Small ISPs happy with new speed matching decision

GATINEAU, Que.—The CRTC decided Monday to reinstate speed-matching rules for incumbent phone companies at a 10 per cent markup cost to small Internet service providers that access the higher speeds. Last year, telcos Bell Canada, Bell Aliant and Telus Corp. successfully appealed a CRTC decision to the federal cabinet when the government, on Dec. 10, 2009, ordered the CRTC to revisit the issue of speed matching. The telcos had appealed a CRTC decision issued the previous March that required them to offer wholesale Internet service to third-party competitors at speeds matching the incumbents’ retail Internet services. Cable companies like Rogers Communications Inc. and Shaw Communications Inc. have offered matching speeds to their wholesale customers since 2006. In a decision Monday, the commission said the incumbents can charge a 10 per cent markup on the fees third-party Internet service providers (ISPs) pay for higher-speed, fibre-to-the-node services under the speed matching rule. The commission said the 10 per cent markup for higher speed services is appropriate considering the investments the incumbent phone companies have made to provide fibre-to-the-node services. Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, told reporters Monday that the speed matching decision was a step back. “I personally don’t think that cabinet sent this issue back to the CRTC so that the CRTC could merely tinker with pricing,” Bibic said. “So now we’re going to have to go back and look at the impacts on our rollout plans based on the returns we anticipate we’ll generate.” Bibic said the federal cabinet has a 90-day window to evaluate the ruling—as it does with all government-ordered CRTC reviews of decisions—and encouraged it to take a hard look. “I think cabinet should take a strong look at this and should be interested given that the decision they received today is not fundamentally different from what was issued in the first place,” Bibic said. But in an interview with The Wire Report Monday, CRTC chair Konrad von Finckenstein said the decision was not the same as the CRTC’s previous ruling on speed matching. “He is completely wrong,” von Finckenstein said in his office in Gatineau. “We had a new decision based on a new record, new data. We looked at it in light of the instructions given by cabinet.” Von Finckenstein added: “Cabinet was right to send it back to us. The way it was before it was a disincentive . We fixed it by making sure it’s not a disincentive, and we also fixed it by making sure the cable companies are funding a similar product.” Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP), representing many third-party ISPs, told The Wire Report that the incumbent telcos would now have to go to the courts to challenge the commission’s speed matching decision. “They’re off to court now if they want to challenge it further,” Copeland said, adding that the decision is good for consumers. “Certainly cabinet has the ability to change any regulatory policy, but that’s the thing, they would have to change policy. To do so they would have to pretty much go back and look at the telecom policy in general and tear apart things like competition, choice and innovation.” In its decision, the commission added that the markup will raise the costs for third-party Internet providers to access incumbent telco networks, but only to a level comparable to what the cable companies charge now. The incumbent phone companies will have 90 days to propose new tariffs to the CRTC that reflect a 10 per cent markup for the higher speed services. MTS Allstream issued a release Monday that said the decision “rightly recognized” the importance of more competition. “Increased competition, particularly in the business market, will bring benefits to all Canadians," Chris Peirce, chief corporate officer at MTS, said in a release. "We are pleased with this first step and look forward to working with the CRTC and the industry to ensure that essential broadband access is available to competitors." In a dissenting opinion attached to the decision, CRTC commissioner Timothy Denton said the commission should have done more to consider the advantages of allowing the third-party providers access to the incumbent telcos’ “central offices”—the central hub that houses regional fibre facilities. Due to the high cost of building a network from scratch, smaller Internet service providers had argued that the CRTC should ensure more competition in the Internet services market with access to the incumbents’ central offices. But the commission stopped short of ordering third-party access to the incumbent telcos’ central offices. In its decision the CRTC said only two third-party competitors, Primus and TekSavvy, were interested in central office-based ADSL, and that other small Internet providers expressed uncertainty about the benefits of such a system. Von Finckenstein added that a central office-based system “would impose a considerable burden on the ILECs without a clear return .” Rocky Gaudrault, CEO of Teksavvy, told the news media Monday that the decision represented a positive step. “The competitors are allowed to survive but are denied the ability to innovate,” Gaudrault said. “It’s a good start however there seems to be a lot of work left to do.” Gaudrault said he agreed with commissioner Denton’s dissenting opinion regarding central office based ADSL. He said having access to the central office would allow companies like his to innovate and differentiate their service from the incumbents’. Denton’s dissenting opinion similarly said central office-based ADSL would have allowed small ISPs to innovate and avoid the incumbents’ traffic management, or “throttling” of data flows. During the CRTC’s hearings on wholesale access in the spring, Denton suggested that the cable and telco incumbents wanted to “crush the weak feed the strong” in their efforts to stay ahead of the competition. “ would allow an independent ISP to get behind the traffic management measures imposed by the incumbent carriers,” Denton wrote in his dissenting opinion. “The effect of doing so would be to allow substantial service innovations, so that the lessee of the wholesale service could rearrange the technical characteristics of the signal without harming the underlying network, and which would allow it to offer quality of service guarantees, different bit rates, capacities and prices.” As it stands, third-party ISPs can be subject to the same Internet traffic management practices that the incumbent ISPs apply to retail customers. jmigneault@thewirereport.ca

Small ISPs happy with new speed matching decision

News | August 30, 2010

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