This seems to be the week when core Internet issues are being
discussed. While much of it is under the phrase “Network Neutrality”,
that term is confusing enough that opponents are able to distract
policy makers and citizens. This is why my article on Saturday focused
on 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 that
Charlie Angus got from Industry Minister Jim Prentice. After being
asked a question about throttling, the Minister stated:
“Mr. Speaker, for the edification of my friend, the Internet is not
regulated in Canada. We continue to monitor the discussion that is
taking place, but there is no regulation of the relationship between
Internet providers and consumers.”
This answer is wrong on two fronts.
First, the issue is a third party (the last mile monopoly) inserting
their own policy between Internet providers and consumers. In these
cases the phone company is not the Internet provider at all. The
Minister cannot leave this to market forces given market forces only
work in a competitive market, and there is a natural monopoly on that
“last mile” to the customer premises. The only way a market can exist
at all is if the government regulates (or outright owns and manages, as
I proposed earlier) that last mile connection.
Second, the question related to the throttling of wholesale
customers of the phone companies, with the wholesale market created by
CRTC regulation in 1997. You can read the CRTC release from March 3
titled “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 have
access to the facilities and certain services from the incumbent phone
companies, these competing ISPs could not exist.
In the CBC article, Bell is claiming that there is adequate
competition without the CRTC mandating access to their “networks”. This
too is wrong on two fronts:
First, it is not access to the wider networks that is the issue, but
access to that “last mile” connection into the customer premises. When
a company like Teksavvy hires
Bell as a wholesale DSL provider it is only hiring a connection between
the customer premises and the Teksavvy facilities. Within this
connection it isn’t really “Internet” traffic at all yet, but a
point-to-point connection (not unlike a leased line or other type of
connection) between the customer and the ISP (Teksavvy — Bell isn’t
acting as an ISP at this point at all!). From that point onward the
competing ISP builds their own network, and through various business
decisions sets the policy for that network.
It is misleading for Bell to suggest that these competitors are not
building their own networks. If it costs less money for a competitor to
hire connectivity from Bell for services unrelated to competitive
access than to light up some dark fiber, then why wouldn’t they be
expected to utilize that service? By suggesting that competitors would
always build out their own networks (everything except the last mile
monopoly), Bell is almost suggesting they should be treated as an
inferior supplier of these services — bad enough that customers would
be driven elsewhere.
The second aspect of the claim from Bell is familiar, which is that
because cable and cellular companies exist, that between them there is
adequate competition. The cable companies only represent a second “last
mile” connection into the customer premises, and most of the cellular
towers 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, 2004
to discuss Bill C-2. The discussion was about satellite television
broadcasting, and the duopoly of Bell ExpressVu and Star Choice
Communications 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 limiting
choices for Canadians.”
The “answer” from Mr. Phil Rogers was: “the Canadian broadcasting
system consists of a large number of distribution undertakings. We have
two satellite undertakings that are authorized and several hundred
cable companies that are all authorized to distribute that type of
programming, whether it be Canadian or foreign programming.”
He was including the various cable companies (almost always one per
region) as competition to the satellite. That is equivalent to
including 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 get
better municipal bus or cable service (or that either had anything to
do with airline or satellite services) is absurd, but it was the basis
of 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 premises
of at most one cable company and at most one phone company, with many
locations outside of the urban core not even having both choices. We do
not have, nor does it make sense to have, separate physical wires for
each possible competitor under the roads in every municipality.
Bell’s challenge of the CRTC regulation (yes, the regulation that
Minister Prentice doesn’t seem aware exists) brings up an interesting
question that the CRTC needs to answer. If the phone companies which
manage “last mile” connections to customer premises are mandated, then
why is the same regulation not being applied to cable companies as
well? Both the phone and cable companies talk about convergence,
suggesting that phone and cable companies are increasingly offering the
same services. If this is the case (and I agree it is), why are they
not regulated the same way with cable companies mandated to offer
competitive access to facilities and wholesale services to competitors
as well?
Please note that I use the phrase “manage last mile connections”.
These connections travel under our municipalities, and can only be put
there with the permission of the municipality. I believe the superior
ownership right is that of the municipality, not the company who “paid
for” (often subsidized/protected by taxpayers/governments) and then
manages the wires/fiber/etc. While the municipality can easily put
their own connections under our streets without needing to involve a
phone or cable company, the phone and cable companies can do nothing
without the permission of either the municipality or the intervention
of the provincial or federal government. I fully reject the suggestion
that the phone/cable companies “own” the last-mile connections and thus
should be able to do anything they want with them.
