Usage-based pricing is when consumers pay internet service providers for a specific amount of data they agree to consume instead of a flat fee for unlimited data.
Users who go over data caps usually face extra charges or slower internet speeds, and large ISP providers are all now offering users the option to pay an extra monthly fee for higher caps or unlimited usage.
Learning that Telus will charge its biggest users up to $75 for going over monthly usage allowances, internet freedom group OpenMedia.ca posted a message online reading, "Telus: Now charging $75 for 'too much internet.'"
On mobile? Read the tweet here.
How much internet is too much?
Until now, Telus users had it comparatively easy as far as internet prices go as Telus offered one of the best deals in the country based on price-per-gigabyte of data, and data caps were not enforced.
"Western Canada has gone longer without caps," said Dan Deeth, spokesman for Waterloo-based ISP research firm Sandvine.
"In Ontario, it’s been more common for a longer period of time."
And for those consumers who already have usage-based pricing, a 2013 survey by the Public Interest Advocacy Centre showed 78 per cent of Canadians said the were satisfied with their current monthly data caps.
At the same time, 42 per cent weren’t very familiar with the concept of data caps and how it affected their monthly bill. Consumers are often unclear about what online activities consume the most data.
"I don't think people know how much data is used when they download an episode of Modern Family or download a movie," said Chris MacDonald, a business ethics professor at the Ted Rogers School of Management at Ryerson University. "People don't have a sense of how data intensive something like Google Maps is."
Telus says customers will be notified when they have reached 75 per cent of their data allowance, again when they reach 95 per cent and finally when they have exceeded their data allowance.
"Companies need to provide fairly explicit information about data usage and not bury it six levels deep on their website — just like a car company needs to be transparent about gas mileage," MacDonald said.
Paying your fair share
According to Telus, usage charges have been designed to ensure the amount a customer pays for internet service reflects the actual data consumption. "You pay for what you use," the company said.
Their announcement reads: "In the last 16 months alone our customers’ monthly internet data usage has more than doubled. Further, much of this consumption is being driven by a minority of our customers — in fact, less than five per cent of our internet customers are consuming 25 per cent of the data on our network in any given month."
But as OpenMedia.ca spokesman David Christopher says, "when it comes to home internet, it’s the speed that people pay for, not a capped amount.
"In other industrialized nations customers do not face these kinds of caps and overage fees. Customers are getting nickled and dimed," he said.
What can I do online with one gigabyte?
In Canada, most internet packages from large providers such as Bell and Rogers range from about 30 GB of data to 500 GB with the cost ranging from about $50/month to $100/month.
With one GB of data you can send/receive 105,000 emails, download more than 200 songs, download about 1½ movies or stream about one hour of Netflix.
Casual users of the internet may use only a few gigabytes a month. But usage can increase rapidly if your smartphone accesses your wireless network at home and you play things like YouTube videos or you watch last night's hockey highlights on your smartphone.
Your usage will increase exponentially if you download a lot of movies or stream through subscription services like Netflix.
Netflix offers tips on how to use less data while streaming videos by changing the video quality settings, which allow Canadian customers to use less of their monthly data allotment by lowering their picture quality.
"It’s moving backwards in many ways," said Christopher.
Netflix chief content officer Ted Sarandos famously quipped when the video streaming giant came to Canada, "it’s almost a human rights violation what they’re charging for internet access in Canada."
"The only major difference between networks that have unlimited data and usage-based pricing is you’ll see less file-sharing traffic on usage-based pricing," said Deeth. "That’s typically something that can be controlled. If I use bit torrent I know I’ll go over my cap."
Will usage-based billing change your habits?
For heavy users who will now face usage-based billing, costs will increase. For the rest, it remains to be seen.
According to Deeth, the amount of streaming that takes place during peak hours, between 7 p.m and 11 p.m., is about the same for everyone, with or without unlimited internet data.
However, there are concerns that everyone will be using far more bandwidth as the way we use the internet evolves.
If most of the television programs or movies that Canadians watch are seen online, rather than on traditional TV, consumers could quickly surpass a cap of 100 GB a month.
Telus provides an upgrade to unlimited data for a surcharge of $30/month, and for managing your data the company recommends password protection for Wi-Fi, installing anti-virus software and turning off streaming music and video when it’s not in use, so you are not charged for what you are not watching.