Bell Canada and traffic management - It’s Comcast all over again
It’s often said that Canada copies the U.S. to an unhealthy degree, and in the case of Bell Canada, the entire Comcast/FCC mess that has managed to torpedo Sandvine’s near-term prospects is happening all over again at Bell Canada. The strange aspect out of all of this is that Bell Canada is mirroring the actions Comcast took years ago - already Comcast has vowed not to discriminate against P2P traffic and will manage the traffic flows on an aggregate basis. For Bell, if you’re going to mirror the U.S., at least keeping up with the latest trends would be helpful.
The initial problem was related to Bell starting implement more aggressive traffic management practices through deep packet inspection (DPI), whereby peer to peer file sharing is being throttled back at peak hours - which enables the carrier to provide a better quality of service for the general public by targeting heavy users of P2P. The problem? For resellers of Bell’s Internet service, they’re not starting to notice degraded service offerings as well - in essence, Bell’s competitors are now having their offerings degraded, perhaps enabling Bell to look better and to up-sell its premium service tiers. An even bigger problem was Bell’s approach, which is eerily similar to Comcast’s approach - not inform anyone that this traffic management is going to take place, and then claim that they’ve reserved the right to take “reasonable steps” to ensure that their capex investments are properly capped. This follows on Rogers’ recent introduction of overage charges for its Internet service - seemingly a concerted effort from the big carriers to start monetizing Internet to a greater extent.
The latest news is that the Canadian Association of Internet Providers (CAIP) has now filed a grievance with the CRTC against Bell, which will have 15 days to respond. It appears that the biggest takeaway from this announcement is that traffic management and DPI in particular is getting more and more attention from the public, which must be feeling that it’s getting less and less value going forward from their ISP providers. For the carriers and the technology “arms dealers” in DPI (Arbor, Sandvine, Cisco, Allot), it’s becoming a tricky and turbulent time. Will the heat continue to be ratcheted up under the feet of DPI vendors in the term? It certainly looks that way at least in the near-term, and will be an incremental negative for Sandvine (SVC-T) and Allot (ALLT) over the coming months. While it’s likely that Arbor (ex-Ellacoya) is doing the traffic management at Bell and not Sandvine, the whole DPI vendor space will suffer from these very public missteps. The DPI companies really have little influence on the way that their technologies are being deployed, much less the business processes surrounding these initiatives, and should hurt valuations in the space for some time.
