Bell and ISPs are back in the ring

Bell Canada is at odds once again with independent Internet service providers, this time over Asymmetric Digital Subscriber Line (ADSL) services.

“Our position is very simple,” said John Nemanic, president of Internet Direct and board member of the Canadian Association of Internet Providers (CAIP). “Bell is being anti-competitive. They’re leveraging their monopoly in order to drive us out of business.”

Nemanic, along with Ron Kawchuk, president of CAIP, said Bell is being anti-competitive by allowing its Sympatico brand of Internet service to take a loss on ADSL lines. Sympatico pays Bell the full rate on the ADSL lines, which Kawchuk said is between $160 and $200 per month. Sympatico then sells the service to its customers at $39.95 per month.

“Under the law, Bell Canada as a regulated company cannot sell services below a compensatory rate,” Internet Direct’s Nemanic said. “That is, they have to make money on the services. So they set up something called Sympatico, it’s supposedly this competitive company, but it’s totally controlled by Bell. They go in the market place, they lose tons of money selling services below cost, and every now and then Ma Bell gives them money from the treasury to keep it going.

“If you take a dollar from one pocket and put it into another, it’s still the same pair of pants,” Nemanic said.

Bernard Courtois, Bell’s group vice-president of law and regulatory matters, said the cost of ADSL is still quite high and Sympatico has to take a loss because customers won’t pay the full price.

“In order to develop a product like that, you put it out there in the market place at a price customers are prepared to pay…and then you work on your costs to get them down, with the object that over time the service or product is going to be a profitable one,” Courtois said.

CAIP brought its complaint before the Canadian Radio-television and Telecommunications Commission in December 1998. Submissions from all parties were being presented to the CRTC during the month of January.

“We brought it forward because we really thought it was time to call a spade a spade,” Kawchuk said. “The kinds of activities that [Bell is] undertaking are, well, Bell says they’re within the law, but they’re not in the spirit of competitive behaviour by a dominant provider.

“What the phone company has to learn is indeed it’s got to play a big role in the Internet, be a player, be a participant. It just can’t be the only one any more,” Kawchuk said.

David Colville, the CRTC’s vice-chairman of telecommunications, said it isn’t clear to him at this point in the proceedings whether or not Bell or its parent BCE Inc. is directly subsidizing Sympatico, or whether they’re simply allowing the ISP to incur what they hope to be a temporary loss.

“I suppose [Internet Direct’s Nemanic] is looking at it from the point of view that it’s all part of the BCE empire and that BCE as a whole is making money…to that extent, I suppose he’s probably right,” Colville said.

Colville said, from the CRTC’s perspective, Bell is charging its subsidiary the same rate it is offering to the ISPs, so Bell is “on side” in that issue.

“I also understand that Bell has offered at least to engage in several discussions with the ISP industry to see how they can resolve this problem,” Colville said. He said it is possible that Bell and the ISPs might talk and reach a solution before the CRTC judgement is made. Given the CRTC is still engaged in its new media hearing proceedings, Colville couldn’t pin down a date for a decision in this particular case.

As for sitting down to talk, Bell’s Courtois said several times he would like to do just that with the ISPs. Nemanic, on the other hand, said the offer to talk is an empty one.

“It’s just cheap talk,” Nemanic said. “They want to talk and stretch out negotiations while they steal more of our customers away. It’s standard delaying tactics…This is the phoney language of accommodation. When you want to deal with someone, you put an offer on the table and you talk in specifics. You don’t just indulge in rhetoric.”

Nemanic said Bell has not made a specific offer of resolution to either Internet Direct or CAIP. In fact, he said Courtois hasn’t returned his phone calls.

“I would love to have him call me, but he will never call me. He doesn’t have the guts,” Nemanic said.

CAIP’s Kawchuk said his association has had several dialogues with Bell without result, and as such he has doubts of the phone company’s sincerity in finding a fair solution.

“I think it’s fair to say there’s quite a divergence of opinion, even among the ISPs, on this,” the CRTC’s Colville said. “Some of the players I think are quite prepared to sit down with Bell and find a solution to the problem. Apparently [Nemanic] is less enthusiastic about doing that than the others.”

Indeed, Courtois said only a few ISPs support CAIP’s plea to the CRTC, adding that other ISPs have had fruitful conversations with Bell.

However, Kawchuk said most of CAIP’s 130 members support the action, and about 20 to 30 of them have sent in letters of support. He and Nemanic both said Bell is trying to paint the ISPs as a marginalized minority, even though major ISP players such as UUNET have demonstrated support.

Kawchuk said the entire CAIP board was not invited to vote, because the board includes Bell. He added that the other two telcos on the board weren’t required to vote because the ISPs felt it wouldn’t be prudent to drag them into the issue.

Part of the problem comes from the fact that those other telcos — BCTel and Telus — are offering ADSL services at a lower rate than Bell. Kawchuk said CADVision, a CAIP member ISP in Alberta, is leasing wholesale ADSL service from Telus for $39 per month, whereas Bell is charging between $160 and $200 per month for the same service.

CADVision’s Web site advertises dial-up ADSL access for $599 per year (about $50 per month) plus various set-up fees, or dedicated ADSL access for $995 per year (about $83 per month).

Nemanic said his company, Internet Direct, can offer ADSL in British Columbia for $70 a month.

“We have a wholesale rate from BCTel that is below our retail rate,” Nemanic said. “I would like to ask Bernard Courtois why it is in British Columbia [BCTel] can sell comparable ADSL services to us at a third of the cost that Bell wants to charge us. What is it about this side of the Rockies that makes prices three times as high? Are the laws of physics suddenly suspended?”

Courtois said if the ISPs don’t like Bell’s prices, they’re welcome to set up their own networks.

“We’ve opened our networks so they’re allowed to come into our central offices and put their own equipment in. So they have the choice to do it themselves, if they think they can do better than us on the cost,” Courtois said.

But Nemanic responded Bell has not made that clear to the ISPs.

“I’d like to know what the process is by which we could do that. I’d like him to lay it out and tell the ISPs,” Nemanic said, expressing doubt that it would even be possible.

“As an ISP, I can’t get access to all of the unbundled elements. I don’t have the rights of a CLEC (competitive local exchange carrier). I don’t know where he’s coming from,” Nemanic said.

Courtois charged that the ISPs applying to the CRTC might not even truly be interested in ADSL technology at all. He said perhaps those ISPs wish to delay ADSL instead of contributing to the roll-out process.

“High-speed access is only good for your customers if you as an ISP have a high-speed network to take the traffic to. I’m not saying they’re not, it’s just not clear at this stage whether there’s posturing or real interest on behalf of all ISPs,” Courtois said.

Nemanic responded he is interested in offering ADSL and would do so immediately if Bell would give him the same price he gets from BCTel.

Colville said it will likely be April or May before the CRTC makes any decisions in this issue or the related new media hearing.