBB Plan Proposal” to be based on

network costs plus a profit margin. As part of this, in paragraph 6 (b) (i) it states that: “Cost

should be based on the marginal cost of delivering a GB of traffic, which Sandvine estimates at

approximately $0.17”.

Sandvine’s model appears to be intended to reflect their estimate of the cost associated with

Internet connectivity. On the other hand, the CRTC 2011-77 proceeding is only focused on the

possible addition of a usage based billing (UBB) component to the connectivity in the local

access “cloud”, as proposed notably by Bell Canada in its initial filing of changes to its GAS

Tariff in TN7181.

Bell Canada’s GAS Tariff does not include Internet connectivity. Per Bell Canada’s GAS Tariff:

Gateway Access Service (GAS) “will enable a service provider to establish a high speed

data access path between its end-user’s premises and a Company serving wire centre.”6

As part of the Bell GAS Tariff Notice, the wholesale usage component was to be an add-on to

other tariffed items relating only to the local access network. The newly proposed AVP approach

from Bell would also be an add-on to other tariffed items, as discussed above, and also only

relates to local access and not to Internet connectivity.

6 Bell Canada General Tariff CRTC 6716, Item 5410 Gateway Access Service, page 738, paragraph 2 (a)




Page 21

Bell’s GAS service only includes the function of transiting the local access network cloud –

providing the connections from end customers to a small independent ISP. In addition to this, the

small independent ISP incurs other costs to connect to peering points, transit via the Internet

itself, etc.7

Sandvine does not separate out cost elements for which small independent ISPs would already be

paying – either via existing portions of the GAS Tariff such as GAS Access and AHSSPI or via

other services that they require in order to provide Internet delivery in addition to GAS services

such as peering and connections from the Bell CO to the peering point.

Sandvine sets out in general terms a number of items that are included in its model.8 Very little of

what Sandvine identifies as cost elements that underlie its model are actually relevant to the Bell

GAS service tariff and some cost elements (e.g. the local loop) are not mentioned. In any case

even those that are relevant to GAS may already be included as part of existing Tariff Items –

notably the fixed links from Central Offices to Remotes, which are not traffic sensitive and are

covered by GAS Access.

Sandvine suggests that small independent ISPs should subscribe to a tiered plan with “top-up”

options available based on “premium cost-plus pricing”. Sandvine does not propose what the

premium “top-up” rate would be, but based on this wording, it would likely be greater than the

rate in the tiered plan of $0.17 per GB plus a profit margin. It is noteworthy that Bell’s own “top-

up” plan for retail Internet customers provides for prepaid “top-ups” at a rate of only $0.125 per

GB.

7 See “The cost of incremental Internet transit bandwidth in the local access cloud”, op,cit., Figure 3 8 Sandvine Comments March 28, 2011 – Footnote 1, page 2




Page 22

Taking only the cost items relevant to GAS, and only the portions not already included in

existing Tariff Items, LYA estimated the range of incremental costs per GB for the delivery of

incremental traffic – excluding Internet connectivity – in the local access cloud to be from 1 cent

to 1.4 cents, depending on the traffic profile and mix of users.9

Overall, Sandvine’s cost estimate is not set out in enough detail to provide guidance to the CRTC

on the question of a usage component as part of GAS services. If Sandvine’s $0.17 per GB is

intended to reflect Internet delivery in total, then small independent ISP’s already pay

considerably more than this for the GAS portion of the network. On the other hand, if Sandvine’s

estimate is intended to reflect the cost of local delivery of incremental Internet capacity, then it

has included many irrelevant cost items.

9 See “The cost of incremental Internet transit bandwidth in the local access cloud”, op,cit., Tables 8, 9 and 10

discussion of tariff proposals for incremental usage and

Documents