CRTC reduces number of interconnection points in network of networks proceeding

New entrants to the telephony game are cheering a belated decision by the CRTC to reduce the number of points at which they’ll have to connect to the incumbents’ phone networks to provide service. On July 14, the commission released its ruling in what was dubbed the "network of networks" public process, announcing in Telecom Decision 2004-46 that incumbent telcos must consolidate their local exchanges into newly created local interconnection regions (LIRs). New entrants are still examining the ruling to determine what effect it will have on their business plans, but say the ruling generally strikes the right note of continued regulation of the incumbents, even if they don’t expect the ruling to be Earth-shattering in the near-term. Now, Bell Canada says the CLECs and potential VoIP competitors have the right regulatory conditions to compete vigorously, a situation which demands that the commission re-visit its approach to regulation with a view to putting fewer burdens on it. CLECs predictably disagree. The ruling puts to rest over three years of haggling between various players regarding how CLECs would interconnect with the incumbents’ networks, and has the potential to create greater efficiencies for new entrants to the telephony market. But competitors to Bell Canada, TELUS and other ILECs will have to determine how to take advantage of the new single points of interconnection without losing the investment they already have in exchange-based arrangements. The new LIRs will be largely based on provincially defined administrative regions such as municipalities, counties, regional districts and the like. In its ruling, the CRTC outlines its reasoning for using these to define where ILECs will have to provide a single point of interconnection: "The commission notes that these boundaries are not reliant on any network architecture and are therefore competitively neutral. These boundaries are well specified, readily identifiable and are associated with economic, social and political interests. They also allow the consolidation of exchanges into LIRs without creating too large an interconnection region." While the multiple exchanges will now be consolidated into fewer LIRs, the commission has ruled that service transport and termination, toll originating, 911 and message relay service traffic will remain on separate trunks, dulling the edge this decision might have had, say competitive providers. Michael Hennessy, president of the Canadian Cable Television Association (CCTA) tells Network Letter that cablecos generally applaud the ruling. "I would say the fundamental decision on points of interconnection we’re very pleased with. We didn’t win everything we wanted, but we think it’s a well-balanced decision going in the right way. We’re pleased that the commission is going to review Cogeco’s issue on 911 through the (CRTC Interconnection Steering Committee). I think we still hope that we could simplify things by not having to have separate trunk groups. I’m a little worried about that in terms of the economies for smaller systems. But, I think we have to give a lot of credit to the commission for the direction they’re moving in. We often don’t give them credit when we’re mad on various files," Hennessy says. He adds that he’s encouraged that the commission also recognized the key role interconnection plays in determining competitiveness. Chris Peirce, senior VP, regulatory and government at Allstream Corp., echoes Hennessy’s reaction. "Overall, we’d say it’s a modest decision. And I think we probably wonder why it took three years to come up with this," he says. "By and large, they have left things largely status quo. I think in terms of language and perspective, it’s good. It continues to describe the fact that despite Bell’s hype the other way, that they are the dominant local providers and that the commission has to stay focused on how to encourage access by competitive providers, whether they’re competitive providers who are already there like us, or ones who are saying they’re going to come along, like cable or VoIP providers. So that’s good. "The language is consistent. They haven’t suddenly started to (agree with) Bell’s language that the landscape has changed so much that we’ve been looking at competition in the wrong way, and actually there is a strongly competitive market. This decision is not consistent with that talk. That’s good – that they haven’t been snowed by the PR campaign of the last couple of months," Peirce says. "And the general direction is good in terms of not making us continue to try and replicate the incumbent network. The problem with how the commission has used the term facilities-based competition has laid in a perceived expectation that we would build out the same kind of network that the incumbents have built out, which we have always said makes no sense. Of course, as you read the decision, they do specifically sort of rebuke that notion." Mirko Bibic, chief of regulatory affairs at Bell Canada, acknowledges that the decision is good news for its competitors. "It remains to be seen what Allstream’s going to plan, what Call-Net (Enterprises Inc.)’s going to plan. But, certainly, now, Rogers (Communications Inc.) was saying it’s going to be too expensive for us to provide local service and have to interconnect at each and every exchange where we want to provide service. This was one of the regulatory conditions they were clamouring for. Well, they have it. Now all they have to do is create one point of interconnection in each of these local interconnection region," he says. " certainly my perspective or Bell’s perspective that it’s time to take it to the next step in building a kind of fair, efficient and modern regulatory model. And what I was thinking is things like this: they’ve got the interconnection regime they wanted so now let’s start addressing symmetrical regulation between cablecos and telcos," he says. "Rogers now ought to come in and we can talk about the terms and conditions for local telephony forbearance. With the wholesale pieces in place, let’s focus on a lighter regulatory touch for the ILECs on the retail side. And, it’s going to be important as we roll out next generation IP services where barriers to entry are low. On the more traditional circuit-switched business, you have wholesale protections including this decision. Is there still a need to have heavy retail regulation of the ILECs? I’m not talking total deregulation, I’m saying if you have the wholesale protections, do you really need all you need on the retail side?" Not surprisingly, both Peirce and Hennessy disagree. Says Hennessy, "I think that the idea that we have to move on to more symmetrical regulation is silly…(Y)ou can’t have symmetry until you have another facilities-based competitor in the market. And, we don’t. So, to look at the rules for symmetry when it’s still 97% of the local market is controlled by Bell and the other telephone companies makes no sense. You have to create a competitive environment before you start looking at issues of reduced regulation for the monopolist. You break up the monopoly first, then you talk about reduced regulation. Not the other way around." Peirce agrees with his cableco counterpart, saying: "Answer? No. This is probably consistent with VoIP to come and, I think, this is consistent with the commission continuing to see a need to regulate – as we’ve said they need to and as they’ve said their first view is – to regulate the dominant providers. This decision’s consistent with a view of Bell and TELUS as needing regulation because they are dominant and, for our part, we recognize that MTS within Manitoba is exactly that. We’ll continue to await CDNA, of course, and we continue to await continued tariffed access to next generation networks. This decision, I think, paves the way for those. It leaves those questions unanswered and those things are all in front of the commission. I know that Bell seems to be waiting for just a tidy closing of the CRTC’s business and a passing over of that to the Competition Bureau, but I don’t see that happening."

CRTC reduces number of interconnection points in network of networks proceeding

News | July 20, 2004

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