ILECs and small independent ISPs find something to cheer about in Cabinet decision on speed matching

Incumbent telephone companies are applauding the federal Cabinet for referring the speed matching matter back to the CRTC, saying the decision recognizes the critical importance of their network investments. Small ISPs are taking the decision in stride, saying it’s business as usual, but they are hopeful the commission will once again affirm their right to service parity. In a December 10 decision from the Governor-in-Council, the federal Cabinet ordered the CRTC to revisit the speed matching issue in the context of an ongoing proceeding (Telecom Notice of Consultation 2009-261) that is considering the “appropriateness of mandating certain wholesale, high-speed access services.” The order-in-council also directed the commission to rule on speed matching no later than September 1, 2010. The country’s two big incumbent local exchange carriers (ILECs) say the order recognizes that wholesale access to next-generation facilities has to be weighed against the impact on future network investments. “We are please Cabinet has reaffirmed belief in investment as the number one contributor to innovation,” Michael Hennessy, senior VP of regulatory and government affairs at Telus Corp., writes in an email to Network Letter. “I think the CRTC has been signaled that any unbundling has to take account of the impact on investment, opportunity to earn a commercial return and priority uses like our IPTV services.” Bell Canada tells NL that the company can proceed with its previously announced broadband network investments in wake of the decision. “It sets the stage for Bell to move forward with a $700 million investment to further deploy broadband fibre over three years,” Bell says in an email. “Reconsidering these onerous wholesale regulations was a good decision – it supports Bell’s and other telcos’ efforts to accelerate investments in next-generation broadband networks.” The order-in-council, which was quietly posted to Industry Canada’s website on Friday, says the commission must reconsider the speed matching decision and whether: the speed matching requirements unduly diminish the incentives to invest in new network infrastructure in general, and in particular, in markets of different sizes in the absence of the speed matching requirements there would be sufficient competition to protect the interests of users; the respective wholesale obligations imposed on incumbent telephone and cable companies are equitable or represent a competitive disadvantage; and the impact of these wholesale requirements unduly impairs the ability of incumbent telephone companies to offer new converged services, such as Internet Protocol television (IPTV). A public hearing in 2009-261 has been set for January 11. Small ISPs, on the other hand, believe they have another opportunity to explain to the commission and federal politicians that the first decision was the right one. The CRTC originally ruled in speed matching in December 2008 and then reaffirmed its ruling in a March 3, 2009 order. Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP) and president of the Cobourg ON-based ISP eagle.ca, acknowledges that the order-in-council was disappointing, but looks forward to further explain why speed matching is important for the independent small ISPs. “We’re hopeful that by bringing it back to the commission and into the current proceeding we’ll have another opportunity to show the commission and politicians that there are some network elements that need to be deemed as mandated essential and not phased out over time like they are going to be doing with Ethernet,” Copeland tells NL in an interview. “Even though it was disappointing I think we have another opportunity here.” While the focus of 2009-261 will be on mandating wholesale access to central office ADSL (CO-ADSL), the independent ISPs are going to use the opportunity to explain, again, that the ILECs local access networks aren’t easily duplicable, and therefore should have access at conventional Phase II plus 15% rates. “Granted Bell and Telus have made significant investments in the last few years, but they’ve had a 100-year head start. The cable companies have had a 40-year head start. And they have the rights of ways in place, based on their historic monopolies,” Copeland says. “So I think we’ll probably try to make the message clearer that these networks are not duplicable.” While CAIP and the other small independent ISPs consider their strategies in the ongoing CO-ADSL proceeding, it’s business as usual for many of them, including eagle.ca. “We’ll continue to serve the niche markets that the incumbents don’t, continue to grow those, and add our own value added services to things, services that aren’t determined wholly by speed,” says Copeland. Facilities-based competition still a priority: Goldberg December 11 was a busy day in the telecom world as Cabinet released three key decisions. In addition to the speed matching order, Cabinet denied an MTS Allstream Inc. appeal on allowing competitors access to ILECs Ethernet and ADSL infrastructure at cost-based rates and it gave Globalive Wireless the greenlight to launch. While some may see inconsistency in government policy with respect to giving Globalive the go-ahead, but refusing MTS’ request and handing speed matching back to the commission, one analyst believes the government is singing from the same song book in all three decisions. The common thread, according to telecom analyst Mark Goldberg, of Mark H. Goldberg & Associates, is that government continues to support facilities-based competition as “being the means to deliver sustainable competition in world of converged communications.” “The three decisions from Friday support a theme of fostering an environment favouring private sector investment in advanced telecommunications infrastructure,” he writes on his blog. “In its decision to send speed-matching back to the CRTC, the government said that it wants the commission to consider the impact of its decision on incentives for investment.” The speed matching issue came to the fore in 2008 when Cybersurf Corp. filed a Part VII application in June, requesting the commission order the ILECs to offer wholesale customers the same broadband speeds as they were offering their retail customers. “It requires an enormous rationalization for the commission to determine there are sufficient barriers to entry and cost constraints to create a functionally equivalent network to compete with ILEC ADSL, so as to mandate access to that network; but then to permit competition on terms the ILEC can dictate by withholding premium services to competitors, thereby essentially ensuring limited competition,” CyberSurf wrote at the time. Perry Hoffman is an Ottawa-based freelance writer. He can be reached at perry@messagingmechanics.com.

ILECs and small independent ISPs find something to cheer about in Cabinet decision on speed matching

News | December 14, 2009

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