From Globe and Mail

CRTC ruling handcuffs competitive market: Teksavvy

Iain Marlow - October 29, 2010

The CRTC has varied one of its decisions on an appeal, which means pretty soon Bell will be allowed to charge wholesale Internet service providers – ISPs, such as Primus and TekSavvy – on a usage-based billing model. That means customers of those smaller ISPs will no longer enjoy unlimited Internet plans, will see data caps put in place and possibly higher monthly fees.

Read the decision

The decision, which comes into effect in 90 days, is emblematic of a gradual shift in the way Canadians are paying for Internet services and is not a particularly sharp turn for the Canadian Radio-television and Telecommunications Commission, which has made an effort to rely more on market forces in recent years. Nevertheless, this has huge implications for competitive “resellers,” like the two mentioned above, because they bring other services to market (like VoIP) over the networks of the big guys.

Matt Stein, a vice-president of network services at Primus and spokesperson for the Canadian Network Operators Consortium, said the ruling is not a huge surprise.

“We've known for a while that usage based billing was going to be a reality. So that's not really a change,” he said. What has changed is the timing, because Bell can now charge ISPs overage charges at the retail rates it currently charges its own customers. It can also charge ISPs these rates before it begins charging them to their own clients, Stein says, which means they could technically start advertising that you get more bandwidth and downloading capacity with Bell – which used to be a key source of differentiation for the competitive ISPs.

But the CRTC said it was prepared to interfere should bigger Internet companies begin taking advantage of the situation by promoting differences in service quality.

To find out what this means for small ISPs, I called up Rocky Gaudrault, the CEO of Chatham, Ont.-based TekSavvy Solutions Inc.

I asked Bell for a response to some of the questions raised by the conversation and Bell's Mirko Bibic, the senior vice-president for regulatory affairs, responded by e-mail:

“Flat-rated pricing structures for wholesale services are no longer viable given the explosive growth in Internet traffic and the load it puts on our networks, even considering our intense investment in new broadband,” Bibic said. “A wholesale [usage-based billing] approach does maintain affordable basic access rates for all end-user customers.”

Here’s the conversation with Rocky Gaudrault.

What was your reaction to the ruling?

I wish I could take pictures to show you the holes in the walls. (Laughs.) Obviously, there’s very little good about the ruling. Between the throttling [decision] and then this, it adds another layer of complexity, essentially handcuffing the entire competitive market. How do you differentiate yourself when every single area where you can differentiate yourself is being removed?

What does the ruling mean for companies like TekSavvy?

It means having to reorganize how we do business. It means having to be extremely aggressive with enforcing these new rules, especially at retail rates of all things – if they charge usage-based billing at retail rates to us, that means we obviously have to be extremely efficient at collecting from any customers who have usage-based billing charges. It becomes a pretty big problem for us from a collections stand point. Who in business wants to have zero margins on a product because you have no choice, yet to collect it? And if there’s any errors, it comes out of your pocket.

I guess you don’t have the business infrastructure to do that kind of thing now?

Even if I had the infrastructure, it boils down to money matters. Because I have to spend body, HR time on collecting money that I will never be able to use to invest with. This is a punitive charge for anybody who uses too much Internet, basically.

So you have to hand over those charges to Bell?

Correct. And pretty much 100 per cent of them. It becomes a pretty big problem in a hurry.

What does it mean for end users, TekSavvy customers or other users of competitive Internet Service Providers?

It means you could get charged in the hundreds of dollars for what you currently pay $35 or $40 dollars for. You could have multiples of your current monthly fee when this all comes through.

Anybody using TV over Internet right now is going to be severely affected by this. I mean, it makes anybody trying to do streaming right now a pretty big concern. Do you keep surfing the Internet? Do you watch TV on the Internet? Just how much gaming do you do because some games now require some pretty big bandwidth? There are far-reaching consequences. Between that and speed-matching, if these are removed it pretty much decimates the entire market space.

What’s your opinion on the speed-matching issue right now?

(Note: The CRTC mandated that big telcos have to provide the same speeds to resellers. So if Bell offers a 25 Megabit-per-second service, they have to allow resellers to sell the same package. Cabinet has until the end of November to overrule it.)

This ruling that just occurred on usage-based billing creates even more importance from a competitors’ standpoint to have speed matching happen. You almost can’t see one happening and then both coming in. If you [impose data caps and don’t have speed matching], it removes the ability for any competitors to come into the market space, to grow, to expand, to invest – it’s all gone.

Is this an issue of concentrating too much power over who controls the Internet in Canada?

It definitely begs the question of how much control they have in the market place right now, doesn’t it? It’s a very difficult situation right now, for sure.

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More Globe and Mail related stories

• High-speed Internet for rural areas pegged at $7-billion

• Telcos told to share speedy Internet

• Canada's digital divide

• CRTC holds hearing on fate of rural broadband

• Canadian wireless pricing is one big question mark

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From Reuters Canada

BCE allowed to use wireless for rural broadband

By Alastair Sharp - Oct 29, 2010

TORONTO (Reuters) - Canada's telecom regulator will allow BCE Inc's Bell companies to use escrow funds to deploy wireless broadband to rural communities, overturning an earlier decision and, rivals say, giving Bell an unfair advantage.

The regulator had forced Bell and others to set funds aside to expand broadband Internet to remote communities they would not otherwise have including in their network expansion plans.

Bell had shown that the HSPA+ wireless service it planned to roll out was of a quality equal to or exceeding urban fixed-line broadband service, the Canadian Radio-television and Telecommunications Commission (CRTC) said on Friday.

A fear that rural consumers would receive a poorer quality connection or less choice was one of the reasons for the CRTC's initial rejection of the proposal in August.

"Today is a particularly good day in that the CRTC has decided that ... we are the experts who should be deciding what technologies to use to best serve consumers and the communities," Bell's senior vice-president for regulatory and government affairs, Mirko Bibic, said.

Bell's rivals did not see it in the same light.
"It is clearly a horrible decision for anyone who subscribes to the principle of fair competition," said Dennis Beland, Quebecor Inc's senior director of regulatory affairs.

Canada's largest wireless provider, Rogers Communications, said the decision was not a good one for consumers. Both companies said they were reviewing their options.

In 2002, in a bid to boost competition, the CRTC forced Bell Canada and Bell Aliant, along with other former regional telephone monopolies Telus and MTS Allstream, to freeze urban rates and create escrow funds, which it later ruled should be used to expand broadband in their traditional markets.

Canada's wireless industry has blossomed since then, with a 2008 spectrum auction bringing in a wealth of new competitors, including Quebecor's Videotron unit, which is building a wireless network in Quebec that competes directly with Bell.

Bibic brushed off his rivals' concerns, saying Bell would not have otherwise delivered advanced wireless coverage to the 112 rural communities unless mandated by the CRTC.

"It is not correct that this in any way gets us ahead competitively when we're talking about unserved communities that aren't economically viable to serve otherwise," he said.

Consumers in those communities would have bandwidth and pricing choices equivalent to Bell's fixed-line urban services, Bibic said, and would also be able to use the network to connect to more advanced mobile devices such as Apple's iPhone and iPad.

Bell would only be able to spend C$306.3 million from its escrow fund, the CRTC said. Bell had estimated HSPA+ rollout to the communities would cost C$463.6 million.