Northwestel appeals CRTC regulation of its backbone service rates

Northwestel Inc. is appealing a CRTC decision issued last month to regulate the pricing of the company's network backbone services. The company, a subsidiary of BCE Inc., is asking the commission to review a decision issued Jan. 5 to regulate the tariff rates for Northwestel’s V-Connect backbone service, which offers large organizations network connectivity between their locations in the North and their offices in other parts of the country. Northwestel's V-Connect is a virtual private network (VPN) service available in Fort Nelson, B.C., and most communities in the Yukon and Northwest Territories. The decision in January ended the CRTC's forbearance, or exemption from regulation, of the rates Northwestel can charge for the V-Connect service. As part of the decision, the commission asked the company to provide cost studies to support its proposed tariff rates, or service prices. Northwestel submitted a review and vary application to the commission on Feb. 6, asking the CRTC to strike down the decision. “The language and analysis in … the Decision are fundamentally incompatible with and incomprehensible in light of the specific language used by the Commission in establishing the legal framework for forbearance respecting such data services,” Northwestel wrote. Northern competitor SSi Micro Ltd. had asked the commission to force Northwestel to file regulated tariffs for the service after complaining that Northwestel uses its monopoly on Internet backbone services to block SSi Micro from gaining a stronger foothold in the Northern market. SSi Micro says it needs access to Northwestel's backbone V-Connect service to support IP voice and videoconferencing traffic for customers. Access to V-Connect is necessary at reasonable rates to help “the development of competitive alternatives in the North,” the company said. In its review and vary application, Northwestel said the decision should be struck down due to “substantial doubt” as to its correctness. Northwestel said the commission erred in law when it determined that the V-Connect service did not qualify for forbearance under a CRTC decision in 1997, which exempted “future” data packet services from regulation. The company is challenging the commission’s position that the 1997 decision did not intend to exempt services like V-Connect that offers “class of service” capabilities, allowing Internet service providers (ISPs) to prioritize data packets carrying video or voice traffic. “The ‘class of service’ capability … is but one example of hundreds of new functionalities and capabilities that have been added to such data services over the last 15 years,” Northwestel wrote. “Most of these specific capabilities were not known in the 1990s. However, given the clear language of the forbearance orders, it was accepted throughout the industry and by the Commission itself … that the Commission did not intend to embark on new forbearance proceedings with each and every addition of functionality.” Northwestel wrote that “less than half” of its V-Connect customers use the “class of service capabilities,” which means the commission would have to “review and approve a wide variety of individual service configurations” if it seeks to regulate the service. The company took issue with the commission’s request to file a proposed tariff and service cost study within 30 days of the decision, arguing that it would take at least eight weeks to complete the cost study. Northwestel asked that the commission forbear the V-Connect service in recognition of increasing competition that the service faces from satellite and other sources. “In this regard, it is notable that, over the last 15 years, across all the past or current users or potential users of V-Connect service, there has been only one that suggested that the service is not competitive and should be tariffed,” Northwestel said. The company also proposed an alternative wholesale ISP service, which it said would be better suited to SSi Micro’s needs because its V-Connect service “does not provide any direct access to the public Internet.” As a result of the regulation of the V-Connect service rates, Northwestel will “very likely lose business and revenues,” the company said. “There is no sense in disrupting an already competitive retail market through regulatory intervention at the retail level,” the company wrote. “uch intervention would cause harm to both service providers and customers.” In a response filed with the commission Feb. 8, SSi Micro called Northwestel’s wholesale service proposal “mal-intentioned” and said the company's review and vary application is a stall tactic to delay competition in the North. The company urged the commission to “immediately and summarily” dismiss Northwestel’s application. “The Commission cannot and must not allow NWTel to use Review and Vary and Stay processes as a stall tactic to prevent companies—including SSi—from having just and reasonable rate for backbone connectivity, and from delivering effective competition in Northwestel’s serving territory,” SSi Micro wrote. SSi Micro wrote that the commission did not commit an error in law when it determined in 1997 that packet data services with “class of service” capabilities do not necessarily qualify for an exemption. It pointed to a section of the commission’s Jan. 5 decision that indicated Northwestel did not file with the commission necessary details about its V-Connect service “to demonstrate that the services meet the conditions of forbearance” when the service was first rolled out in 2006. “This is not an error in law or fact … but simply a failure of NWTel to comply with the Commission’s earlier ruling,” SSi Micro wrote. “The failure is on the part of NWTel, not the Commission.” The company questioned why Northwestel said it required an additional eight weeks to complete a cost study of its V-Connect service when it could “conceive of and prepare tariffs and a detailed cost study for a brand new service” in the 30 days following the Jan. 5 decision. “This new service was not requested by, is not desired by, and is not useful to SSi,” the company wrote, noting that it requires the class of service capabilities available with V-Connect to offer its own voice over IP (VoIP) services. SSi Micro said any decision to suspend the commission’s Jan. 5 decision should include interim rates for its use of the V-Connect service. “If the Stay is granted, the benefits of local and broadband competition, including greater choice, reduced prices and new, innovative and improved services and technologies, will not be delivered to the affected Northern communities,” SSi Micro wrote. The CRTC said Feb. 13 that the deadline for comments on Northwestel's application is Feb. 24 and the company's reply is due by Feb. 29. news@thewirereport.ca

Northwestel appeals CRTC regulation of its backbone service rates

News | February 16, 2012

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