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Teresa Griffin-Muir Vice President, Regulatory Affairs Vice-présidente des Affaires réglementaires MTS Allstream Inc.
28 March 2011 Mr. Robert A. Morin Secretary General Canadian Radio-television and Telecommunications Commission Ottawa, ON K1A 0N2 Dear Mr. Morin:
by Access Key
Subject: TNC 2011-77, Call for comments – Review of billing practices for wholesale residential high-speed access services – MTS Allstream comments 1. Pursuant to paragraph 18 of Telecom Notice of Consultation CRTC 2011-77, Call for comments – Review of billing practices for wholesale residential high-speed access services, 8 February 2011 (TNC 2011-77), MTS Allstream Inc. (MTS Allstream) is providing the following comments regarding the terms upon which large incumbent carriers should be allowed to provide wholesale high-speed Internet access to independent Internet service providers (ISPs). 2. In its 22 February 2011 comments on the scope of the TNC 2011-77 proceeding, MTS Allstream indicated that the Commission needs to address the fundamental issues regarding the nature of wholesale broadband access services. As the Commission noted in its 11 March 2011 letter addressing requests to modify the scope and terms of the proceeding, MTS Allstream requested that the TNC 2011-77 proceeding be revised to include additional questions regarding such issues as network congestion and capacity. In the letter, the Commission also agreed that the issues raised by MTS Allstream can be addressed in the context of the proceeding. 3. During the two years since Bell Aliant Regional Communications, Limited Partnership and Bell Canada (collectively, Bell) filed tariff notices (TNs) 242 and 7181, requesting the ability to apply usage-based billing (UBB) to residential accesses on Bell’s wholesale Gateway Access Service (GAS), it has become increasingly apparent that there is no
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common understanding of the facts and the rationale for wholesale access has become obscured. 4. As Minister Clement stated in his comments to the Industry Committee, affordability and choice are central to the ongoing dialogue. Only a robust wholesale framework that provides competitive local exchange carriers (CLECs), independent ISPs and all other competitors with economically viable access to broadband facilities will ensure this. 5. Therefore, the Commission needs to ensure that: a. any rating structure for wholesale high-speed Internet access services reflect the cost of providing that access, plus a reasonable mark-up, irrespective of whether a flat-rated or usage-sensitive pricing approach is used; and b. if a usage-based approach is implemented for wholesale accesses any applicable usage cap must be based on the aggregate capacity purchased by an independent ISP and it must be based on verifiable metrics, not simply the whim of the ILEC. 6. Independent ISPs, like CLECs, are competitors equal in stature to incumbent carriers. Bell has mischaracterized competitors that use GAS to provide the end-user access for their respective Internet services as resellers of Bell’s retail Internet services. This is just not the case, as is clear from a reading of the Commission’s definition of “simple resale”, which it defines in Decision 2005-6 “as resale without added value and notes that simple resale includes rebilling.” 1 7. CLECs and independent ISPs, on the other hand, add substantial value and are responsible for all the ancillary components that make up an Internet service and that are included in Bell’s retail rates. These include such things as email addresses and storage capacity, security features, parental controls and portal services. GAS only
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provides the “last mile” access and the aggregation necessary for competitors to reach the end-users. 8. As MTS Allstream and others have repeatedly pointed out, aggregated broadband access services, such as GAS, are the only way in which competitors can reach all of the end-users that the incumbent carriers are able to serve with their retail broadband services. The Commission, like other regulators around the world, has consistently found that access is not economically duplicable on a widespread basis. Therefore, in the Internet services market independent ISPs, like CLECs in the local exchange market, need to be recognized as competitors equal in stature to incumbent carriers. 2 9. As Industry Minister Clement noted during his appearance before the Industry Committee: The question of network congestion, whether it in fact exists, and if it exists at a level incumbent ISPs claim, is a subject of some debate. What is clear, however, is that there is nothing transparent about applying or imposing usage-based billing on independent ISPs. There's nothing transparent about how the imposition of this business model has any direct correlation to the real costs of provision of wholesale services. 3 The latter part of this statement points to several significant problems with Bell’s proposed implementation of UBB on GAS. 10. CLECs and independent ISPs purchase both access and aggregate network bandwidth (capacity) when they use Bell’s wholesale GAS. How an ISP distributes this capacity between individual end-customers should be its own prerogative, not that of Bell. Yet under its UBB proposal, Bell would treat each ISP's end-customer that is served over a
Telecom Decision CRTC 2005-6, Competitor Digital Network Services, 3 February 2005 (Decision 2005-6), paragraph 248. In Telecom Decision CRTC 97-8, Local competition, 1 May 1997 (Decision 97-8), the Commission adopted the principle that CLECs are not simply customers of incumbent local exchange carriers (ILECs) but are carriers equal in stature to the ILECs in the local exchange market. This same principle needs to be adopted with respect to independent ISPs.
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GAS access as though the customer were Bell’s own retail end-user. As a result, an independent ISP would be required to pay usage charges for each one of its end-customers that exceeds Bell’s arbitrary usage cap. This payment would have to be made even when the ISP is already purchasing more than sufficient capacity to handle its retail volumes in aggregate. In effect, Bell would be allowed to charge an ISP multiple times for the same capacity. 11. Furthermore, not only are independent ISPs paying Bell for aggregate capacity on GAS through the flat-rated monthly charges, but those rates are based on costs developed using estimates of average peak period demand, as Bell described in The Companies(CRTC)20Aug09 8 TN 242 & 7181. Therefore, independent ISPs are already paying their proportionate share of Bell’s costs to provide peak period bandwidth on its network. The Commission has acknowledged as much, noting that under Bell’s UBB proposal it would continue to recover its access costs and all usage costs from the flat-rate component. 4 Since the flat-rate component of GAS already recovers Bell’s costs to provide the service, independent ISPs would simply be contributing money to Bell’s bottom line, if forced to pay UBB charges consistent with Bell’s proposal. 12. In light of this and as outlined in MTS Allstream's 22 February 2011 letter, the Commission, at a minimum, must assure itself of the following facts prior to implementing wholesale UBB: i. ii. The existence of congestion on the Bell network; The configuration of the Bell network, the traffic that rides on the shared network and the location of choke points within that network and the hand-off of traffic from the Bell network to the “Internet”;
Emphasis added. Telecom Decision CRTC 2010-255, Bell Aliant Regional Communications, Limited Partnership and Bell Canada – Applications to introduce usage-based billing and other changes to Gateway Access Services, 6 May 2010, paragraph 54.
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The Bell GAS service including the differences between GAS and retail internet access service, the structure of the Bell GAS tariff and the fact that within the current tariff competitors pay for access and capacity, the current mark-up incorporated in the price of GAS, and the implication of the proposed wholesale UBB on retail pricing;
The actual cost of capacity and whether the imposition of UBB on wholesale access, and in this instance specifically GAS as proposed by Bell, actually even addresses the so-called “subsidization” by low volume Internet users of higher volume Internet users; and
The relationship between increasing demand and network costs.
Congestion is specific to time and place. No properly provisioned telecommunications network is congested everywhere or at all times. Detailed scrutiny of Bell’s claims that there is congestion in its network during peak periods, is required to pinpoint to exactly where and when this alleged congestion is occurring.
Even the existence of congestion on an ongoing basis has not been adequately established. During his appearance before the Industry Committee, Bell Canada’s Senior Vice-President Regulatory and Government Affairs made the claim that in a 2008 decision the Commission was satisfied that Bell had established that there was congestion in its network during peak periods. The Commission appears to be taking this on faith, seemingly on the basis of Bell’s assertion that: … P2P file-sharing applications are designed to make the maximum use of downstream and upstream bandwidth and to use up additional capacity in the network as it becomes available. The Commission considers that intensive use of such applications could, during periods of high Internet
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traffic, result in network congestion and degrade the performance of Internet services for other end-users. 5 15. However, this is far from proof that congestion actually existed. Nor, even if there were periods of congestion at that time, that there continues to be today. As Bell itself is quick to point out, it has been investing heavily in upgrading its broadband networks. Failure to do so would put it at a disadvantage relative to the cable incumbents. 16. As many parties have noted, applying UBB in the manner Bell is proposing, irrespective of whether the excess usage is during the peak period or not, does nothing to solve what Bell claims is the problem requiring it to implement UBB in the first place – congestion during the busy period. Nor is there any indication, other than Bell’s own statements, that CLECs’ and independent ISPs’ customers, which Bell admits are few in number, are contributing any more heavily to peak period demand than Bell’s own retail customers which form the vast bulk of end-users. 17. Finally, just as the newer technologies being deployed today are increasing the speeds at which data can be transmitted and the capacity of the networks over which that data is transported, they are also substantially reducing the associated costs. The Senior Vice-President Regulatory Affairs for Shaw Communications Inc. (Shaw) alluded to this during his appearance before the Industry Committee, indicating that when Shaw launched its retail high-speed Internet service, it had a download speed of 1.5 Mbps for under $55 per month, while that same service today has a download speed of 7.5 Mbps for under $40. The reason for this is not that Shaw has altruistically decided to give its retail customers a break, but rather is predicated on the fact that costs have fallen dramatically along with the increase in speed. 18. In other words, although the amount of data being transmitted across the Internet is growing rapidly, the time required to transmit that data is decreasing at least as quickly, since service and network speeds are increasing at the same time, as service providers
Telecom Decision CRTC 2008-108, The Canadian Association of Internet Providers' application regarding Bell
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upgrade to newer technologies. Congestion is a function not just of the amount of data being transmitted, but also of the speed at which it is transported. As a recent graphic in the Globe and Mail demonstrated, a 120 MB music file that takes more than 13 minutes to download over a 1.5 Mbps Internet connection would take only 18 seconds at 70 Mbps. Similarly, the time to download a 700 MB video file would be reduced from 79.7 minutes to 103 seconds – less than 2 minutes. 6 19. The solution lies in ensuring that there is adequate competition. As long as this is the case, incumbents, like all other service providers, may implement whatever type of pricing options they wish for their retail Internet plans. However, there is no valid rationale for allowing incumbents to do the same with respect to wholesale access. Permitting Bell to implement its UBB proposal, regardless of any level of discount for the UBB charge relative to the analogous retail charge, would be tantamount to sanctioning retail price fixing – allowing Bell to dictate the price structure and levels that its competitors, independent ISPs, can charge in the retail marketplace. In order to have any control over its costs, an independent ISP would have to be satisfied with addressing a small, and shrinking, segment of the market – those end-customers that can be served directly over an unbundled local loop – or follow Bell’s lead and implement the same usage caps and additional usage charges. 20. This is especially pernicious since retail Internet prices are not rate regulated, so the Commission has neither the oversight nor the visibility to Bell’s pricing. Yet, in effect, Bell would be able to “regulate” the retail prices of its competitors by setting a price floor for its competitors, while Bell itself can target potential retail customers with whatever types of deals it wants with no regulatory oversight on retail. The Commission would have no way of determining whether Bell was behaving in an anticompetitive manner until it was far too late.
Canada's traffic shaping of its wholesale Gateway Access Service, 20 November 2008, paragraph 30. Globe and Mail Infographic, Our growing data appetite, 6 February 2011, http://www.theglobeandmail.com/news/technology/tech-news/ubb-internet/our-growing-dataappetite/article1896708/?from=1938694.
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Wholesale pricing for mandated access must be based on the cost of making the service or facility available to independent ISPs, not on “retail equivalency” or some notion of “value of service”. This is true whether the pricing model used is a flat-rated one or a usage-sensitive one. There has to be recognition that it is not economically possible to duplicate incumbent broadband networks and the regulatory framework must provide for competitor access to those networks at reasonably economic rates. In order to incent competition in the retail Internet market, CLECs and independent ISPs need access to broadband capacity on the same basis as the incumbents – on a competitively and technologically neutral basis.
Anything other than cost-based rates is untenable. Cost-based rates allow incumbents to make an adequate return on their investment in broadband facilities, while allowing competitors to develop their own service offerings without being restricted by a structure forced on them by the incumbent. Bell’s UBB proposal would impose a pricing structure on competitors' retail broadband services and stifle competition. Cost-based wholesale access to broadband facilities, on the other hand, will stimulate competition, which in turn will encourage innovation.
In his statement to the Industry Committee, Minister Clement noted: … But if we lose sight of the consumer I think we lose sight of something critically important to the success of the digital economy strategy and of the economy more generally. Now what do I mean by that. Well it's clear that more competition and more choice for consumers help the adoption of the digital economy, it helps us to be competitive. It helps us to be innovative. It helps us to be creative as citizens and it also helps our small businesses to succeed. All of these things are going to be necessary for a society that is built on the knowledge economy.
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As was made clear during the proceeding leading up to the Broadband Access Policy, 7 independent ISPs are an important source of innovation in the Canadian economy. Often times these smaller competitors are able to develop new niche applications that would not be worthwhile for an incumbent to address. If access to broadband facilities at reasonable rates is not guaranteed, this important source of innovation could be lost.
It is also important to note that Bell’s UBB proposal for wholesale GAS is flawed not only in that the proposed usage rates are excessive, but in that the usage caps are totally arbitrary, being based on what Bell deems to be acceptable in the retail market. This is not appropriate in the wholesale market. Any usage cap must be based on the aggregate capacity that a competitor purchases from the incumbent. There must also be some valid rationale for the cap, not simply an arbitrary decision by the incumbent that can be changed at will.
for Teresa Griffin-Muir Vice President, Regulatory Affairs c.c.: Pauline Jessome, MTS Allstream (613) 688-8791 Lynne Fancy, CRTC firstname.lastname@example.org Tom Vilmansen, CRTC email@example.com Parties to TNC 2011-77 * * * End of Document * * *
Telecom Regulatory Policy CRTC 2010-632, Wholesale high-speed access services proceeding, 30 August 2010 (the Broadband Access Policy).
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