Barrett appeals to Cabinet CRTC ruling on deferral accounts

Barrett Xplore Inc. (BXI) wants the federal Cabinet to stay parts of the CRTC’s controversial decision to allow incumbent telephone companies to use deferral account money to roll out high-speed networks. The Woodstock NB-based company says the commission’s determination to allow ILECs to use the funds to extend broadband into rural and remote regions will do more harm than good. The February 16 ruling says that incumbent telcos have to use 95% of their deferral account money to extend broadband into regions previously unserved, and the telcos are to file their detailed plans by June 30 (NL, April 27/06). The remaining 5% is to be used for improving accessibility of telecommunications services for the disabled. If there is money left over, the ILECs are to implement price reductions for their local telephone service. In its appeal to the Governor-in-Council, filed on May 18, Barrett Xplore says allocating the $620 million in deferral account money only to the incumbent telcos will distort a growing market. The company argues that giving the money back to the ILECs is essentially subsidizing their broadband expansion efforts when in fact they don’t "require artificial financial incentives." Ed Barrett, founder and chair of the board of Barrett Xplore, says, "This decision would seriously damage the many Internet service providers, including Barrett Xplore, now investing heavily in rural broadband across Canada." The company writes in the appeal that "by effectively granting the ILECs a $620 million subsidy to serve the same market, the CRTC has threatened the viability of BXI’s business plan, and forced BXI and many other independent telecommunications providers to face subsidized competition." To illustrate the commitment that it has made to serving Canada’s rural and remote population, Barrett Xplore, which launched commercial operations last July, now serves 125 rural communities. The company plans to add 200 more communities in each of the next three years. By the end of 2008, BXI says its service will be available to two million households. The company notes in the appeal that it will have invested $40 million in private capital in its broadband initiatives. As well, Barrett Xplore has inked an equipment supply agreement with Motorola Inc. and a service purchase commitment with Telesat Canada both totaling more than $240 million over the next 15 years. Allowing ILECs to use the deferral account money for this type of initiative will cool potential investors on upstart providers. However, the efforts of rural communications service providers seemed to have been lost on the commission when it made its decision, according to Barrett Xplore. "The CRTC appears to have assumed in its decision that competitive suppliers are unwilling or unable to serve the markets in question and that the ILECs represent the only alternative for broadband services in these regions," reads its appeal. The company suggests that the commission underestimated the impact that newer technologies such as fixed wireless and broadband satellite are having on this market. With more than two years having passed since Bell Canada filed an application requesting the use of its deferral account to extend its broadband network (NL, Dec. 8/03), new technologies have changed "the face of the telecommunications market and enabled competitive broadband service providers to provide rural broadband services profitably," BXI. Not only did the company take issue with the overall subsidy issue, but it also notes in its appeal that the decision to include both backbone and access facilities was a mistake. The New Brunswick firm says that the CRTC should have looked to the Alberta SuperNet project as a model. "That experience demonstrates that if an independently managed backbone network is constructed, literally dozens of companies will augment that network with their own wireless access networks," reads the company’s appeal to Cabinet. Barrett Xplore argues that the commission erred in its decision by not adopting a competitively neutral subsidy regime that would have seen companies bid for the right to build backbone facilities in a particular region. The CRTC determined that such a program would be difficult to administer and "would add a significant layer of complexity, delay the implementation of broadband expansion, and result in substantial administrative and regulatory burden." The company discounts this assumption, noting that the benefits of a competitive-neutral bidding system would have more than offset the complexity of such a system. "What might be lost to the CRTC, in terms of the time and effort required to establish a competitive bidding process, would be offset by: a more sustainable model for rural broadband without the need for ongoing subsidy, and a model which brings much needed choice and competition to broadband, and to Internet applications such as voice and entertainment in rural areas; the greater speed of execution offered by nimble, entrepreneurial independent service providers; and the benefits of Ka-band satellite broadband service which is ‘ready now’, providing ubiquitous coverage of the Canadian population," concludes Barrett Xplore.

Barrett appeals to Cabinet CRTC ruling on deferral accounts

News | May 25, 2006

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