Telus gets testy at CRTC speed matching hearing

Most public hearings before the federal telecom regulator are fairly polite, but a battle this week between phone companies, cable companies and independent Internet providers has become so heated that someone loudly complained the discussion was “bullshit.”

The outburst came Thursday as MTS Allstream Inc. chief corporate officer Chris Peirce said it has been almost impossible to negotiate a deal with Telus or BCE Inc.’s Bell Canada to access non-essential high speed services.

Over the years the Canadian Radio-television and Telecommunications Commission (CRTC) said certain services incumbent local phone companies (ILECs) offered are no longer essential and therefore could be accessed by competitors. Allstream, based in Manitoba, has been expanding its business services across the country and would like to lease some of those high speed services.

But Peirce said Bell and Telus will only talk about selling end-to-end services, which are uneconomic. It’s not that there are no deals, Pierce said: MTS pays the two phone companies over of $200 million a year for other types of connectivity.

“But after seven years we know that [a deal for] unbundled broadband access is not coming.”

Asked bluntly by commission member Leonard Katz if Telus and Bell’s won’t negotiate unbundled access under any condition — Katz didn’t define access to which services – Telus senior vice-president Michael Hennessy said Peirce knows MTS has just negotiated a “significant” and “very sizable” but confidential arrangement with his company.

“I take significant exception to the tone and allegations of what he [Peirce] is saying,” Hennessy said.

“Of course I’m not suggesting that we don’t use all sorts of services from both Telus and Bell,” replied Peirce. “But what I’m saying is they have not been prepared to negotiate unbundled access to Ethernet ….”

Katz interrupted to ask again if Bell and Telus are willing to negotiate access to any unbundled services.

“We don’t have to negotiate that with Mr. Peirce,” Hennessy replied, “because there are substitutes in the marketplace.” One of the grounds on which the commission unbundles services from ILECs is that they can be duplicated by competitors.

“So your company’s not prepared to negotiate,” said Katz.

“We’ll negotiate anything,” Hennessy replied testily. “I just told you we negotiated a big deal with them. Bite me.”

Someone close a microphone then said, “This is bullshit.”

At that point, commission chairman Konrad von Finckenstein stepped in. “Mr. Hennessy, let me put the question to you unequivocally .What we want to know is are you prepared to negotiate non-essential services, which obviously include Internet access, with MTS, yes or no?”
Hennessy sighed. “I can’t give you a yes or no. That depends on whether or not whether MTS is prepared to negotiate things we need to access in their province or not.”

At issue in this bit of fireworks is whether incumbents are willing to let competitors have access to their newest and fastest networks, which they believe are crucial to their survival. Bell and Telus are just rolling out fibre to the neighborhood (FTTN) and fibre to the home (FTTH) to compete with the ultra-fast Interet speeds cable companies are offering as well as to be able to offer Internet television (IPTV).

The hearing, which started Monday, has to decide whether the commission should order phone and cable companies to give wholesale access to the newest networks of incumbents. In 2008 commission said yes, and in 2009 made it clear speed matching and access not only applied to the telcos’ legacy copper-based networks but also to the new fibre-based ones.

However, last December the federal cabinet ordered a re-hearing, saying the commission had to put more weight on whether speed matching would impair the ability of incumbents to invest in new networks.

This week independent service providers (ISPs) have raised number of complaints about incumbents to buttress their demand for speed matching to boost broadband competition, including allegations – like Peirce’s – that incumbents drag their heels on negotiating access deals.

Hovering over the hearing is not only the cabinet directive that the CRTC consider the risk a speed matching ruling will have on incumbents, but also the Harper government’s 2006 directive to the commission that it rely on market forces as much as possible – a directive incumbents never fail to remind the commission of at every hearing.

A number of industry observers believe the directive is cabinet’s way of saying the regulator should lean towards facilities-based providers – telcos and cablecos – at the expense of those who want to buy wholesale access and resell telecom services to others.

The rigidity of the incumbents’ positions got to commission member Timothy Denton, who – admitting he was being “tendentious” — summarized them as “Crush the weak, feed the strong, that’s nature’s way don’t tell me it’s wrong.”

It’s not only being said in the hearing room, he added, it’s being said around Ottawa: The telcommunications industry would be better with only large facilities-based providers.

So Denton put it squarely to them: “Are you not asking us something very bold,” he said, “which is to stake the future on telcos and cable?”

Ken Engelhart, Rogers’ vice-president of regulatory affairs, replied by noting that under deregulation cable companies quickly captured 25 per cent of the local phone market from the telcos. “No real regulatory muss or fuss,” he said. “We just did it.”

“I think you’re perceiving a hostility towards small players that I don’t think is correct,” he told Denton. “I think small players have been and continue to be a very vibrant part of the larger communications sector. I just think the commission needs to ask itself to what extent the regulated wholesale model is the right model.”

But, Denton said of ISPs, “Once they’re gone, they’re gone, and they won’t resurrect.”

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