Cabinet agrees with CRTC on Ethernet

The federal Cabinet Friday has refused to overturn last year’s decision by the Canadian Radio-television and Telecommunications Commission (CRTC) to classify Ethernet services as essential services, whereby incumbent local exchange carriers would be told what to provide and at what price, to competitors.


Cabinet also told the CRTC to reconsider its refusal to allow Bell Canada Enterprises (BCE) Inc. to sell fibre to the node to retail customers at higher speeds than the wholesale digital subscriber line (DSL) connectivity it sells to independent Internet service providers.

Will this help consumers by forcing newer carriers to build their own networks? Or will it hurt competition by favouring the older incumbents, which for most of their history have been monopolies?
Winnipeg-based Manitoba Telecom Services (MTS) Inc., which provides competitive services outside Manitoba through its Allstream unit, immediately issued a press release decrying the decisions as a “setback for Canadian consumers and businesses.”


In both cases, the decisions resulted from Cabinet appeals by MTS and Bell Canada.


Johanne Lemay, co-president of Lemay-Yates Associates, a Montreal telecommunications consultancy, noted that in both cases Cabinet ruled against regulating prices.


“The Canadian government continues to believe in facilities-based competition at the expense of competition that would be increased from the wholesaling of facilities, and I think they’re very determined on that path,” she said. “They’ve been on this path for quite some time, and I think again they’ve determined this is the only path they want to go down.”


The rulings are good news for Bell and Telus Corp., she added.


The CRTC has been dealing with the Ethernet issue for nearly two years. In March, 2008, it issued decision 2008-17, which changed the regulations for wholesale services provided by incumbents to competitors. 

MTS Allstream asked the federal regulator to change its definition of essential services to include Ethernet, but a year ago, the CRTC refused. That was decision 2008-118.


Last March MTS Allstream appealed the decision to Cabinet, which is an option for carriers unhappy with CRTC decisions.


Friday’s separate decision by Cabinet allowing Globalive Wireless Management Corp. to begin operating a cellular carrier was the result of a different appeal, of a decision in October by the CRTC, which concluded that Globalive was effectively controlled by a foreign company.



“It appears the federal government is concerned there’s is not enough competition in wireless, but it doesn’t appear to have the same concern on wireline,” MTS spokesman Greg Burch said Friday night.


On Friday, the Cabinet issued an Order in Council stating Industry Minister Tony Clement will not overturn CRTC decision 2008-118, which effectively deregulated Ethernet services.


The broadband Internet services regulation it sent back to the CRTC was comprised of two separate but related CRTC rulings.


The first decision, no. 2008-117, is on matching speed requirements for wholesale Internet services. In 2008, ISP Cybersurf Corp. asked the CRTC to force incumbents to provide wholesale ADSL services at the same speeds that are available to the incumbent carriers’ retail customers. The CRTC approved part of Cybersurf’s application, but said it will only apply where a competitive carrier actually requests matching speeds.


The second order, 2009-111, said the first order does not apply only to copper-based services. That order resulted from Bell Canada’s interpretation that the matching speeds rule does not apply fibre to the node services. Bell Canada appealed that ruling to Cabinet, arguing that it should not have to provide wholesale services at the same speeds it is providing with fibre to the node.


So on Friday, Cabinet is asking the commission to reconsider the question of whether the matching speed requirements “unduly diminish the incentives to invest in new network infrastructure.” It also asked the CRTC to consider whether the rules put the incumbent providers at a competitive disadvantage and whether they “unduly impair” their ability to offer services such as Internet Protocol television (IPTV).


Lemay suggested the incumbents be happy with these rulings after losing the fight to keep Globalive from launching service.


But for business buying next-generation broadband telecom services it may mean less choice, she said.
“There’s still a number of business locations that are only served by one incumbent, and the ruling means you may not be able to get retail access (because) other carriers may not be able to resell that facility.”
The issue was the subject of a lively debate at last June’s Canadian Telecom Summit, an annual event co-produced by analysts Mark Goldberg and Michael Sone.
At that time, Mirko Bibic, senior vice-president for regulatory and government affairs at Bell Canada, said the CRTC decision on fibre to the node was an “obstacle to investment.”


He said Bell had to “re-evaluate” its fibre rollout plans, especially in small to mid-sized cities.


“After building from scratch, it’s completely inappropriate to give newcomers any access they want, at subsidized, low, mandates rates,” Bibic said at the time.  “This is tantamount to saying, ‘Heads, competitors win, and tails, facilities-based ISPs lose.”
The federal government opened up local phone service to competition in 1998. But within a few years the competitors started going under, with two filing for bankruptcy protection in April of 2001.

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