For years the federal telecom regulator has ordered incumbent phone companies to give independent Internet providers wholesale access to their legacy copper-based networks because they were the only game in town.
That has to end now that incumbents are spending hundreds of millions of dollars on new high speed fibre-optic networks, the head of one of the nation’s biggest phone companies said Monday.
With cable companies and new wireless broadband carriers there is so much competition for Internet, TV and phone service the commission can’t justify giving independent service providers (ISPs) regulated access to new ultra-fast networks, he said.
“In a competitive environment like this we must choose to whom we sell and distribute our products and at what price, just as any other competitive industry,” Cope said.
Bell, the incumbent phone company in much of Ontario and Quebec, and its sister company, Bell Aliant, are spending big money extending fibre optic to the neighborhood (known as FTTN) or to individual homes (FTTH) in part to offer IPTV and compete with cable companies in cities.
“With this investment we’re going to accelerate urban TV competition,” Cope said.
But if ISPs have access to fibre networks they will slow down enough that IPTV can’t be offered, he said.
Cope made it very clear if the CRTC hamstrings utility so it doesn’t get the return on investment needed to extend fibre the casualties will be low priority cities. Asked by one commissioner what will happen if Bell is ordered to give ISPs wholesale access to its fibre facilities, Cope was blunt.
“I know I will put London, Ont., on the backburner,” he said. “London will wait longer for those services.” He didn’t explain why. The southwestern Ontario city, home to the University of Western Ontario, has a population of 335,000.
Earlier this month Cope told financial analysts that Toronto and Montreal have new FTTN facilities and will be able to buy IPTV by the end of the year. By 2015 Bell and its partners hopes to extend fibre in some way to 5 million homes.
The appearance of the head of the telco was meant as an indication of how serious Bell believes the stakes are at the hearing. Usually lawyers represent companies before the commission.
For its part, the CRTC showed how serious it believes the issues are by assembling a panel of seven commissioners to decide the matter.
The hearing is a federal cabinet ordered review of a 2008 commission decision that phone and cable companies have to let wholesale buyers of Internet connectivity get access to and match the speeds the incumbents offer their own business and consumer subscribers. A 2009 decision made it clear that ruling applied to so-called next generation networks like fibre as well as legacy networks.
Most of the Internet service phone companies sell over their legacy lines uses ADSL technology, which offers maximum download speeds for businesses of 6 Mbps and 5 Mbps for residences. ISPs buy ADSL connectivity and resell it to their customers.
But Bell, Aliant and Telus Corp., the incumbent phone company in B.C. and Alberta, are shifting to fibre-based networks which offer potential speeds of up to 100 Mbps.
But ISPs say if they can’t match the speeds of the incumbents they’re future is dim.
The CRTC agreed, but in December the cabinet told the commission to re-examine its decision, paying closer attention to whether speed-matching will impair the ability of facilities-based carriers like telcos and cablecos to invest in new networks.
In its presentation Monday, Bell insisted on separating speed matching from fibre access. Speed matching, which it prefers, lets ISPs only offer exactly the same speeds as the provider it buys from at stepped rates – the higher the speed, the higher the incumbent charges. But one ISP later in the day said that won’t allow it to offer different products from the incumbents.
Cope stoutly resisted giving competitors what they want, which is access to a telco’s central office for ADSL services, an approach at the hearing called ADSL-CO. Cope explained ADSL-CO means an ISP gets full access to the telco’s entire bandwidth at only one price, leaving it free to undercut the telco.
To not to leave ISPs out to dry, it did suggest ways in which ISPs can access to copper based sub-loops near residences. However, ISPs would have to pay for some fibre infrastructure.
Cope also said that if mandated fibre access to ISPs is denied Bell will could still sell them unregulated access.
Bell wasn’t the only company to make a dire statement to the hearing. Andrew Day, chief operating officer of Toronto-based Primus Telecommunications Canada, told the commission that if it doesn’t mandate ADSL-CO service, “Primus will be effectively be forced out of the residential high speed Internet business within five years.” A unit of U.S.-based Primus Telecommunications Inc., Primus Canada has 1 million Internet, home phone and long distance subscribers across the country as well as seven data centres where businesses buy hosting and managed services.
To blunt the complaint that allowing ISPs access to new networks will slow investment by incumbents, ISPs are trying to show that it would spur investment.
For example, Day stressed that Primus Canada isn’t just reseller of Internet access from incumbents. It has spent hundreds of millions of dollars on its own infrastructure, he said. With a favourable decision Primus Canada will spend to extend its reach half of the country’s households from the current 21 per cent, Day said.
Other ISPs testifying Monday also made the same point. Rocky Gaudrault, CEO of Teksavvy Solutions Inc. of Chatham, Ont., said his company has 50,000 business and residential customers in four provinces. It’s even experimenting with building fibre to homes in small communities, although he admitted that his firm couldn’t afford to do it on a mass scale. But with access to more capital the company could not only expand geographically, it could also offer more Internet services, he said. That capital will only come with stable CRTC decisions that help ISPs, he said.
Broadband isn’t a service on its own, Gaudrault said, it’s a platform for building services such as voice over IP and IPTV. If Teksavvy gets access to ultra-high speed connectivity, it can build these services.
The ISPs also shrugged off promises from Bell that allowing fibre access and speed matching will affect their investment decisions. Local exchange carriers (ILECs) l will keep investing in fibre even if ISPs are given central office access, Primus’ Day maintained. “No matter what you do in this proceeding, they are not going to concede the market to the cable companies,” he said. “So please take their threat of infrastructure investment reduction with a large grain of salt.”
But in his presentation Bell’s Cope said that argument is merely proof that there’s lots of competition in much of the country.
The hearing in Gatineau, Que. is scheduled to finish Friday, but given the issues the CRTC has already set aside a few more days in case it goes on longer.