The battle over wholesale rates between independent service providers and big carriers isn’t over yet

ISPs to fight CRTC again on wholesale rates

A group of independent Internet service providers is demanding access to the confidential costing figures four of the country’s big carriers gave  the federal telecommunications regulator before it set a new pricing regime for residential and business Internet service.

 
The move is part of a complex appeal made Friday by Canadian Network Operators Consortium, which represents ISPs such as Primus Canada and Teksavvy, to the Canadian Radio-television and Telecommunications Commission to toss out parts of  the wholesale rates it set  last November, saying they will lead to  “unreasonable and competitively unsustainable” retail rates for customers.
 
CNOC members buy wholesale access from carriers like BCE Inc.’s Bell Canada, Telus Communications Corp., Rogers Communications and Videotron at rates set by the CRTC, then resell access to their own customers.
 
As it has for years in other matters, the carriers gave the commission confidential financial information to help it set new rates. But CNOC is essentially saying it doesn’t trust the numbers from Bell, Rogers, Videotron and Cogeco Cable, so has demanded is lawyers counsel and experts “have full access to the information.” CNOC also objects to a number of other parts of the new rate system with othere carrers. 
 
For their part, a number of carriers including Bell, Rogers Communications Inc. and Shaw Communications Inc. also asked the commission to review its new wholesale rate schedule, arguing it is unfair to them. They are expected to vigorously fight any attempt by competitors to see sensitive information.
 
“The commission rate setting process needs to be redone in a more transparent manner,” CNOC chairman William Sandiford, who also heads a Toronto-area provider called Telnet Communications, said in a news release.
 
“The net result of this procedural unfairness is that competition in the provision of retail Internet and other high-speed services is imperiled on a going forward,” he said in the release. “While the old process for rate setting in which a considerable amount of confidential incumbent information was filed in confidence with the CRTC and interveners were not granted access may have worked in the past, this process does not work now.

“In the Internet era, wholesale rates are very sensitive to the inputs used to derive those rates and market conditions can change rapidly. In this environment a new balance must be struck between protecting the competitively sensitive information of incumbents and enabling interveners to participate in a full and meaningful manner in the regulatory process.

 “Another tribunal in Canada, the Canadian International Trade Tribunal, has struck this balance. It is time for the CRTC to do so as well.”
 
The fight over wholesale rates is crucial to the survival of ISPs, for it is tied up with their need to offer download speeds that come close to the speeds offered by the carriers. This is particularly important to the majority of ISPs, who buy connectivity from Bell.
 
Until about 18 months ago, Bell offered maximum download speeds of around 5 megabits a second. With cable companies like Rogers offering significantly faster service, Bell was forced to upgrade its network to fibre optic. The speeds Bell then offered to its own retail customers increased, leaving the ISPs behind.

Bell and other carriers tried and failed to get the CRTC to agree that ISPs didn’t have the right to buy access the new network. That left the question of what wholesale rates it and other carriers should charge ISPs for faster access.

The CRTC turned that into a matter of overhauling the wholesale rate it sets because the commission had agreed that Bell could impose usage-based billing on ISPs. But early last year Prime Minister Stephen Harper and then-Industry minister Tony Clement made it clear the federal cabinet wouldn’t let that decision stand.

That led to November’s CRTC decision to turn from usage-based billing to capacity-based billing and a new rate schedule.

CNOC has no problem with the capacity approach, but says the new wholesale rate schedule its members would have to pay can’t be justified.
 
To back up its arguement, CNOC filed two consultants’ reports to the commission. One, it says, shows the costs the commission accepted from Bell (and, it says, by extension Rogers, Cogeco and Videotron) are “highly inflated” because because of the amount of confidential information that couldn’t be tested by the ISPs. The second study shows that the capacity-based rate levels set by the commission for the four carriers “will no lead to sustainable competition” from the ISPs.
 
CNOC wants the commission to reduce the wholesale residential rates it set in November for Bell, Rogers, Cogeco and Videotron and the wholesale business rates for Bell and Telus after a more transparent review of carrier costs.
 
CNOC also wants the commission to calculate wholesale rates on the peak traffic capacity on the carriers’ networks, not a monthly traffic volume to traffic peak conversion. It also wants the commission annually take into account the decline in the costs of telecommunications facilities and increases in peak traffic demand when it calculates wholesale rates.
 
In particular, CNOC can’t understand the wide range in wholesale rates the commission set for different carriers. The monthly capacity rate for Manitoba Telecom is $281, it says, while the rate for Cogeco is $2,695. (The appeal application doesn’t say so, but the result would be ISPs in Manitoba buying access from MTS would pay signifiantly less than
ISPs in Ontario and Quebec buying from Cogeco). “The wide variation in those rates among these network providers does not make sense,” CNOC said in its appeal to the commission.
 
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