CRTC review should look at support for mobile, new technologies: Northwestel

One of the top issues for the CRTC's upcoming review of Northwestel Inc. and telecom services in the North will be how to better support newer technologies like advanced mobile services, said Paul Flaherty, Northwestel’s president. “Lots of people are going to talk about the interest of having more wireless and higher speed Internet and things like that,” Flaherty said in a phone interview last week. “But that doesn’t really fall under the regulation we have today, so are we going to expand the form of regulation?” In a decision in November 2011, the CRTC said it would take steps over two years to end Northwestel’s decades-old monopoly on northern wireline telecom services and that it will review price caps and subsidies applied to the company to help it provide remote communities with low-price telecom services. In that decision, the commission said it was concerned that Northwestel’s aging telecom switches were failing to serve customers’ needs, and ordered the company to file a “modernization plan” to outline a way to replace them. This month, the CRTC said it will hold a hearing in June to conduct a “holistic review” of Northwestel’s regulatory framework, price caps and subsidies. The CRTC said in its decision in 2011 that Northwestel receives more than $20 million in annual subsidies to provide telecom services in remote communities, and that its annual income from operations had nearly doubled to reach $69.3 million in 2010. It denied Northwestel’s request for a $2 rate increase on local residential and business services, and said it would again provide Northwestel with an annual subsidy, worth $20.5 million in 2012, to support residential telephone service in remote communities, where high costs make the services unprofitable. The CRTC expressed concern about the availability of number portability, or the ability for customers to carry a phone number over to a competing company, and ordered Northwestel to implement the portability service in several communities and cities. The commission's proceeding for the 2011 decision focused on wireline telephone services, an area it identified as lacking competition, though Flaherty suggested the commission was too focused on landline phone access as the company tries to expand newer services like mobile. “One of the things the commission seems to be very focused on is voice telephone service, but most of our customers are not focused on that,” Flaherty said in a phone interview last week. “More and more people are going to cellphone service only. They don’t even have a wireline phone.” Filed with the commission in July, Northwestel’s modernization plan included a commitment to roll out third-generation mobile services to all 96 of the northern communities it serves, conditional on the company's use of $40 million in broadcasting benefits money coming from parent company BCE Inc.’s acquisition of Astral Media Inc. That fell through when the CRTC blocked Bell’s application to purchase Astral in October, and Bell subsequently said a revised application will not include the same request. Without that $40 million for mobile wireless, Flaherty said, the company’s plans will be scaled back and it will be no longer capable of expanding third-generation HSPA mobile services to all 96 communities. Several communities will be left with older, slower, second-generation mobile services, he said, while as many as 30 or so smaller communities may not receive anything. “I don’t see, practically, how we would be able to continue forward with that, absent some subsidy to make that happen,” he said of the company’s former plan to roll out and upgrade wireless services without the broadcasting benefits money. “The challenge you get into in all of the small communities is that there’s not enough money in the communities to actually support the infrastructure, let alone the operating costs,” he said. Flaherty said the cost of the wireline switch upgrades will lead to “trade-offs” affecting Northwestel's mobile expansion that will be unpopular with customers. Len Katz, the CRTC's former vice-chair of telecommunications, said in a phone interview that the commission, in the past, did not look at broadband or wireless services in the far North because there was enough competition. He said the 2011 decision recognized that there should be some degree of intervention if there is not enough competition. “The first issue is: is there competition? If there competition, then the commission's role is clear. If there isn't competition, is there need to go in and provide new services that haven't been introduced?” he said. Last week, Northwestel said it upgraded its mobile services to HSPA in Norman Wells and Fort Simpson, N.W.T., and in Dawson City, Yukon. The company added that it rolled out an unspecified wireless service for the island community of about 2,000 people in Igloolik, Nunavut. Iristel Inc., a new entrant telco in the North, said it launched voice-over-IP phone services in Yellowknife, Whitehorse and Inuvik on Monday. Samer Bishay, president and CEO of Iristel as well as president of northern mobile provider Ice Wireless Inc., said in a phone interview that the CRTC was right to require Northwestel to upgrade its switches. He said Iristel, Ice Wireless, and other potential competitors cannot compete effectively in areas served by older switches in part because they do not accommodate calling features like call display or number portability. “If they don’t upgrade the switches on the wireline, then all the wireline/wireless competitors will not be able to connect properly with Northwestel to offer services,” he said. John Lawford, executive director of consumer group the Public Interest Advocacy Centre (PIAC), said he believes many northerners would prefer wireline services—which in some areas Northwestel bundles with Internet—if they had to choose between that and mobile. Lawford said the North also needs wireline backhaul, or network transport infrastructure, to help connect with mobile signals in southern Canada or other international destinations because the current satellite-based backhaul network is “kind of iffy.” He said good wireline infrastructure is a prerequisite for the rollout of more third-generation mobile services so that mobile networks do not strain satellite bandwidth. Bishay said northern mobile services are “very reliable” right now but will require additional, fibre-based backhaul capacity to expand. “Everybody needs that fibre ,” Bishay said, adding that Northwestel’s wireless backhaul network is vulnerable to service disruptions. “Without your wireline infrastructure properly set up, anything on top will only be as good as your weakest link.” Flaherty said the hearing next June should also review the “basic services” Northwestel should be required to provide as the North’s incumbent telecom provider. “As I hear more and more of this dialogue going on, it really does beg the question, at least for Northern Canada, as to whether we first need to come to grips with what are we expecting to be provided to each of these locations. Once we align on that, the question becomes, how are we going to fund it?” In an application filed with the CRTC in August, Iristel and Ice Wireless proposed a new, northern subsidy regime for companies to compete for funds to support backhaul infrastructure and to provide wireless services in smaller communities. Flaherty said Northwestel needs its $10 million annual service improvement subsidy—which is in addition to roughly $10 million for serving high cost areas, for a total of $20.5 million—to continue supporting wireline services in remote communities. He said any new price caps imposed on the company’s other services would increase its reliance on subsidies, as would the introduction of competing telcos in the North’s two largest cities, Yellowknife and Whitehorse. Bishay said competition, not subsidies, will bring more advanced mobile services to northern communities. “If anybody gets a subsidy, either it’s fair and equally split, or nobody gets anything,” he said. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and reporting and editing by Simon Doyle at sdoyle@thewirereport.ca. news@thewirereport.ca

CRTC review should look at support for mobile, new technologies: Northwestel

News | 12/18/2012 3:02 pm EST

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