First Look at Comcast's Neutral Throttling Scheme

Last week Comcast submitted to the FCC their detailed proposal for congestion throttling of broadband subscribers, one that does not discriminate on content. When I read reports about it I was very curious about it so I read through the document to see the details, or at least the details that they disclosed. While this is a US regulatory process it could very well impact Canadian ISPs, especially in light of throttling of P2P and other applications by Rogers, Bell Canada (both Sympatico and unrelated ISPs) and others.

The questions I had for myself were, how it works, will it meet its objectives, and who is impacted and how? My hypothesis on a first skim of the document was that it would not do quite what they claim. Then I read it more carefully, and now I more sure of it. It isn't that it's a bad plan, just deficient in certain and important ways. Let me take you through my thinking on this, and my conclusions.

For purposes of argument I will construct a simple cable broadband scenario with lots of easy to manipulate numbers. It doesn't fully correlate to reality or Comcast's figures though it should prove sufficient for a quick analysis. You'll see that it's easy enough to alter the numbers for a real case study while using the same methodology. Here are the attributes of the scenario I am constructing:

• 200 Mbps downstream capacity serving 275 subscribers (275 is Comcast's average number). Comcast's scheme targets both upstream and downstream data, and although I am only describing downstream, upstream is similar. Also note that the cable access is shared, unlike DSL. However it does correlate well with the shared link between the DSLAM and IP core, so in that way my analysis could also apply to DSL. In other words, Bell Canada could, if the CRTC nails them, implement this scheme (with suitable interfaces).
• Each subscriber's downstream capacity is 8 Mbps, as determined by modem, policies and DOCSIS level.
• From the above, bandwidth is overbooked at over 10:1. This is perfectly reasonable and good engineering practice as we'll see.
• At 'busy hour' there are 200 active subscribers (~75%), with an average long-term (15-minute window) utilization of 0.85 Mbps (my invention, but is probably not an unreasonable choice). The pseudo-normal curve of subscribers counts will show a peak near 0.85 Mbps, with a declining number of subscribers at lower (toward 0 bps) and higher (toward 8 Mbps) speeds.

Here we have a long-term utilization of 85% (200x0.85 = 170 Mbps out of 200 Mbps), which Comcast correctly notes is within the range where congestion can appear often enough to impact subscribers. When congestion does occur it will impact all subscribers regardless of their individual traffic profiles since every packet has an equal probability of being delayed (buffered) or lost (protocol or application timer expiry, or buffer overflow); all subscribers start with the same 'best effort' service level.

As an aside, at windows shorter than 15 minutes the probability of congestion (>80% utilization) increases. This phenomenon is a consequence of the statistical nature of communications by multiple independent transmitters. Therefore at very short windows, say 1 second, congestion is common but is usually invisible except as some (variable) latency as packets are buffered until the link is free. As congestion increases, so does packet loss (and retries).

Now let's say there is one subscriber downloading at maximum rate (8 Mbps) in the measured 15-minute window. Comcast will throttle that one subscriber to, perhaps, 1 Mbps. That will drop the utilization from 170 Mbps to 163 Mbps, or 81.5% of capacity. Congestion will be reduced but not to below their objective of under 80%. If that subscriber is only using 6 Mbps, which is still above Comcast threshold of 70% of the maximum 8 Mbps, the effect is even less. However this should not be disregarded since congestion becomes severe because of a 'knee in the curve' that is typical in packet networks. That is, if the knee is near 80% of capacity, the impact of a 1% from 84% to 85% can be much greater than a similar 1% from 80% to 81%. Therefore in the instance of one heavy usage subscriber being throttled, the improvement for the other 199 subscribers can be significant.

To get below 80% they will need to throttle 2 such heavy usage subscribers, which is 0.73% of the total of 275 subscribers (both active and inactive during the period). By Comcast's own figures, in the Colorado throttling trial, about 0.36% of the over 6,000 subscribers were throttled at one time or other. However these were not even concurrent and they did not say how many subscribers were at most concurrently throttled. This implies that my choice of 2 concurrently throttled high usage subscribers would be uncommon.

Let's now look at the case where there is no subscriber using more than 80% of their 8 Mbps capacity in the 15-minute window. We are still at 85% of the 200 Mbps capacity yet there is no one to throttle according to their policy. In other words we have 200 fairly average subscribers, or we may have one or more heavy usage subscribers who game the policy by deliberately throttling their traffic to below 5.6 Mbps (70% of 8 Mbps) during busy hours. Comcast can then only respond by changing the policy or reducing the number of subscribers per shared access to a number less than 275, or I suppose they could ignore the problem and allow the congestion to affect all 200 subscribers.

I don't have the numbers at hand, though it is known that the average user's traffic rate and traffic total are increasing, due in part to richer web content and the popularity of video sites (Hulu, YouTube, etc.). So even if a connection is now at 70% utilization at busy hour they need only wait a few months until they reach 80%. They will still need to upgrade the network, at some cost, regardless of high usage subscribers such as BitTorrent users.

My conclusion is that their throttling scheme, while it is application agnostic, does not solve any problem. All they are doing is delaying for a short period the need for network upgrades. Otherwise their only alternative is to use the technology to put in place increasingly severe policies, which over time will decrease their delivered bandwidth to subscribers to much lower levels, even (horrors!) to below that of their DSL competitors.

Update: 22 out of 6,016 users is 0.36%, not 3% as I originally stated. Now corrected.
Update (Oct 1): Yikes! Another error. 8 Mbps - 1 Mbps = 7 Mbps, not 5! Fixed throughout subsequent calculations. Conclusions remain valid.

Cogent and Network Competition

With all the noise recently about about telecom providers charging high rates for low-bandwidth services like SMS, Bell Canada rumoured to charge for mapping (while impairing competitors), and mobile providers blocking or impairing VoIP (via their control of user appliances), it was refreshing to read this Forbes article about Cogent and its CEO, Dave Schaeffer.

While I have nothing to say about his aggressive, though legitimate, business tactics, the network logic is compelling despite being an old story: keep the network stupid and cheap, and watch telecom innovation and usage explode upward. As Cogent is showing, competition in the backbone (transport between carriers and between the core and the access networks) is vibrant, fierce and dirty, and fairly healthy.

Contrast this with the edge. That's where there is still a monopoly, or oligopoly at best, and so service providers try to squeeze every penny they can from customers. While I don't blame them for doing so, after all it's their job to make money for shareholders, it smells of desperation. They seem to be rushing headlong, often clumsily, to find new things to charge for and to fight every competitive option by leveraging their privileged position as network "gatekeeper". I believe the tide has turned against them and these efforts to stem the tide will, in retrospect, be seen as futile.

I don't claim this position as an ideological rant, but rather as a reasonably informed and (mostly) disinterested observer. Consumers, including businesses, are becoming far too aware of how they are paying more than they ought and this in turn creates a market for new competitors. The access network oligopoly is ever-so slowly being wedged open and as it does so it becomes too difficult for the incumbents to push the door closed; the opening will only grow wider.

Those who want this to happen can all help bring it about in their choices as telecommunications consumers. Choose providers and equipment vendors that are increasing competitive options. This makes them stronger and thus able to make further investments. There can be a cost of inconvenience since, as we see, the incumbents will fight back by trying to impair the services or business of the upstarts, whether through technological or political means.

Ultimately there will be broad economic benefits as telecommunications get cheaper and both technology and content providers have easier access to the market. The biggest cost will be that the incumbents will lose their dominant, or perhaps just their privileged, position. That's an acceptable cost to all but their shareholders.

EU Splitting Telcos: Network & Retail

I was surprised when I read this article saying that the EU is going to split incumbent telcos' businesses into separate network (wholesale) and retail units. I know the Europeans are more interventionist than here in Canada or in the US, however I believe this is going too far.

In comparison, the US opted for non-structural separation (accounting and marketing) between wholesale and retail units in the 1996 Telecom Act, along with a sunset clause that has now fully kicked in. Even with a Democrat in the White House the government did not go so far as to force a permanent severance between the incumbents' business units; it is too interventionist and anti-free market for American tastes. There were consequences of this choice, which I discussed back in July (under "The Worst Job There Is"), but that's what they wanted.

In Canada the situation is similar to the US though the CRTC made the conditions for wholesaling less favourable to the new entrants, except for DSL wholesale which is better for ISPs in Canada than in the US.

My gut reaction to the EU action is that it goes too far. The above-referenced CBC article makes the tired claim that the networks were largely funded (indirectly) by taxpayers through regulations that pretty much guaranteed profits to the telcos. The argument is valid except when overused; expecting eternal gratitude from the telcos, at a severe cost to their business, is not reasonable. Besides, the population did derive secondary benefits for their investments, such as portfolio appreciation (investments directly or via government ownership) and lots of spin off economic activity.

Regulation has its place and I have argued in favour of it in other circumstances. In this instance you cannot regulate yourself into a healthy and vibrant telecommunications sector. What is needed is more competition, not more parasitic business on another, large and regulated one. That's what this model promotes. It depends on the belief that the existing access networks are a natural monopoly, so that this sort of telco wholesale-retail separation is necessary.

The assumption is that the access network natural monopoly is perpetual. Therefore, because the expense required for a new company to build a similar network is so high, it hobbles their ability to offer competitive pricing. Another less well understood cost is one on society since these companies need to tear up streets, string cables, raise towers and otherwise mar the cityscape with their networks. To an ordinary citizen these networks may seem redundant and therefore unnecessary.

The questions to ask before enacting this severe form of EU regulation is: will regulation stifle the impetus of both incumbents and their competitors to create new networks that, in future, will break the natural monopoly? New wireless technologies are already pressing the boundaries, getting ever closer to being fully competitive with wired networks, whether they be twisted pair, coax or fibre. If the incumbent's core network business effectively becomes a utility (including rate-of-return guarantees) they will have no incentive to take on the risk of deploying new technologies, including fibre. The new entrants will always find it cheaper to leech off that incumbent's network rather than build their own. The bigger risk is that society's future economic growth will be limited just to get what may only be a short term benefit.

I lean towards more open competition combined with rules to ease experimentation and exploitation of new technologies. I believe this will deliver the biggest benefits to the economy and society at large. I am against regulations that have the effect of locking down current business models and technologies, and that consequently discourage innovation.

Monty Python-esque All-Candidates Debate

Here they go again. This week there was a "debate" among local candidates here in Ottawa West-Nepean that was nothing more than a contest between Conservative (Baird) and Liberal (Pratt) candidates to see who can behave the worst. Sounds like they both won.

Their clumsy tactics remind me of an old Monty Python skit. This is the one where a "Mr. Hilter" is running for a council seat (UK version of a municipal election) as the first step to world domination. Hilter, played by John Cleese as I recall, bears an uncanny resemblance to you-know-who, and who, perhaps, did not die after all. In one of his clumsy campaign tactics he gives (shouts) a street-corner speech to a bemused crowd of several passers-by. Circulating through the "crowd" is Graham Chapman dressed as a common citizen but bearing a striking resemblance to a certain former chief of propaganda. As Hilter makes a nonsensical campaign promise Chapman whispers to one of the listeners, "he's right you know."

Unfortunately that's far too similar to what happened at the all-candidates debate. At least those two contendors filled the audience with party shills who would applaud or cheer whatever their candidate said and try to shout down the other candidate. I wonder how many regular citizens were among the 300 in attendance.

Do they honestly believe this crap furthers their causes? All I've heard in response to this event is disgust or disinterest. I suspect only partisans were satisfied with the evening.

These antics make Baird and Pratt look like buffoons. Perhaps that's what they are.

Venture Capital Exits

There is a dearth of venture capital (VC) in Ottawa. [... pause ...] Alright, everybody knows that. Despite this truism there is a lot of money out there. That is, the wealth is there but not the investment activity. Why not?

The other fact everyone knows is that the general investment climate at this time is one of fear. Investing, which includes VC, is a pendulum that swings aperiodically between greed and fear. We are in a prolonged period of fear. It is a fear of calamitous losses resulting from any investment, and especially illiquid investments like those in technology start-ups.

I wish the environment were better since the technology sector in Ottawa is moribund with no obvious signs of improvement in the foreseeable future. Money is the fuel that will light that fire, but it is staying put under investors' mattresses. What I want to talk about in this post is why that money is not seeing the light of day. I think it is better to understand what's driving this behaviour rather than reading more articles about how awful things are, or about the new models of investing that are nothing more than ways for investors to reign in their risk.

Investing of any sort, which naturally includes VC, is all about making money. Forget the mushy words about how investors' purported enthusiasm for telecom (or Web 3.0, mobile, clean tech, etc, etc). While often true it is irrelevant. Pleasant feelings may drive their interest in playing the VC game, and this includes angels, it remains (always always always) about the money. If they don't see the prospects of a substantial return the money stays under the mattress.

Now we can look at how they determine the prospects for a beneficial financial outcome. For the moment let's gloss over their due diligence of prospective start-ups; we'll assume the company is good to go so that is not at issue. We will also assume the VC has a portfolio of companies so the usual start-up attrition rate is taken into account.

The way I would then summarize the thinking of a VC is as follows:

The valuation at exit 'x' must exceed the valuation at investment by some factor 'y', and the exit must happen within 'z' years.

Take these numbers and the start-up attrition rate, do some rudimentary actuarial calculations and you get an expected rate of return. Simple, isn't it? Except of course for knowing the values of x, y and z. And there's the rub.

If you don't know the exit parameters it is not possible to come up with an acceptable post-money valuation. Forget all those fancy algorithms and charts that depend on rigourous scientific and market analysis to come up with a number. It's almost entirely a wasted effort. Of course it sounds good to the company making the pitch ("our company will be worth $500 million in 3 years based on our business plan and industry valuation metrics..."). Now go sit on the other side of the table. That isn't the sort of talk that pries money out of their hands, and especially not for angels who you are asking to part with their own money rather than money from a fund being managed for their limited partners.

What will instead impress them is industry comparables (or simply, comps). These are ongoing exits of other companies that are operating in the same space as the prospective start-up. Those companies don't have to be identical to yours, just close enough to make the comparison meaningful. Let's say your start-up makes widgets. You have competitors who also make widgets (except that your widgets are superior). Several of them were acquired or did an IPO in the past 6 months and their valuations at exit ranged between $300 and $450 million. You make better widgets, you have delivered prototypes to customers and they even like your prototypes better than the other guys' widgets (guys who just got bought out for $375 million).

Now you have the investor's complete attention. Their next question should be something like, "if you get the money you're looking for how many widgets can you produce by next Christmas?" Give a good answer and they'll offer you twice the amount you want. They see the exit possibilities and want to strike quickly while the iron is hot; widgets could fall out of favour next year. So you negotiate and end up doing the deal and go on to fame and fortune.

Except that back here in the real world there are no IPOs or acquisitions of companies making widgets. In fact, while the market for widgets is healthy it really isn't growing much if at all. So no comps. No comps, so no exit prospects or any way to judge exit valuation. The money stays under the mattress and customers make do with today's batch of widgets.

Perhaps a very aggressive investor will offer some money for a disproportionate fraction of the company (i.e. low post-money valuation) to allow you to make a superior but far less featured widget by the Christmas after next, in the hope that the environment will eventually improve and offer an exit. Sure the exit valuation may be depressed, but since the post-money valuation is kept very low there is still a prospect for an outsized return, and if you flame out, well, at least the investment wasn't large.

So that's how to know the investment environment in Ottawa is improving - when the pace of technology exits picks up, if it picks up again. If you cannot wait you should do what others are doing, which is to build their businesses with little or no investment capital. It is especially doable for software products and services. Or, you can follow the money to a sector that does have better exit possibilities, like clean tech.

There are strategies for entrepreneurs to follow that don't involve waiting for the world to change. Patience is not a virtue since the wait could be very long.

Unintended Consequences of Attack Ads

I don't plan on more than a few posts about the election, and even that will be non-partisan in nature since I am vehemently non-partisan; I tend to despise all the parties, and party-centred politics, to a greater or lesser degree. With that in mind I would say that the barrage of attack ads against Dion by the Conservative party can have consequences they do not intend. Let me explain by showing how I interpret these attacks.

I almost always discount any attack ad because it is so expected in any competition. We all know that Coke hates Pepsi and that Pepsi hates Coke; of course I expect that Liberals and Conservatives hate or at least dislike each other. So what? That's expected, and irrelevant to me and my vote. Instead, when I hear a non-stop series of attack ads this is what I think:

• Every attack ad is a lost opportunity to tell me what the Conservatives stand for and what they will do in the next Parliament. They are doing this to deflect attention from an agenda I might otherwise dislike, or because they have nothing concrete to offer. That is, they are declining to promote their own agenda.
  
  
• The relentless attacks on Dion lead me to believe the Conservatives are afraid of him because there may be more substance to him than I realized. Since the Conservatives are so worried about him I need to pay closer attention to what he is saying. If the Conservatives really thought he wasn't a threat, their campaign would ignore him.

With those lessons learned at Conservatives' cost of their attacks on Dion I am now more likely to seriously consider the Liberals. It's still a dilemma for me since I have ample reason to turn my nose up at the prospect of voting for either. I may say more about this in a future post.

Whither Nortel?

As a former employee of Nortel back in the '90s I am saddened by their present dilemma. Saddened, yes, but not surprised. This slide in Nortel's fortunes reflects what, in my view, is a long-standing and never corrected problem in the fundamentals of their business. They still don't seem to know what they want to be when they grow up. That is, just what business are they in?

Let me give an abbreviated review of Nortel's history to put this in some context. At each major phase, as I will define it, I will try to summarize their business focus, with the understanding that I have to simplify, though hopefully not over-simplify.

1. Pre-1996: Engineering-driven, hardware-based product business, selling primarily to telephone companies and secondarily to enterprises. The only significant service business was post-sales product support; telcos had their own large internal organizations to develop systems and processes to use the products. Major competitors in the carrier space were AT&T (now Lucent), Siemens, GTE, Ericsson, Alcatel, and some 2nd-tier vendors like Tekelec. It was difficult for smaller vendors to sell into the carriers.
   
   
2. 1996 to 2001: There are two new strategies that overlap, but with different start times. With the opening of the telecom market in the US in 1996, and elsewhere shortly thereafter, there were a large number of start-ups in the carrier space. These included the large optical players like Qwest and Level 3, hundreds of CLECs, a smaller number of wireless players (by means of the then novel spectrum auctions), and cable companies (MSOs) that turned their attention to telephony. Nortel approached these companies the same way as before - sell them products to build telephone networks. Since many of these companies were neophytes, or at least new to the segments they were entering, Nortel and other vendors needed to offer more. Apart from the disastrous vendor financing, Nortel developed a services organization to help these companies build their business plans and network plans, and even to help operate their networks. Apart from network operations, the planning work was given away; these services became part of the cost of sales.
   
   The second strategy that began in 1998 was to begin its transformation into an IP company (Roth's "right angle turn"), since they correctly ascertained that IP was the future of networks, and Cisco was increasingly a competitor. Not having time to transform the company's products overnight, Nortel began its strategy of acquiring IP companies, starting with Bay Networks. The bidding war among Nortel and the other major vendors was intense and the number of companies bought was enormous. They could afford this with their 'dot com' inflated stock valuation.
   
   By 2001 when their stock tanked (along with everyone else's) Nortel had failed on both strategies. The first being to build a services business as a complement to their products business, and the second to become a leader in the IP products business, including telephony, IP infrastructure and applications. The reasons they failed are many, but are not the subject of this article. Suffice to say that 2001 was the start of a very difficult time at Nortel. Most of the services business was dismantled and purchased product companies were shuttered. The remaining product lines saw their revenues plunge as many of their customers disappeared, along with the money Nortel lent them to finance their purchases, and their former large customers merged and cut capital expenditures. Not only that, without a sustainable IP presence, Cisco and many newer companies were making large inroads into Nortel's traditional customer base and were setting the technology agenda for network evolution. And so the cutbacks began, as did Nortel's gradual slide into irrelevance.
   
   
3. 2002 to 2008: As the company contracted they were able to bring costs more in line with revenues (even with the accounting scandals of this period), and so were able to keep the lights on. After all, Nortel still had top-notch products and engineering even if it all looked more and more like a patchwork quilt in comparison to what their customers were looking for. Revenue was also impacted by the transformation from a hardware-based business to one that was increasingly software-based. There is a comparison that can be made to the IBM PC business in the early days where they persisted with a hardware-based business model, with the software being thrown in for pretty much nothing. We know what that led to: Microsoft's growth into a giant while IBM lost the PC business entirely. Unlike IBM, however, Nortel has not succeeded in turning services into a significant business. Their business is still product based. Even with some excellent success with IP telephony this is primarily a software business with its lower revenues in comparison to hardware.

So there we are as 2008 comes to a close. There is no clear foundation in their business - it remains a patchwork. Their attempt to refine the product portfolio by selling or killing products and business units only answers short-term financial metrics and further confuses their customers. Just what kind of company is Nortel? At the moment no one really knows, and possibly not even within the company, though we can hope. Consider this quote from a recent Globe and Mail article:

Among investors, there was increased frustration that Nortel lacks the scale and the financial flexibility to become a top player again. “They're worth more dead than alive,” said a portfolio manager of one large equity stakeholder who asked not to be named.

Nortel is playing defense, not offense. That is not a business strategy; it is one that smacks of desperation, which is the view of many analysts watching the company. The stock price cannot recover until they define themselves clearly and at least put in place a credible plan to execute. Investors have to see the potential for growth to bid up the stock. As was noted in this article in the Ottawa Citizen, technology companies are often priced on growth, and so it is common to see the market cap of high-growth companies at many times annual sales. Nortel as of Friday was trading with a P/S of about 0.13!

So what are Nortel's options? I see three main strategies they could follow, or some sensible combination of them:

• Continue as a product-based business. Unfortunately they will never regain their past dominance. They don't have the talent (or the ability to attract the best talent), the R&D budget, the speed, and investors will not give them the time needed. They can keep the products and technology that is most profitable or promising and get rid of the rest. Management is doing that now. MEN is a puzzle since it is profitable and no one in the company knows or will say why it's being sold, so it may indeed be an indication how big Nortel's problems are; many suspect they are doing this because they need the money now to shore up the company. If they continue with a incomplete mix of products they cannot be a prime vendor to the major carriers. Instead they may be relegated to supporting the bids of larger vendors with the few pieces they can supply.
  
  
• Become a network integrator. If you don't have all the products in-house and want to bid on the largest network projects you must bring in other vendors to supply the missing pieces. These outside products may indeed form the lion's share of the bids. Nortel can rebuild its credibility with the carriers by becoming effective at doing this. I know they have tried (including from personal experience), though perhaps not as successfully as others. It requires building an 'ecosystem' of products that they can guarantee will inter-operate and that also use a common management framework. They must also demonstrate the expertise to support these products. They have made some missteps in the past though if they begin to take it seriously, rather than treating outside vendors as a threat, they could excel at this strategy.
  
  
• Service business, both consulting and operations. I have my doubts that they could regain credibility in this space, especially since much of that expertise is long gone and they may not have the luxury of time to build the business. Further, the competition is much stronger now than it was a decade ago.

This article is going to end with a whimper, not a bang. I have no magical solutions to offer. At worst Nortel could be dismantled, with its valuable products and people sold piecemeal to other companies. The company is now so sick that may be all their investors will have the patience for. It will be a loss to Ottawa (and perhaps even Canada) even should those pieces survive since there will no longer be a dominant, or any, Canadian branding on those businesses.

The company has repeatedly failed in the past to reform itself into a major player with the strengths to compete in the new telecom environment. Why would this time be different? In conclusion, I am not hopeful that Nortel can survive the decade.

Reregulation

This Business Week article is interesting since it shows how the US government is getting serious about returning to increased regulation. While this is currently being driven by the woes caused in part by deregulation of financial markets some years back, the momentum to regulate crossing all sectors, including food safety.

This topic is only being addressed in isolated talking points in our election. Both recent governing parties have failings in this are. For the Conservatives it is ideological aversion to regulation. For the Liberals it is a tool to manage the deficit. In my opinion, regulation should be more apolitical. Every party should be promising improvements in safety through a strong, independent regulatory regime. That's an important way for our governments to serve us.

Unrealstic Expectations For Banks and Other Financial Institutions

I had a good laugh this morning when reading this article in the Ottawa Citizen. I think it takes a totally nonsensical view of the business world. Whence comes this expectation that the most amoral of institutions, the corporation, and one whose core purpose is the generation of returns for its investors, is somehow going to unilaterally do something other than just that? Investors expect nothing less from management of their corporations, including all the various financial institutions, or they push those teams out and replace them with management that will generate the returns they expect. I wrote about this once before, so you can see a bit of my own ideological thoughts emerging here.

No, it is not the job of corporations to reign in their quest for profits. That is the job of the society in which they operate. Our appointed agents to do this is government. On our behalf, and to protect us, government must regulate corporations so that they cannot get away with, at least not for long, activities that threaten us and our society. Banking and finance are no different in this than are food safety, pollution controls, environmental management, and all the rest. Regulation of industries that can cause damage in their relentless pursuit of profit is necessary. Laissez-faire capitalism was supposed to have gone out of style in the 19th century.

Government is to blame here, and us for allowing them to get away with dereliction of duty. There seems to be some ideologically-driven need of governments here and in the US lately that eschews regulations. It is also driven by a desire to reduce government expenditures, which is very much in vogue with Canadian federal governments, whether Liberal or Conservative.

I'll say it again - self-regulation is an oxymoron. Give a teenager a car and he (or she) will almost certainly speed. Putting up speed limit signs while the police duck into the nearest Tim Hortons is avoiding the problem. The speed limits must be actively enforced for drivers to begin altering their behaviour. Financial regulations must be enforced if our large banking corporations are to begin to avoid risky, though profitable in the short-term, behaviour.

The responsibility is ours. We must hold our governments accountable for their failure to protect us with effective regulation and regulators. Everything else being said is just so much hot air.

Update: Here is an excellent post on this topic by Barry Ritholtz I read after writing my post. The punch line is particular relevant here: "Chalk up another win for excess deregulation . . ."

Bell ExpressVu - The Shakespeare Decision

This is a potentially promising development for everyone who uses any telecom or broadcast service. It is a controversial decision, and since I am certainly not a lawyer I can't say if it is likely to be sustained on appeal.

Apart from the "administrative fees" covered in this particular case, there are more that we are all aware of. Perhaps the most ridiculous are those "system access charges" for cell phone and long distance service. These are thinly disguised basic service charges that you must pay, and are named in a way to make them appear as justified supplementary charges or even as charges required by the government. They are careful to never claim this, they just let the misleading names they give those fees lead customers into deceiving themselves.

Once upon a time Bell Canada and other telephone companies were stringently regulated on the fees they could charge for late payment of bills, service and equipment installation, unjustified service calls, and much more. A lot of it was nonsense and needed to be loosened up in our now more competitive market. The trouble is that the prices continued to rise past the point of reasonable cost recovery, and then even more fees were invented.

It doesn't end with telecom services. Think of all those shifting and unpredictable charges on air travel. Not only do they use these charges to claim that the basic fee (just like on your telecom bills) isn't changing, it's just all those pesky "extras" you are requesting. These fees are charged even when travelling on frequent flier points, making them far less valuable. Of course that is their intention.

As Shakespeare is so oft' quoted: "What's in a name? That which we call a rose by any other name would smell as sweet." Or as more popularly quoted: "a rose is a rose by any other name." That's the value of this court decision. Calling a fee by any other name does not change it's true nature. In this court decision, ExpressVu's late fee administrative charge is fundamentally an interest charge. What they call it is not important. It's still a rose.

The same legal argument may very well apply to system access charges and all the rest of their ilk. This could be a huge win for consumers when dealing with quasi-monopolistic businesses. It just requires someone in Canada, someone with the tenacity of Peter de Wolf, to take on telecom service providers and the airlines.