CRTC’s denial to include Ethernet as an essential service flawed: SeaBoard

“The commission is wrong. Two decades of progress, two decades of a communications services renaissance, two decades of public benefit from a competitive communications environment are in jeopardy,” concludes a report by The SeaBoard Group. The telecom consultancy’s harsh words are in response to the CRTC’s decision (Telecom Decision 2008-118) to not to include Ethernet services as an essential service. SeaBoard warns if the decision is allowed to stand “competition in business services will wither, innovation will dry up, prices will rise, and service levels will decline.” In the essential services decision (Telecom Decision 2008-17), the CRTC determined that Ethernet services were non-essential because of evidence that competitive providers could either self-supply these facilities or get access through other third parties. MTS Allstream Inc. appealed that decision, but it was denied. It has since asked Cabinet to intervene and order a reversal of the CRTC’s subsequent decision. In an interview with Network Letter, SeaBoard’s managing director Iain Grant says the CRTC chair may have been influenced by criticisms of his predecessor, Charles Dalfen, to make more timely and “crisper” decisions. “Now the danger there of course is that, to use the American PBS example ‘All things are not considered’, and I think that’s what we got here,” he says. “We have a half-baked decision. I too think the CRTC should be more timely in its decisions but I think there was evidence there which would have led a reasonable man to a conclusion other than the conclusion that came to.” SeaBoard claims the CRTC was wrong to deny MTS Allstream’s appeal. “The reach and breadth of the incumbent (former monopoly) telephone networks cannot be duplicated by competing carriers, and the fact that a competitor might be able to cobble together a roughly equivalent communications pathway from legacy offerings isn’t material to the real advantage that native Ethernet services have over Rube-Goldberg-like ad hoc solutions,” reads the report, A Giant Step Backwards: Canada’s CRTC Moves to Re-Monopolize Communications Marketplace. Grant says that competitors can deliver Ethernet-like services through a combination of other legacy circuits, but adds this isn’t optimal. Three DS3s can get you an Ethernet-equivalent service, “but a) the price is far higher and b) the ability to make them actually work as one 100 Mpbs service is challenging and introduces a whole bunch of potential errors and flaws into the equation,” he says. “This shows…a level of ignorance which is of serious concern for a regulator which is trying to balance the interests of the various parties.” The report warns that the current regime will lead to a re-monopolization of telecom for the enterprise market. While Grant acknowledges that it will be up to the competitors themselves to determine if the business market remains viable in the current regime, their ability to compete for customers will be severely restricted as a result of a doubling or tripling of network access costs. “Their ability to obtain circuits in a timely manner will probably be frustrated and, generally speaking, the costs of access to Internet for business is going to soar because there’s nothing to balance the incumbents’ rapacity,” he adds. Grant suggests that competitors will have to scale back their activities in the business market because investing to replicate the incumbents’ networks is simply not feasible. Connecting fibre across a street to reach a customer can cost $250,000. That cost increases to $5 million if a company needs to hook up a customer that is down the block and around the corner. Larger enterprises will feel the sting of higher prices if the decision is allowed to stand, but small- and medium-sized business will be hit hard, Grant says. “Larger enterprises will certainly feel it and they will start yelling, but more importantly it’s that small-medium sized business that is going to start noticing its communications costs after decades of going down are going to start going up radically,” he tells NL. When MTS Allstream appealed the second CRTC decision to Cabinet, the company said the commission had lost its way. “At a time when public policy should support and encourage competition, innovation and productivity, the CRTC has refused to remove the roadblocks to full and fair competition in the provision of broadband services.” The federal government is now studying the matter. Comments on the appeal were due May 4, but have not yet been published on Industry Canada’s website.

CRTC’s denial to include Ethernet as an essential service flawed: SeaBoard

News | May 7, 2009

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