Wholesale high-speed access debate intensifies as incumbents criticized for monopoly business models

GATINEAU, Que.—Divisions between Canada’s incumbent cable and telecom companies and small, third-party Internet service providers (ISPs) intensified at the CRTC Thursday as commissioner Timothy Denton said the incumbents aim to “crush the weak, feed the strong.” “Cable is, at least in this decade, and maybe in the next, triumphant,” Denton said. “Investments need to be made in order to stay abreast, and in particular, the proposition that is emanating from both the telco and the cable is, ‘Let’s just kick the hell out of the small competitors because they’re a nuisance.’” Denton was responding to comments from Ken Engelhart, senior vice-president of regulatory affairs with Rogers Communications Inc., and Jean Brazeau, senior vice-president of regulatory affairs with Shaw Communications Inc., who previously said wholesale access to their networks should not be mandated by the CRTC because facilities-based competitors—the large companies that own the infrastructure—provide enough competition in the marketplace. “At least the two of you are agreed on one thing,” Denton said. “Crush the weak, feed the strong. That’s nature’s way, don’t tell me it’s wrong.” Denton made the comments during the CRTC’s hearings this week to consider whether it should mandate wholesale access to high-speed Internet in Canada. Brazeau said Thursday that the cable companies function in a facilities-based industry and that control over one’s own facilities is necessary to compete. “This is really a facilities-based industry,” he said. “In order to promote real competition in this industry, you need facilities-based carriers. You may not like it but that’s the market we are operating in.” Parties were given the chance to provide oral rebuttals at the commission Thursday, where many of the third-party ISPs said the incumbents are drumming up excuses to block wholesale access to their high-speed networks. Canada’s largest cable companies have said there are technical impediments--limited spectrum in the cable network--that prevent them from allowing access to their networks. The smaller providers have asked for 6 MHz channels on the networks. Melvin Cohen, president of Distributel Communications Ltd., a third party ISP, said the cable companies could harvest the spectrum that will be freed up as Canada makes the move from analogue to digital television signals by the CRTC’s Aug. 31, 2011 transition deadline. “There is no capacity issue,” Cohen said. “As we mentioned briefly yesterday, the cable companies have a wealth of capacity available to them, if they choose to operate in a rational and efficient manner, harvesting their analogue channels once the digital transition comes into effect.” Cohen said the cable companies have anywhere from 49 to 74 analogue 6 MHz channels that could increase the spectrum available for digital capacity. “Consequently, the commission could require the cable companies to dedicate a dozen or more 6 MHz channels to competitors without fear of compromising the cable companies’ digital television business,” Cohen said. But the cable companies said freeing up those channels would be a huge and expensive undertaking. Engelhart said the cable companies won’t be affected by the digital transition because only over-the-air analogue signals will be phased out. “Every single television in very single home that doesn’t have a digital box would need a digital box to be able to receive that channel ,” Engelhart said. He added that providing a digital box to every Canadian citizen who doesn’t have one already would cost $1 billion. Dennis Béland, director of regulatory affairs and telecommunications at Quebecor Media Inc., went further in the criticism of Cohen’s suggestion. “What’s being proposed is, in effect, a massive, wide-scale, customer disruption to purchase, and distribute, and install these digital conversion boxes in order to permit the launch of a highly speculative, unproven, deployed-nowhere-in-the-world, experimental effort to unbundle 6 MHz cable network channels,” Béland said. Smaller ISPs also criticized Bell Canada’s suggestion to grant third party access to “sub-loops” that connect to the company’s network. A sub-loop represents the final kilometre of copper connecting to the central office, where the telecommunications company’s fibre facilities are located. But the third-party wholesale buyers have asked for direct access to the central office, where they have direct control over the kind service they can offer their customers and match Bell’s Internet speeds. Third-party providers say Bell’s sub-loop proposal would require them to build out remote access to each loop, and with limited resources. Chris Peirce, chief regulatory officer with MTS Allstream Inc., said that in Manitoba a competitor would have to build out 1,000 locations or more to access every sub-loop in the province. Bill Sandiford, president of Telnet Communications, a third-party ISP and member of the Canadian Association of Internet Providers (CAIP), said his company would need to negotiate with each relevant municipality for access to public land. He added that obtaining a permit for access to Bell’s support structures has never been guaranteed in the past. “Whereas Bell, as a result of its monopoly legacy, is merely constructing over existing pathways. Independent TSPs would be starting from scratch,” Sandiford said. Mirko Bibic, senior vice-president of regulatory and government affairs with Bell, said the sub-loop plan would present risks to the smaller providers—but also great rewards. “The technical impediments do remain with our sub-loop proposal,” Bibic said. “The difference is that the competitor will have built their network to the node, they will have built their fibre, they will have taken the risk. Having taken the risk, they’ve won the home. He who takes the risk wins the spoils.” Bibic added that the competitors’ cost structure could be successful without requiring risk capital upfront. “If they get a customer, they pay us. If they don’t get a customer, they don’t pay us,” Bibic said. The hearings are expected to conclude Friday with a final round of rebuttals. jmigneault@thewirereport.ca

Wholesale high-speed access debate intensifies as incumbents criticized for monopoly business models

News | June 4, 2010

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