Incumbents say regs for IP interconnections mean hundreds of millions of dollars in capex

GATINEAU—Requirements for local telcos to offer Internet protocol (IP)-based interconnections would add huge costs to incumbent carriers without providing any additional benefits to consumers, Bell Canada Enterprises Inc., SaskTel, and Telus Communications Co. told a CRTC hearing Monday. The commission should instead allow carriers to reach IP-based interconnection agreements driven by market forces as consumer demands continue to fuel technological innovation, Jonathan Daniels, BCE’s vice-president of regulatory affairs, said on the opening day of commission hearings to review Canada’s voice services interconnection regime. “Speaking for ourselves, the requirement to offer mandated IP interconnection, wherever demanded, would force us to incur significant upfront capital expenditures,” Daniels said. “These could reach the hundreds of millions of dollars and, it must be stressed, we would see zero return on our investment because taking on IP interconnection neither brings our subscribers anything nor lowers our costs.” As the growth in IP-based voice communications’ continues to grow, the incumbent telcos' abilities to offer exchange connections to competing carriers’ IP-based customers is becoming an increasingly hot topic. That was reflected at the hearing Monday where much of the focus was whether the commission should regulate IP-based interconnections. Under current regulations, incumbent telcos are required to offer competing wireless and wireline carriers interconnection capabilities that allow the competitors’ customers to communicate with others on the same network as well as those of other providers. But there are no requirements that the incumbents offer these services for IP-based voice communications, so IP-based carriers typically assume the cost of converting their customers’ digital communications so they can operate with the circuit-switch connections offered by traditional incumbent telcos. This, the small competitors argue, is unfair and should be regulated to ensure the costs are more evenly distributed and that the local exchange carriers are required to upgrade their networks to accommodate IP voice communications without conversions. Daniels said Monday that because Bell’s current circuit-switch wireline voice access connection “works perfectly,” there is no business reason for the company to spend “hundreds of millions of dollars” to upgrade its switches to accommodate voice-over-Internet protocol (VoIP) services. He said these costs would be too much at a time when Bell customers, operating on a traditional circuit-switch network, would not gain any benefit, because the company's copper-based infrastructure would not allow it to benefit from VoIP interconnections. “But as we build out the situation changes,” he said of the growing fibre network in Atlantic Canada of Bell Aliant, a subsidiary of BCE. “As such, we are just starting the migration of our wireline network to VoIP,” he said. Bob Hersche, SaskTel’s director of regulatory affairs, said IP interconnection requirements imposed on his company—“by far the smallest major ILEC in Canada”—would ultimately lead to higher costs for his customers. “Competitors will come before you and ask you to mandate the ILECs to connect with them using IP interconnections which have not yet been standardized and doing so at the ILECs’ expense,” Hersche told the commission. “For Saskatchewan consumers this would mean lower grades of service on some calls because of the use of non-standard technologies, and increased costs to SaskTel to subsidize competitors, costs which we would have to look at passing on to the people of Saskatchewan.” While SaskTel has offered some IP-based test services for fibre-to-the-home customers and can connect them to each other, he noted this is only because they are operating on the same standards and protocols and using the same vendors. If any of those factors differed, he said, SaskTel’s interconnection facilities could not guarantee proper delivery of the IP voice calls, and certain services may not work as intended. “Specifically, issues have been encountered in the provision of call waiting, selective call accept, 911 call control, and components of voice mail services,” Hersche noted. Also appearing before the commission hearing Monday afternoon, representatives from the Canadian Network Operators Consortium Inc. (CNOC) said that, as IP services continue to grow, it is important that the commission force local carriers to offer interconnection to VoIP customers. “IP-based network interconnection must be mandated and corresponding basic rules are required,” Chris Tacit, counsel for CNOC, said. “This is necessary in order to overcome the ILECs’ reluctance to cooperate with respect to such matters and also to ensure that the principles of technological and competitive neutrality are observed when IP-to-IP network interconnection is implemented. Laying out an 11-point “road map for promoting IP-to-IP interconnection,” CNOC asked the commission to require ILECs to table a timeline to make IP-to-IP interconnection for voice services possible while following a series of guidelines recommended by the commission’s network working group. Tacit also argued that a lack of IP-to-IP interconnection is stunting innovation. “Clearly, have an incentive to progress things in a very incremental fashion in terms of their own self-interest. They aren’t necessarily interested in promoting the kind of innovation that typically takes place at the edges of the networks, and which is brought by their competitors,” he said. Ted Woodhead, Telus’ vice-president of telecom policy and regulatory affairs, disagreed. Calling IP-based technologies “the way of the present and the future,” he said all carriers are investing in IP-based wireline or wireless networks. While he acknowledged that IP networks enable some services that are not possible in a circuit-switched network, these services—such as high-speed data and video—“are not affected by the voice interconnection regime.” Woodhead added: “It would be misleading to claim that circuit-switched interconnection will mean that Canadians are left with inferior telecommunication services.” Instead of immediately stepping in to regulate IP-based interconnections, Woodhead suggested that the commission continue to regulate circuit-switch connections until a future date when IP-based connections comprise a majority and when there is more degree of certainty in how the technology will evolve. At that point in time, he said it would make sense for the commission to stop regulating switched-circuit connections and to instead regulate those over IP. But Tacit suggested that type of clarity may never come. “IP technology, by definition, is going to evolve.” Tacit said. “If we wait for it to crystallize in some firm fashion before we take any action, we’re going to be waiting a long time.” Six days of hearings are scheduled to continue with opening arguments Tuesday from MTS Allstream Inc., Bragg Communications Inc., Rogers Communications Partnership, and the Canadian Independent Telephone Company Joint Task Force. nkyonka@thewirereport.ca

Incumbents say regs for IP interconnections mean hundreds of millions of dollars in capex

News | October 24, 2011

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