Of Coffins, Nails, and Innovation

Recently our national department of influence and lobbying – the Canadian Radio-television Telecommunications Commission or CRTC (Canada’s version of the FCC) – approved of usage based billing for internet service providers. This means that owners of the big pipes can charge the little providers of your access for all the bits and bytes they send down the line.

So a bit of Netflix or Apple TV here, a big update or a new distro there, a Skype session that never got shutdown, and all of a sudden your mortgage payment is looking like a bargain compared to your monthly internet bill!  If you’re wondering why everyone else gets all excited about the latest internet thing but we don’t have it here this is (primarily) why!  Apple TV might cost $100, Google TV might be included in your next wide screen, but if you’re going to have to pay a premium data charge to use those features they’re suddenly no longer appealing!

But we pay for our gas right?

You pay for the gas you put in your car; and the electricity you consume in your home; and a lot of other monthly bills are consumption, or usage, based.

The electrons (or photons if you’re lucky) that deliver the internet to your home though are not really consumed.   They don’t die and and float up in the atmosphere to tear holes in the ozone like that billion year old dinosaur you’re burning up in the car.

Granted delivering the internet requires some infrastructure and people to run that infrastructure.  And the more internet that gets delivered the bigger an infrastructure is required.  So theoretically the more internet you consume the more you contribute to the next iteration of infrastructure.  But we’re all going to benefit from the next upgrade, not just the heavy duty users.

Broadly, deeply, totally integrated!

The other issue we have here is the owners of the big pipes are so broadly and vertically integrated they have little incentive to invest in one infrastructure over another and lots of reason to keep milking the old models as long as they can.  The TV stations, newspapers, and other media producers are owned by the same people who own the satellite/cable, wireless, and internet distribution channels.

There’s no reason for them to build bigger internet pipes since more people using Netflix (for example) means less people buying their TV offerings.  More people reading the news online (or wirelessly) means less people buying their newspapers.

They come up with competing offers, like Video-on-Demand to counter Netflix; and they sweeten the deal by saying it won’t count towards your bandwidth cap (and then they raise your rates so ultimately it’s the same thing, but that’s another article) .  But really, can one regional service provider compete with a multinational like Netflix or Apple or Google when it comes to securing the rights to hot new TV shows, sporting events, and other audio-visual entertainment?

We’re not all the same

Granted, not everyone of us wants to watch every video on Youtube each month; or has a dozen computers that need to be upgraded simultaneously.  A bit of e-mail and some Facebook certainly won’t clog the pipes or require fibre to the home.  These people would be okay with a trickle of data and really low cap.  Wouldn’t it be unfair for them to share the bill of a bigger, faster internet?

At the same time, even some of us who want more internet can’t because the copper lines running to our house were installed by Alex himself and haven’t been changed since!  Why should these people pay for something they can’t even have if they wanted it?!

For the first group I say progress is inevitable.   Your friends are going to send you links to Youtube videos and power points full of sappy pictures.  The corner video store is going to close down. The news paper will eventually be delivered wirelessly.  The sooner our internet flows freer the sooner we can all progress, even if a few curmudgeons don’t like it.

And if you’re paying for better internet than you can possibly get in your neighbourhood then you’re going to insist on getting it.  There won’t be any excuse for the providers not to give it to you (although, today they’ll happily sell you services they can’t deliver but that’s yet another article).  The rationalization argument will be gone and soon you too can watch Top Gear on Netflix whenever you fancy.  Or get IPTV or VOIP or plethora of other internet based services we only dream of!

Is tiered-billing good or bad?

In economic theory and practical business tiered-billing is great!  It allows more people to participate in the market and for companies to reach a wider audience.  That’s why we have student and senior rates, mid-week deals, etc.

How does tiered-billing apply to internet access?  Some how the ISP’s have to make the internet proposition appealing at different prices so that grandma who just wants to see pictures of her grandkids is as enthusiastic about signing-up as the gamer who wants to watch Netflix while torrenting warez and boot-legged concerts.

But if grandma’s overage charges are ridiculously high and the gamer can’t get unlimited bandwidth at a reasonable price it’s not appealing.  The ISP’s could always ask for our income tax returns and charge us a percentage our gross income, but really?! In a way we already do that, most – if not all – the cables running across this country and down our streets were subsidized by our taxes.  Or at least our parent’s taxes.

The ISP’s need to find a way to package the internet so the unlimited packages are reasonably priced for heavy-duty users; and casual users can find cheaper packages that suit there needs.  But never should the excess data charges on your package make it immediately more expensive than an unlimited plan!

In the end

Canada is one of the only, if not the only, country in the world that meters their internet usage.   We’re also one of the last countries in the world to get cool new services delivered over the internet or to take advantage of them.  I realise it’s not just a matter of having unlimited bandwidth (at a reasonable price) but it’s certainly not going to encourage adoption if I have to figure I can join Netflix for $8 a month but it will cost me $100 in excess data charges to watch a couple movies a week!

Make sure you have your say!  Start by signing the petition at OpenMedia.ca and don’t hesitate to remind your MP what you think of usage based billing!

Cross-posted on 2FatDads at Of Coffins, Nails, and Innovation

An open (rant) letter to Canadian banks

Right after my daughter was born we opened an RESP for her, a family RESP as we were planning to have more children. We opened it at TD Canada Trust because the MER on their e-Series funds is practically non-existent.

And all was good (well almost, read Mike Holman’s blog or his book
for details on the convoluted process of opening an RESP at TD for e-Series funds).

And then our son was born and we dropped by the bank to add him as a beneficiary to the family RESP. Unfortunately we stopped there and I didn’t follow-up closely enough with TD.

Now I have an issue with TD and issue with banks in general over their handling of RESP’s!

Even though our Family RESP is converted to an e-Series account and my daughter’s investments are all e-Series investments it appears that my son can’t invest in e-Series funds until I convert his account as well!!! WTF?! Do they have meetings at TD to brainstorm ways of making things complicated for their customers?! Do they think this is good for business?! Are they just throwing darts at a board without considering the over-all user experience!?

There were a few other blunders and fails on their part (TD couldn’t spell RESP if you tatooed it on your forehead). So one of my new year’s resolutions (motivated in part by bigcajunman’s saga) was to do away with TD.

The rest of our accounts are with RBC and they also have some really low cost funds so I figured it was a no-brainer to move over there. I visited RBC today and found out that they too split a Family RESP into separate individual sub-accounts for each child! So I can’t pool all my money and simplify my investments and have more flexibility (i.e.: you often need over $1,000 initial investment which is easier when all your money is pooled).

Hey, listen up Canadian banks: if a dumb-ass klutz like me can add a column to a spreadsheet called “Beneficiary” and write my daughter’s or son’s name in there when I make a contribution (or a withdrawl) then why can’t your fancy-shmancy computers do that too!? Why do you force me to have separate accounts?! While the money is “in” the RESP why can’t it just be one big pool?! The government only needs to know going-in and coming-out who the beneficiary is – not while the money is in the account!

So at this point I need to weigh the value of continuing my battle with TD or moving to the same structure but with better customer support at RBC. Any third options out there?

UPDATE Jan 6, 2011: A friend who understands this finance stuff better than me has explained that pooled is the wrong term to use when referring to funds in a Family RESP. Investopedia defines pooled funds as:

Funds from many individual investors that are aggregated for the purposes of investment, as in the case of a mutual or pension fund.

The advisor at RBC that I had been dealing with also left me a voice-mail correcting his earlier statement and confirming that a Family RESP does indeed combine all the contributions so they can be invested together and I can benefit from the flexibility and simplicity. So it looks like I’ll be moving our RESP over to RBC in the end!

UPDATE Jan 10, 2011: The folks behind @TD_Canada have contacted me through Twitter (via Direct Message) so I’ll let you know if leads to anything. The core issue I’m having though is the structure of their Family Plan RESP and I’m not sure that can be resolved quick enough for me – but we’ll see!

UPDATE Jan 11, 2011: I’m talking to a few folks and re-reading my post. I don’t think I made it clear that although TD Canada Trust has an overly convoluted process to open an e-Series RESP and their customer support is un-prepared for e-Series and RESP questions the ultimate issue the way they structure a Family RESP: each child’s investments are separate. So if you contribute $500 for one child and $500 for a second child you will have to invest each $500 separately – NOT as a $1,000 single investment. Although it’s a Family RESP and you can (theoretically) transfer money between the kids this separate investment arrangement makes things complicated and reduces your flexibility as each child will need to have enough funds to make the minimum initial purchase when you want to start putting money in a new mutual fund (for example, when the kids get older and the investing horizon gets closer).

Cross-posted on 2FatDads at An open (rant) letter to Canadian banks