CRTC delivers blow to Bell

Tuesday, August 31st, 2010

Major Internet providers must now lease network space to independents

Jamie Sturgeon

The country’s major Internet providers, such as BCE Inc.’s Bell Canada and Telus Corp., will be forced to lease network space to smaller competitors at matching speeds to ensure competition for broadband services, the telecommunications regulator said in a key ruling Monday.

The decision, delivered after hearings last spring, is a critical, if only partial, victory for independent resellers like TekSavvy Solutions Inc. and Telnet Communications, which will now be able to keep pace with incumbent offerings.

Yet for Telus and Bell, it is a big blow in their fight to gain television share and slow phone line losses against rival cable companies Shaw Communications Inc. and Rogers Communications Inc.

Limited bandwidth capacity the pair would rather use for new Internet TV products must now instead go toward wholesale services under regulated prices and fixed returns.

Konrad von Fickenstein, the chairman of the Canadian Radiotelevision and Telecommunications Commission, acknowledged that big providers are investing in network infrastructure, but regulated access was still required to foster “more competition and (to better serve consumers.)”

Third-party resellers’ business model depends on set prices for wholesale network access, which is then resold to customers.

The group, which consists of several dozen companies across the country led by the bigger firms like TekSavvy, has been selling slower broadband services over the past several years as incumbents have steadily increased their own speeds, threatening to drive out independent wholesalers.

Short of a ruling mandating matching, “we [would have to] close our doors,” said Tom Copeland, head of the Canadian Association of Internet Providers, which represents about 50 small ISPs. “If we can’t deliver services to our clients on a competitive basis, what else is there to do? We can buy retail services from these companies and repackage them, but at that point, we’re already under margin pressure.”

Resale data speeds will now be dialed up to comparable incumbent rates of about 15 to 16 megabits per second, from between four to five Mbps in many cases, said Andrew Day, chief operating from Primus Canada.

To compensate for the increase, the commission said it will allow for incumbent network owners to raise tariff prices by 10 per cent.

It is a policy tweak that few are happy with — it cuts into already thin reseller margins, Day said, but fails to make up for capital losses phone firms like Bell and Telus are sure to see, according to Telus’s chief of regulatory affairs, Michael Hennessy.

Telus, like Bell, is locked into a growing “facilities-based” battle for household Internet, television and home-phone accounts. The speed matching required from the regulator means the phone firms will have to give greater bandwidth to resale services, even drop services like TV where capacity is constrained, he said.

“When we give our loop to a reseller, we’re foregoing the opportunity to sell TV,” Hennessy said. “So at the margins, particularly in rural markets, this decision has the potential to slow the rollout of investment.”

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