Lighting a fire over lighting fibre

Telus Corp. is sparing with a U.S. broadband provider that wants to resell the telco’s fibre here, prompting the Canadian telecom regulator into looking into why the move doesn’t make it a telecom carrier.

AboveNet Communications Inc. says it wouldn’t be a carrier, and should it win its case some industry observers say the result will be increased competition in broadband services to businesses from local providers.

“If they [regulators] open Pandora’s Box and say, ‘That’s not considered common carrier turf,’ that opens the market up for a lot of other people to come in and do exactly the same thing,” said John Piercy, CEO of Atria Networks LP, which runs a fibre network in southern Ontario.

“To be able to get dark telco fibre and turn it into a business is an opportunity,” said Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecommunications consultancy.

However, some industry experts also say this could end up being a fight over the possible foreign control of a telecom company.

The dispute comes at a time when the federal government wants to open the industry to more foreign investment but its policy is unclear. It began last November when White Plains, N.Y.-based AboveNet, which owns and operates an optical network across the U.S., asked the Canadian Radio-television and Telecommunications Commission (CRTC) to declare its Canadian subsidiary, AboveNet Canada Inc., to be a telecom reseller.

A long-time customer of Telus, AboveNet has been leasing dark fibre from the telco for some time. But now it wants the subsidiary to sell dark and lit fibre here.

Dark fibre is a carrier’s unsold or unlit optical cable. Fibre becomes “lit” when connected to a laser transmitter and receiver.

It’s not uncommon for carriers to buy and sell dark fibre between each other to fill in gaps in geographic coverage. But they try to avoid letting buyers sell it to end users for competitive reasons.

Telus quickly filed an objection to AboveNet’s application with the commission. If AboveNet Canada attached electronics to light the leased fibre, the telco argued, it would be operating a transmission facility. Therefore, it concluded, AboveNet Canada would be a telecommunications common carrier, not a reseller.

The commission found it an argument interesting enough to start a closed door review. That’s because it has never ruled on whether a service provider that doesn’t own transmission facilities becomes a telecom operator when it lights and sells dark fibre leased from a third party.

The difference is crucial for two reasons: First, resellers of telecom services are exempt from being regulated by the commission, which controls only common carriers. Second, the Telecommunications Act specifies foreign ownership and control restrictions on telecom carriers. According to the CRTC notice of the issue, AboveNet Canada is a wholly-owned subsidiary of its American parent.

Should the commission rule AboveNet Canada is a carrier, that could make it ineligible to sell lit fibre unless it proves it is under Canadian control.

AboveNet didn’t reply to telephone and e-mail requests for comment.

The first question is whether AboveNet is a carrier.  The Telecommunications Act says a company that owns equipment that is limited to switching or controlling the speed or intelligence of a telecom signal isn’t a carrier.

In an interview,Mark Goldberg, a Thornhill, Ont.-based telecommunications consultant, noted that in 1998 the commission said that a reseller that acquired an indefeasible right of use (akin to a lease) to a submarine cable didn’t make a company a telecom carrier.

However, he also said the commission may have to look at the Telus-AboveNet lease to see if it details particular strands of fibre the provider gets, or just strands in general to determine if AboveNet has control of the infrastructure.

On the other hand, SeaBoard’s Iain Grant believes Telus has a good case because AboveNet Canada not only will have equipment that controls the intelligence of the signal, it will add to the intelligence by adding services. That would put it beyond the reseller exclusion of the Telecommunications Act, he believes. If Telus loses, Grant predicts, it will appeal to prevent resellers from lighting fibre.

Both consultants agree the case will end up as a foreign control battle, with Telus trying to torpedo AboveNet Canada over its U.S. control.

That was flatly denied by Telus spokesman Shawn Hall. “They’re a customer of ours. We sell them access. We want to make sure that access meets the rule, that’s all.” Telus, he said, is “indifferent” about whether AboveNet Canada is a reseller or a telecom carrier.

“Under the current terms of the Telecommunications Act, we’re not sure whether they can (resell lit fibre) or not, and are seeking clarity on that.”

Those wanting to file written submissions to the CRTC have to give notice by Monday, March 29. The deadline for submissions is April 19, with replies allowed until April 28. The commission says it will give a ruling by the end of August.