Federal cabinet asked to referee fights with Bell, Allstream

Struggling to stay in power with a minority government that is trying to steer a shaky economy and command troops in Afghanistan, Prime Minister Stephen Harper and his cabinet have more than enough to keep themselves busy.

But on Thursday, MTS Allstream and Bell Canada added to their burden by petitioning politicians to step in the middle of scraps with competitors and the federal communications regulator over broadband service.

Both phone companies maintain two rulings of the Canadian Radio-television and Telecommunications Commission (CRTC) imperil investment in high speed networks and threaten access by Canadians to leading-edge services.

In a brief synopsis of the appeals

–Allstream wants the cabinet to tell CRTC it must order incumbent telecos to sell their corporate Ethernet and DSL services to it at cost instead of what Allstream calls “monopolistic rates.”

Last December the commission refused to order incumbent telcos to give competitors access at cost to their DSL and so-called “next generation” communications facilities, which includes Ethernet. Essentially, the commission said such facilties can be duplicated by competitors so they can’t be considered essential. If they aren’t essential the commission won’t regulate them.

–Bell is trying to overturn a separate CRTC decision issued the same month that it has to give Internet service providers access at regulated rates to the new high-speed Fibre-to-the-node (FTTN) network it is building to homes and apartments for fighting cable companies.

The CRTC has ordered incumbents like Bell and Telus to share service on its existing networks which were built at a time when they were monopolies. But Bell argues that giving competitors access to a new network is wrong because they could build their own.

The cabinet can over-rule the CRTC, send the decisions back to the commission with some guidelines or let them stand.

The rulings have prompted both telcos to make provoactive statements about the future of broadband service, and about each other.

Should Allstream fail, “you’re impeding customers from having the benefit of the innovation and pricing that comes when competition gets to their doorstep. Right now there’s a swath of small business that don’t have the same kind of access to competitive choice that they should have,” Chris Peirce, Allstream’s chief corporate officer, said in an interview Thursday.

In a document to cabinet, Allstream warns if Ottawa follows the deregulation policies of the U.S. Federal Communications Commission, this country could loose 21 million jobs and $6 billion in gross domestic product growth. It wasn’t immediately clear from that document where those figures came from.

“MTS is unhappy with [the CRTC ruling] because it doesn’t want invest” in building new networks itself, retorted Mirko Bibic, Bell’s senior vice-president of regulatory affairs. “Whoever wants to invest can invest,” he said.

Told of Bibic’s comments, Peirce replied: “That’s patently false on its face. No company including Bell Canada has invested more in competitive infrastructure than we have … we’ve invested billions.” But no competitor can replicate the network of incumbents, he maintained. Therefore they need regulated access.

For his part, Bibic said that if Bell looses its appeal, it will have to re-evaluate the utility’s planned $700 million spending over the next three years to extend the FTTN network to more cities in Ontario and Quebec.

The two appeals deal with the same principle, Bibic argues: “If the CRTC said that the building of Ethernet services is something everyone can do, we say the same logic ought to hold with respect to FTTN.”

To Toronto telecom consultant Mark Goldberg, both cases point to the need for Ottawa to create a national broadband policy, including whether the government is taking the right steps to encourage investment in next-generation networks. Policy is the government’s role, he said, not the CRTC’s, so it’s appropriate this has landed in the cabinet’s lap.

“Both applications raise the issue of competition and investment in networks,” he said. Allstream wants the ability to building out networks from components, some of which – such as Ethernet services – belong to incumbent telcos. Bell wants to invest in FTTN.

Iain Grant, managing director of the Montreal-based telecommunications consultancy SeaBoard Group, says that the CRTC doesn’t realize that with business customers spread across the country, Allstream can’t build a national network on its own.

“I think the CRTC is deeply flawed in its logic” in deciding that Ethernet services can be duplicated by other carriers, he said. If the government wants a competitive market for telecommunication services it has to allow other carriers to access the networks of the incumbents, he said.

“If it doesn’t happen I think prices go up, innovation goes down and the incumbents become fatter, happier and lazier,” said Grant. “And the challengers go broke.”

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