Wholesale ISPs fear Bell tariff will end competitive marketplace

A group of Internet service providers (ISPs) says Bell Canada’s proposed tariff for wholesale high-speed access services may lead to the collapse of small ISPs. “It will be very difficult for a smaller company to compete at a higher price when we are already struggling to compete at a lower price. It will hurt competition in Canada very badly,” Matt Stein, Primus Telecommunications Canada Inc.’s vice-president of network services and vice-president of communications of the Canadian Network Operators Consortium (CNOC), said in an interview. CNOC is a national collective of competitive ISPs that banded together in September to further their regulatory interests. “ was an outcome of a number of realizing that two or three times a year we were being forced into a position of going and participating with the CRTC,” Stein said. “Our messages sounded very similar and our needs are the same. We are all in favour of competition, better wholesale access tariffs and a freer Internet.” In a Dec. 21 letter to the CRTC, CNOC appealed a proposed Bell tariff that set its wholesale Internet access prices at par with its retail prices. Under the CRTC’s usage-based billing policy, telcos can set their wholesale prices lower than, or at par with their retail offerings. But CNOC said the proposed tariff will force ISPs to charge their customers more than Bell charges its customers. “The reason is that only a portion of the service is actually delivered by Bell. It is a common misconception that the wholesale access service offered by Bell is an Internet service. In fact, it is approximately half of the service,” Stein said. “It connects the user’s home to the ISP, but it doesn’t connect the user to the Internet. By charging the wholesaler the same as retail, it gives Bell the flexibility to recoup more than their fair share of the process.” The CRTC’s wholesale policy also requires wholesaler ISPs leasing from Bell to maintain the same technical Internet traffic management processes as Bell, such as throttling and bandwidth caps, Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP), said in an interview. He said this makes it more challenging for ISPs to distinguish their services to consumers. Copeland said he would like to see the CRTC rule in favour of discounting wholesale ISPs, but isn’t confident that will be the case. “I would like to predict that there will be an epiphany within the CRTC and they will say that wholesale pricing means that the service should be to make money, but we haven’t seen that type of revelation with the commission. We are not yet sure that the commissioners themselves truly appreciate what a wholesale market can bring to consumers,” he said. CNOC said it is hoping the CRTC will review the file and ask Bell to offer discounts to wholesale ISPs. The CRTC is currently collecting submissions on Bell’s proposed tariff. “The current proceeding happening this month is attempting to determine what, if any, discount is appropriate. CNOC’s view is that it’s not reasonable to charge the same thing . Wholesale rates should be less than half the cost,” Stein said. The group’s letter also expressed concern over the amount of time the CRTC is allotting ISPs to rework their prices and services after a new tariff is approved. The group said 90 days, instead of 30, is the “appropriate minimum” time frame for implementation. CNOC said ISPs are considering how they will handle customer relations and marketing following a drastic change to their prices. “The decision on the discount will make a big difference to how we handle the tariff. Until then we can’t really do anything,” said Stein. The CRTC’s record on the file is open for comments until the end of January, with implementation of the approved tariff scheduled for March 1, 2011. Jonathan Daniels, vice-president of regulatory law for Bell Canada, said in an interview that “ voluntarily pushed the date to March 1. The issue has been on hold since the fall. This is just an effort by the wholesale ISPs to delay it further. We don’t expect that the CRTC will grant further delays.” Daniels said the commission’s policy gives wholesalers’ customers incentive to pay for the cost of the Internet traffic they use. “We have a regime right now that does not encourage wholesale ISPs to monitor their usage and to give incentive to their end-users towards that because there is no relationship between how much they use and how much they’re charged,” he said. “ is actually making it consistent with proper economic incentives. It’s the notion that people should pay for what they use … Ultimately the concern is that increased traffic drives additional capital requirements. Wholesale ISP customers tend to have higher usages than Bell’s retail customers,” he said. But CNOC said Bell created the problem of Internet bandwidth management by structuring their service in an unlimited fashion years ago. “There are places in the Bell network where there is congestion, but charging this much per gigabyte and setting caps this low is so unreasonable and out of sync with the rest of how their network is built, either in retail or wholesale,” Stein said. Bell’s tariff application states that it will charge wholesalers different rates and have different bandwidth caps in Quebec and in Ontario. Bell’s Gateway Access Service (GAS) in Ontario will offer downstream speeds of 6 Mbps and have a 25 GB monthly usage allowance, while in Quebec the downstream speed will be 7 Mbps and have a 60 GB monthly cap. Daniels said Bell’s proposed tariffs vary for each province to reflect the difference of the markets. “What is fundamental to the CRTC’s regime in terms of how we are to introduce usage-based billing is the concept that we charge our wholesale customers like we charge our retail customers,” he said. “Our rates are different in Quebec and Ontario because of different market forces and we are to match our retail rates to our wholesale rates. It’s consistent with what the commission asked us to do.” But Rocky Gaudrault, CEO of Teksavvy Solutions Inc. and member of CNOC, said in an interview Bell should have the same tariff in both provinces because it operates off of the same network. “There is no different network when you change provinces. This cannot be an economic management practice for the network. This boils down to marketing,” he said. Stein said fierce competition in Quebec is behind the variation in tariffs. “The difference is the competitor. Videotron is at a far different price point in Quebec than Rogers is in Ontario, so Bell has chosen a far, far different cap between the two provinces,” he said. asmith@thewirereport.ca

Wholesale ISPs fear Bell tariff will end competitive marketplace

News | January 5, 2011

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