And then there was two: Bell Canada seeks to wipe out ISP competitors

This seems to be the week when core Internet issues are beingdiscussed. While much of it is under the phrase “Network Neutrality”,that term is confusing enough that opponents are able to distractpolicy makers and citizens. This is why my article on Saturday focusedon separating the competitive access issues from the Net Neutrality issues, and my earlier article discussed An ideal future communications infrastructure, how do we get there, and what is stopping us!.

The last few days saw Charlie Angus raise this issue during question period, and an article from CBC talking about Bell Canada going to court to seek to wipe out all ISP competitors. That is, except the cable companies who manage a separate connection to the customer premises.

The link between these two events can be seen in the non-reply thatCharlie Angus got from Industry Minister Jim Prentice. After beingasked a question about throttling, the Minister stated:

“Mr. Speaker, for the edification of my friend, the Internet is notregulated in Canada. We continue to monitor the discussion that istaking place, but there is no regulation of the relationship betweenInternet providers and consumers.”

This answer is wrong on two fronts.

First, the issue is a third party (the last mile monopoly) insertingtheir own policy between Internet providers and consumers. In thesecases the phone company is not the Internet provider at all. TheMinister cannot leave this to market forces given market forces onlywork in a competitive market, and there is a natural monopoly on that“last mile” to the customer premises. The only way a market can existat all is if the government regulates (or outright owns and manages, asI proposed earlier) that last mile connection.

Second, the question related to the throttling of wholesalecustomers of the phone companies, with the wholesale market created byCRTC regulation in 1997. You can read the CRTC release from March 3titled “Revised regulatory framework for wholesale services and definition of essential service” to get an idea of how this regulation works.

Without the CRTC stepping in and mandating that competitors haveaccess to the facilities and certain services from the incumbent phonecompanies, these competing ISPs could not exist.

In the CBC article, Bell is claiming that there is adequatecompetition without the CRTC mandating access to their “networks”. Thistoo is wrong on two fronts:

First, it is not access to the wider networks that is the issue, butaccess to that “last mile” connection into the customer premises. Whena company like Teksavvy hiresBell as a wholesale DSL provider it is only hiring a connection betweenthe customer premises and the Teksavvy facilities. Within thisconnection it isn’t really “Internet” traffic at all yet, but apoint-to-point connection (not unlike a leased line or other type ofconnection) between the customer and the ISP (Teksavvy — Bell isn’tacting as an ISP at this point at all!). From that point onward thecompeting ISP builds their own network, and through various businessdecisions sets the policy for that network.

It is misleading for Bell to suggest that these competitors are notbuilding their own networks. If it costs less money for a competitor tohire connectivity from Bell for services unrelated to competitiveaccess than to light up some dark fiber, then why wouldn’t they beexpected to utilize that service? By suggesting that competitors wouldalways build out their own networks (everything except the last milemonopoly), Bell is almost suggesting they should be treated as aninferior supplier of these services — bad enough that customers wouldbe driven elsewhere.

The second aspect of the claim from Bell is familiar, which is thatbecause cable and cellular companies exist, that between them there isadequate competition. The cable companies only represent a second “lastmile” connection into the customer premises, and most of the cellulartowers are owned by the incumbent phone and cable companies.

This argument is familiar to me. I was a witness in front of the Standing Committee on Industry, Science and Technology on May 4, 2004to discuss Bill C-2. The discussion was about satellite televisionbroadcasting, and the duopoly of Bell ExpressVu and Star ChoiceCommunications Inc.

At least one parliamentarian had a concern with the word “duopoly”.Hon. David Collenette said that, “The last time I ran into duopolies,two major airlines were artificially keeping prices up and limitingchoices for Canadians.”

The “answer” from Mr. Phil Rogers was: “the Canadian broadcastingsystem consists of a large number of distribution undertakings. We havetwo satellite undertakings that are authorized and several hundredcable companies that are all authorized to distribute that type ofprogramming, whether it be Canadian or foreign programming.”

He was including the various cable companies (almost always one perregion) as competition to the satellite. That is equivalent toincluding all the municipal bus systems (almost always one per region)in the discussion of the duopoly that existed in the airline industry.The suggestion that someone is going to move to a new city to getbetter municipal bus or cable service (or that either had anything todo with airline or satellite services) is absurd, but it was the basisof Mr. Rogers answer.

It is also the absurd suggestion that Bell Canada is making today.For any given customer premises there will be wires into the premisesof at most one cable company and at most one phone company, with manylocations outside of the urban core not even having both choices. We donot have, nor does it make sense to have, separate physical wires foreach possible competitor under the roads in every municipality.

Bell’s challenge of the CRTC regulation (yes, the regulation thatMinister Prentice doesn’t seem aware exists) brings up an interestingquestion that the CRTC needs to answer. If the phone companies whichmanage “last mile” connections to customer premises are mandated, thenwhy is the same regulation not being applied to cable companies aswell? Both the phone and cable companies talk about convergence,suggesting that phone and cable companies are increasingly offering thesame services. If this is the case (and I agree it is), why are theynot regulated the same way with cable companies mandated to offercompetitive access to facilities and wholesale services to competitorsas well?

Please note that I use the phrase “manage last mile connections”.These connections travel under our municipalities, and can only be putthere with the permission of the municipality. I believe the superiorownership right is that of the municipality, not the company who “paidfor” (often subsidized/protected by taxpayers/governments) and thenmanages the wires/fiber/etc. While the municipality can easily puttheir own connections under our streets without needing to involve aphone or cable company, the phone and cable companies can do nothingwithout the permission of either the municipality or the interventionof the provincial or federal government. I fully reject the suggestionthat the phone/cable companies “own” the last-mile connections and thusshould be able to do anything they want with them.

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