MTS says CRTC wholesale access hearings an opportunity to open up monopoly-dominated Internet market

The stakes are high as the CRTC begins hearings on wholesale Internet access services Monday, with some framing the proceeding as an an opportunity to open up an Internet market long dominated by a monopoly of incumbent phone companies. “Too often, the conversation about broadband in Canada is just looked at through a residential lens,” Chris Peirce, chief regulatory officer with MTS Allstream Inc., told The Wire Report in an interview. “It’s a completely different situation in the business market, and a much more serious situation in terms of the presence or absence of competition.” Peirce said broadband services for small and medium-sized businesses in Canada are at a bottleneck--where the incumbent phone companies supply 80 to 90 per cent of the market. A more open wholesale framework for the enterprise Internet services market would help benefit Canada’s economy, he said. “Our small and medium-sized businesses in Canada have steadily become less and less productive when compared with their international competitors,” Peirce said. “Our productivity has been declining over time and we think that an important ingredient in that decline has been the diminishing competition in the business market to provide advanced, next generation services.” Ken Engelhart, Rogers Communications Inc.’s senior vice-president of regulatory affairs, told The Wire Report that he understands the argument for "unbundling" in the enterprise market--to encourage competition in Internet services market for small and medium sized businesses. But he said he does not see wholesale access as a necessary precursor to competition in residential Internet service markets. “I think Chris has a point, that a lot of the business market is pretty much monopoly-supplied,” Engelhart said. “Cable networks, for various historical reasons, have very poor coverage in the business sector. We’re starting, slowly, to take baby steps in delivering services out to businesses, but mostly there’s only one network that goes into business locations, and that’s the incumbent phone company.” But Engelhart said the residential market is not in need of competition. He said competition between cable and DSL networks in Canada has been sufficient without the regulated competition that a stronger, wholesale market would provide. “We have the highest broadband penetration in the G8,” Engelhart said. “We have virtually the whole country blanketed with ultra fast, cable broadband. On top of that, we now have three wireless providers providing 21 Mbps broadband fairly ubiquitously throughout the country.” “The wholesale thing, I’ve got to say, is yesterday’s news,” he said. Commission hearings on the issue of wholesale high-speed Internet access are scheduled for all of next week, with tentative hearings the following week. Michael Hennessy, senior vice-president of government and regulatory affairs with Telus Corp., echoed Engelhart’s concerns in an email to The Wire Report. “There is no need to regulate competition in the Internet market. It is one of the most competitive markets in the world, and government policy requires the regulator to rely on market forces to the maximum extent possible,” Hennessy wrote. Hennessy said regulatory interventions in the wholesale market would be negative because they would distort investment decisions and dilute the revenues that companies like Telus would otherwise use to invest in their networks. “In the case of Telus, unbundling harms our ability to compete in the television distribution market,” Hennessy wrote. “That is because the same lines we use to offer IPTV are used for broadband, and when they are unbundled for wholesalers, Telus loses the opportunity to offer TV to its customers. That means less competition and less real choice.” But other parties to the hearings argue that network unbundling would create a more competitive environment for residential Internet across Canada. “If we can unbundle the aggregated service deeper in the network, we could thereby avoid the traffic having to traverse large parts of Bell’s network,” Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP), which represents many of Canada's smaller Internet service providers, told The Wire Report. Copeland said that by accessing the regional central offices in Bell’s networks, the wholesaler purchasers can get around the company’s Internet traffic management practices, offering stronger competition and more choice for consumers. Copeland said the problem, however, is that there is no way for the wholesale Internet purchasers to bypass most of Bell’s network. They would have to build their own network. He said the CRTC’s decision following the hearings could help find ways for the wholesalers to share that cost with the incumbents. Copeland added that such a network would also benefit Bell because it would help relieve congestion on its own network and reduce the need for traffic shaping. Michael Janigan, executive director of the Public Interest Advocacy Centre (PIAC), told The Wire Report that the CRTC needs to enable the greatest amount of competition possible in the wholesale Internet market. “We are concerned that in the event of reliance on proprietary facilities, without the ability to access those facilities by competitors, it will limit the competition and end up with a result that is contrary to the objectives of the Telecommunications Act,” Janigan said. Engelhart disagreed. “They have no network and are totally dependent on unbundling,” he said. “If you’re in the network business and you have no network, it’s not a good place to be.” jmigneault@thewireport.ca

MTS says CRTC wholesale access hearings an opportunity to open up monopoly-dominated Internet market

News | May 28, 2010

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