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From CBC.ca

Small Internet providers win access fight against cable, phone giants

August 30, 2010 -  Jennifer Ditchburn, The Canadian Press

OTTAWA - Canada's big telephone and cable companies must provide the highest broadband speeds available when they sell access to smaller Internet service resellers, the federal telecom regulator ruled Monday.

The Canadian Radio-television and Telecommunications Commission (CRTC) said companies that own the nation's Internet infrastructure, such as Bell (TSX:BCE) or Rogers (TSX:RCI.A), can no longer hoard those high speeds for themselves.

The commission said the decision helped safeguard the principles of public access and greater competition. Currently, smaller Internet service providers, or ISPs, only account for 7.3 per cent of the market.

"Access to broadband Internet services is a key foundation for the digital economy," CRTC chairman Konrad von Finckenstein said in a release.

"The large telephone and cable companies are bringing their fibre networks closer to Canadian homes and businesses, which allows for faster Internet connections. Requiring these companies to provide access to their networks will lead to more opportunities for competition in retail Internet services and better serve consumers."

Large telephone companies such as Bell will be permitted to charge an additional 10 per cent markup on the costs of providing access to their highest speeds.

But the CRTC says cable companies, such as Rogers or Videotron, are already charging a sufficient markup for their service. The cable firms must also make technical changes to their networks so that secondary sellers have easier access.

A similar decision had been reached in late 2008, but Bell Aliant (TSX:BA.UN), Bell Canada and Telus Communications Corp., (TSX:T) successfully petitioned the federal cabinet last year to have the issue sent back to the CRTC for a second look.

Mirko Bibic, Bell's vice-president of regulatory and government affairs, said he hopes cabinet will scrutinize the latest decision within the 90 days it has to order a change.

"There's no policy clarity in Canada has far as I'm concerned," Bibic said following the decision.

"On one hand you have (Industry) Minister (Tony) Clement very preoccupied with the national digital economy strategy and access to broadband .... On the other hand, we have a regulator that imposes rules that don't allow us to maximize the returns on our investments, and that has a definite impact on our (technology) roll-out plans."

The commission, however, ruled against allowing the smaller ISPs to gain access to the broadband networks at the source — a move which would have given them greater control of the actual broadband traffic.

They remain subject to the traffic management techniques used by the big telephone and cable companies when they sell to retail customers. The CRTC said it feared that giving smaller players such access would hurt innovation within the larger firms.

CRTC commissioner Timothy Denton dissented with that particular part of the decision. He underlined that smaller outfits were often the innovators in a marketplace, and denying them access to the tools to come up with new products and services was not in line with the concept of increasing competition.

The smaller ISPs were once the pioneers of the retail Internet industry in Canada, but were quickly overtaken by the larger firms.

Rocky Gaudrault, co-owner of ISP Teksavvy, said the decision tied their hands in terms of future innovation. But he said it was a positive result for smaller companies like his.

"From a consumer perspective, it means that possibility to get higher speeds now, so from that perspective it's a great gain," Gaudrault told reporters.

"We've been at a very slow speed and stuck there for a number of years now."

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Press Release

Regulator delivers on consumer choice and fairness: Policy is a step toward serving the interests of Canadian consumers and business

OTTAWA, ON, August 30, 2010 – After a proceeding that lasted 19 months and included intervention by the Federal Cabinet, the Canadian Radio‐television and Telecommunications Commission (CRTC) has issued a policy decision concerning the future of broadband competition in Canada.

The proceeding explored wholesale access to network infrastructure that competitive telecommunication providers need to deliver their voice, data and Internet services to consumers. Included in this review was “speed matching” – the ability for competitive providers to provide access to broadband services at speeds equal to those that the incumbent telephoneand cable carriers provide to their own customers.

“Today the CRTC has made it abundantly clear that they consider adequate competition is not provided by a duopoly of telephone and cable carriers,” says Tom Copeland, Chair of the Canadian Association of Internet Providers (CAIP). “We have been making this argument for many years”.

CAIP was one of several parties who made presentations in early June at hearings overseen by the CRTC. CAIP’s panel of business and residential service providers illustrated the diversity of their services, their responsiveness to customer needs and ability to react quickly to market opportunities.

“By introducing competitive providers as real people who know their customers and contribute to the social fabric of the communities we live in, CAIP was able to help Commissioners understand, in concrete terms, the benefits that competition brings to the market,” notes Copeland who has been an independent Internet Service Provider since 1995.

In today’s decision, the CRTC upheld earlier decisions, some rendered as much as two years ago, that required incumbent telephone carriers to provide speed matching. The CRTC also required incumbent cable carriers to improve their wholesale offerings in order to render them a useful means for competitive providers to obtain access to end‐customers.

However, the CRTC provided incumbent telephone carriers the ability to charge an extraordinary mark up over and above their existing supra compensatory mark ups on these same higher speed services.

“The mark ups built into the current wholesale rates that competitive providers pay to the incumbent telephone companies are already extraordinary, given that the wholesale access services in question are essential to maintaining a vibrantly competitive marketplace. To consider that an additional mark up over and above the already extraordinary mark ups on these services is difficult to fathom,” says Copeland.

The Commission also failed to mandate further unbundling of the incumbent telephone and cable carriers’ wholesale services. In doing so, the Commission again missed the opportunity to enable new, facilities based competition and further innovation and price competition that would benefit the public. “What the Commission failed to recognize is that they have effectively said “no” to Canadian consumers and businesses by precluding services that are innovative and cannot be delivered over the current infrastructure,” Copeland points out.

“Today’s speed matching decision was long overdue and could have gone further in establishing the foundation required for competitors to deliver greater price discipline and innovation to consumers. We will continue to encourage the CRTC to establish the regulatory framework needed to continue to serve our customers in the future,” concludes Copeland.

About CAIP

Formed in 1996, CAIP's Mission is to foster the growth of a healthy and competitive telecommunication service industry in Canada through collective and cooperative action on Canadian and international issues of mutual interest. CAIP membership comprises commercial Internet Service Providers ("ISPs"), telephone companies, cable companies and enterprises interested or involved, directly or indirectly, in the industry of telecommunication serviceprovisioning.

The main aims of CAIP are to:

• provide effective industry advocacy respecting public policy and regulatory matters (e.g., access, copyright, privacy and security issues, e‐commerce guidelines) affecting Canada's ISP industry;

• promote a positive image for the Internet industry and the Association through proactively educating Canadians about, and building awareness of Internet industry issues; and

• offer value to members through the timely communication of relevant business information and the provision of special member benefit in partnership with Affinity members.

For further information, contact:

Tom Copeland
Chair, Canadian Association of Internet Providers
tom.copeland@caip.ca

905-373- 9313   Direct