Don’t arm ILECs with deferral account money: CCSA

In the letter to the CRTC excerpted below, the Canadian Cable Systems Alliance Inc. (CCSA) voices concerns about use of telco deferral account money. The organization says a CRTC decision to allow incumbent telcos to use such funding to extend broadband to rural areas will harm cable operators already serving those regions. CCSA member companies rely on their ISP operations to generate new revenue streams necessary to remain viable in the face of growing competition in their core broadcasting distribution operations. Moreover, those companies recognize that their ability to deploy and offer on-demand broadcasting and IP-based voice services over their networks will be critical to their continuing economic viability… While the task has been daunting, CCSA member companies generally have responded to the challenge posed, on the broadcasting side, by their DTH competitors: most have weathered that storm so far. Those companies recognize and are equally prepared to meet the challenge of competition from unsubsidized, entrepreneurial market entrants in the broadband access market... However, as a result of Decision 2006-9, those companies now face a new challenge presented by the incumbent telcos armed with substantial subsidization from the deferral account, providing zero-cost and risk-free financing to already well-financed corporations. These funds are available exclusively to the ILECs expressly for the purpose of building broadband facilities up to the doorsteps of CCSA member companies and into the very geographic areas in which their future opportunities lie. Application of those funds will provide the incumbent telcos with a springboard to overbuild into CCSA member companies’ territories at a cost substantially less than would otherwise have been required. By granting the ILECs this exclusive subsidy to upgrade and expand their infrastructure, the entrepreneurial cable operators and their financial backers will be severely handicapped in their ability to grow, to generate a reasonable return on capital investment and, indeed, to survive. CCSA member companies are, almost without exception, privately held and have restricted access to capital even without this new challenge. CCSA member companies see Decision 2006-9 as being nothing short of a disaster for their business plans. By creating such overwhelming, subsidized competition, this decision will prevent them from taking the financial risks that they must take to modernize and grow. CCSA member companies concur, in particular, with Barrett Xplore’s submission that one critical result of Decision 2006-9, if implemented, will be the loss of "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". CCSA member companies agree, as well, with Barrett’s submission that "once backbone facilities are available at a reasonable cost, competitive market forces can deliver access." CCSA member companies see their continued success as an indispensable element in the sustenance of such competitive market forces. CCSA therefore submits that the better, more productive application of funds in the deferral accounts would be to the build-out and delivery, at reasonable and equitable prices to all market participants, of internet backbone to unserved rural and remote communities....That is the way to support healthy competition in the delivery of broadband access to Canadian consumers throughout the nation.

Don’t arm ILECs with deferral account money: CCSA

News | 07/20/2006 4:00 am EDT

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