Rising wholesale Internet rates have reached ‘critical status’: CNOC

The rates large telecom companies charge small Internet Service Providers (ISPs) to access their wireline networks have reached extreme levels and are eroding competition “with every passing day,” according to a CRTC application filed by the Canadian Networks Operators Consortium (CNOC). “The amount of capacity and usage that people are using is increasing exponentially every year, and the capacity rates are a driving force in what the overall cost is that the consumers pay,” CNOC president Bill Sandiford said in a phone interview. “We can’t wait forever until the regulatory process takes its course. … The pace of regulatory change is slow, but the pace of our industry is very quick, very fast.” In the Part 1 application posted on the CRTC’s website Friday, CNOC asked the CRTC to make usage-sensitive rates, including capacity-based billing (CBB) fees, interim. That would mean that, should the CRTC lower those rates in the future, small ISPs would be able to access refunds and retroactive rate adjustments. CNOC said the window for such refunds would be until the CRTC issues a decision on the review of the wholesale wireline market it held in December, and on any followup proceedings. During that hearing, CNOC argued that the usage-based rates incumbents charge must be lowered as soon as possible so that third-party ISPs can begin to offer television and phone service via customers’ Internet connections. In its application, CNOC said the refunds its members would have access to if the CRTC grants its request “would help to mitigate the harm suffered by competitors by: helping them to overcome barriers to entry and expansion that are created by Usage Sensitive Rates; enabling them to structure the terms of their retail offerings to better respond to the marketplace; and offsetting losses from elevated costs attributable to Usage Sensitive Rates.” In response to a request for comment on CNOC's application, Rogers Communications Inc. spokesman Kevin Spafford said in an email: "Customers have a huge number of Internet choices; clearly the system is working. We’re focused on delivering great value to our customers with fast, reliable connections with all the data they need. The current wholesale system lets our competitors do the same and it is based on the rate structure they asked for." CNOC said in its application that the relief it requested “is time sensitive” and asked the CRTC to process its application “on an expedited basis.” It listed divisions of Rogers, BCE Inc., Cogeco Cable Inc., Shaw Communications Inc., Telus Corp.,Saskatchewan Telecommunications Holding Corp. and Quebecor Inc. as respondents on the application. Unless the CRTC grants the interim relief, third-party ISPs will suffer “irreparable harm” due to financial losses caused by high rates, damaged relationships with customers who will see price increases, and “lost opportunities to enter and expand markets for retail services,” CNOC said. It argued that the refunds interim relief would grant small providers are the only option to mitigate long-term harm. In the application, CNOC said CBB rates are “severely inflated,” and that the problem is magnified by the increase in bandwidth consumed by Internet users, partly due to the rise of streaming video services like those offered by Netflix Inc. “When projected into the future, the rising CBB costs per-consumer will soon fully eclipse the retail rates” of large telecoms, CNOC wrote. “While the problem with CBB rates compounds with every passing day, the situation has long reached critical status. CBB rates are already foreclosing independent from competing in markets for IPTV and bundles of telecommunications services,” it said. CNOC added that small ISPs can’t offer the $25 skinny basic TV package the CRTC introduced in March “without incurring significant losses.” The deadline for replies is June 1. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Rising wholesale Internet rates have reached ‘critical status’: CNOC

News | 05/04/2015 8:30 pm EDT

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