Incumbent telcos argue for no obligation to serve on broadband

The Public Interest Advocacy Centre (PIAC) is challenging the incumbent Internet service providers (ISPs) that say, in the CRTC’s obligation to serve proceeding on Internet access, market forces are enough to provide universal Internet access across Canada. “They’re not going to drive DSL or some other form of Internet out to high cost areas without being really pushed ,” John Lawford, counsel with PIAC, said in an interview. Whether the CRTC should implement “obligation to serve” rules on broadband Internet providers is at the top of the commission’s proceeding to review access to basic telecommunications services. Public hearings will start in Timmins, Ont., on Oct. 26. PIAC says it wants to see the obligation to serve, now applied to all Canadians for basic phone service, expanded to broadband access. That obligation to serve is now imposed only on phone services provided by incumbent wireline companies in high-cost serving areas. The vast majority of customers live in competitive markets where local home phone services are now available. In the proceeding on the obligation to serve, incumbent phone companies Telus Corp. and Bell Canada argue that the level of competition that exists for wireline phone services also exists for broadband Internet, eliminating the need for regulations to force them to provide wireline broadband in high-cost serving areas. Bell and Telus argue that they should not be forced to roll out broadband in high-cost serving areas. But if they are, subsidies could be put in place through price adjustments, direct government funding, or other mechanisms. Price caps have been used previously to subsidize the roll out of phone services in non-competitive markets. Before phone services were competitive in most markets, the CRTC established subsidies by regulating wireline telephone rates and ensuring that telephone service providers could recover costs involved in operating in more expensive areas. “In most markets for most services, there is no longer any need for the basic service objective or the obligation to serve,” Telus said in its submission to the CRTC for the proceeding. “Competition has rendered these measures obsolete.” Bell Canada said in its submission that government programs, like Industry Canada’s Broadband Canada program, can fill the connectivity gap between rural and urban Canadians. “Given the extensive amount of broadband facilities in Canada and the extent of government-sponsored programs, the Commission should maintain its overall objective of reducing subsidies and not expand the obligation to serve to include high-speed Internet access,” Bell’s submission said. “If it is determined that broadband availability is a desirable national policy, then general federal government tax revenues should be used to fund efficient, targeted subsidy programs.” But Lawford argued that phone companies have a legal obligation to provide broadband services, even in a competitive environment. “I don’t know how they expect to magically roll out there if they say, ‘You can’t force us to, and it’s kind of expensive,’” Lawford said. Mark Goldberg, head of telecom consultancy Mark H. Goldberg & Associates Inc., told The Wire Report that implementing an obligation to serve rule for broadband Internet is complicated when the market is not dominated by a monopoly telecom provider. “It’s fine to say that it’s a matter of social policy that we want Canadians to have access to broadband, but how exactly does that mechanism work when you don’t have a monopoly service provider who gets all of their costs covered?” Goldberg said. Goldberg added that a subsidy mechanism for an obligation to serve regime could distort the market by giving one Internet service provider more funds than another. Unlike the phone market, ISPs are also cable companies like Rogers Communications Inc., Shaw Communications Inc. and Videotron Ltd. Goldberg said subsidies for cable companies’ broadband services could have the unintended consequence of creating new monopolies in some markets. “We would be far better off focusing on how we increase broadband adoption with people who already have access than to have this single-minded focus on broadband access when there really are options already available for everybody,” Goldberg said. Telus said alternative technologies, such as wireless broadband through HSPA+ networks and satellite Internet services, will help Canada reach 100 per cent broadband Internet access nationally. “While wireless for broadband (HSPA/LTE) tends to be most effective in smaller clusters, broadband via satellite will soon make a significant step forward with the launch of new satellites capable of delivering speeds up to 10 Mbps,” Telus said in its submission. “That means not only does satellite broadband have enough capacity and speed to serve 100 per cent of unserved/underserved demand, it also has enough capacity to support basic phone service using VoIP .” But wireless and satellite broadband tend to come with lower and more expensive monthly data thresholds. Barrett Xplore Inc.’s basic home satellite broadband service in the Ottawa area costs $60 per month for speeds of 1 Mbps download and 128 Kbps upload. Rogers offers a wireless broadband plan on its HSPA+ network that costs $60 for a monthly 5GB download cap. A CRTC decision last week, on how incumbent phone companies should spend their deferral account funds, said that wireless Internet is not yet a viable substitute for traditional wireline broadband access. The commission denied an application by Bell Canada to use about $463 million of its deferral account funds to expand its HSPA+ network in 112 rural communities in Ontario and Quebec. Instead, the commission directed Bell to use $303.3 million to provide DSL Internet to those communities. The CRTC-approved plan for Bell to provide DSL service to 61,000 households amounts to a subsidy of about $5,000 per household. In contrast, Industry Canada’s Broadband Canada program to connect rural Canadians costs $76.7 million for 161,000 households, or about $454 per household. Industry Canada has handed out contracts through a competitive process to smaller Internet service providers like Barrett, a company that uses satellite broadband Internet for regions that would otherwise be difficult to serve. Ahead of the hearing on access to basic services, the CRTC opened a public consultation to receive comments from the public. Some submitters to the public consultation said the CRTC has to ensure that there is an obligation to serve all Canadians with broadband Internet access. “It seems to us that basic telephone services today should include access to internet connectivity without the dialup method,” Sharon Martin wrote in a submission to the public consultation website. “I would respectfully request that the CRTC intervene to make Canada a country where all of it's citizens have equal access to the internet technology that is available at reasonable rates.” jmigneault@thewirereport.ca

Incumbent telcos argue for no obligation to serve on broadband

News | September 7, 2010

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