Primus warns it would leave residential Internet services if no unbundling

GATINEAU, Que.--Primus will be forced out of the residential Internet business within five years if the CRTC doesn't mandate wholesale unbundling, Andrew Day, chief operating officer with Primus Telecommunications Canada Inc., told commissioners at a hearing on wholesale high-speed Internet access Monday. Smaller Internet service providers like Primus asked the commission Monday to mandate access to "central-office" based aggregated DSL Internet service that they say would allow them to compete with the incumbent phone and cable companies on speeds and differentiate their services with added value. “If you do not mandate an ADSL-CO service, Primus will be effectively forced out of the residential high-speed Internet business within five years,” Day told the commission. “Speed matching is necessary while an ADSL-CO solution is being built out, but it will not let us offer any real differentiated choice to customers over the long run, so it is not enough on its own.” Primus uses unbundled copper "local loops" that are run directly from the central office of an incumbent local exchange carrier (ILEC)--phone companies like Bell Canada. The central office contains the fibre facilities of an Internet provider for the region. The more distance between a customer and the central office, the slower Internet download speeds. If a Primus customer is 5,000 metres from Bell’s central office, for example, the fastest Internet download speed Primus can offer that customer is 500 Kbps, the company says. Primus says access to Bell’s central office infrastructure would allow companies like itself to match Bell’s speeds. Christian Tacit, a partner with Tacit Law, representing the Internet service provider (ISP) TekSavvy Solutions Inc. (TSI), also urged the commission Monday to mandate access to high speed central-office based DLS service and speed matching--in which wholesale Internet buyers can offer speeds as fast as the incumbents. But incumbent phone company Bell Canada also addressed the CRTC Monday, where George Cope, president and CEO of BCE Inc. and Bell Canada, told the commission that there is sufficient competition in the residential Internet market, between large phone and cable companies, to negate the need for wholesale unbundling. Cope highlighted the investments that Bell, Telus Corp. and Rogers Communications Inc. have made in wireless Internet access over the past year through their HSPA+ networks. “Wireless changes everything,” Cope said. “With HSPA+ networks, the vast majority of Canadians, including thousands of rural communities, have access to high-speed broadband at speeds of up to 21 Mbps.” But Matt Stein, vice-president of network services with Primus, argued that wireless technology cannot replace wired Internet--even when it can offer similar download speeds. “It’s important to note that the cost delta relegates wireless to only the lightest of users,” Stein said. “Overcharges on wireline versus wireless are very different. A gigabyte costs 50 times as much over wireless as it does over wireline.” Mirko Bibic, Bell Canada’s senior vice-president of regulatory and government affairs, said granting competitors access to the company’s central offices would limit Bell’s opportunities to invest in its network and negate the large sums of capital the company has spent building it. “For one regulated price, which I will call subsidized because TekSavvy or others wouldn’t have to build that fibre themselves, the competitor would have access to absolutely all the speed capacity capable of being pushed through that fibre,” Bibic said. “With ADSL-CO, it doesn’t matter what we offer, the competitor has access to all the speed and all the capacity on that pipe, and now can significantly down-price the market. So if we’re charging X for 25 megs, they can charge less than X for 25. That fundamentally deteriorates the business case and our incentives to invest.” Bell suggested that the CRTC instead allow the incumbents to give wholesale Internet buyers access to a "sub-loop" that would connect to their networks. The sub-loop represents about the final kilometre of copper that connects to the central office. Access to it would allow competitors to build fibre from customers’ homes to a node within a kilometre from the central office. According to Bell, competitors could provide speeds comparable to the incumbent without direct access to their fibre facilities. “Access to sub-loops eliminates any possible argument in favour of ADSL-CO and wholesale speed matching,” Bibic said. On a procedural level, Tacit told the commission that the sub-loop suggestion--arising for the first time Monday morning--alarmed him. “It is very difficult to assess what this option means because it came so late in the proceeding,” he said. “We can’t test what it would look like, how it would be deployed, and what it would cost, so we’re kind of alarmed, frankly, that this kind of option would veer away from the real subject matter of the proceeding.” Tacit added that it's difficult for small Internet service providers to connect to sub-loops and that the idea hasn't proven to work in other countries. “You need land, you need power, you need AC. There are a whole bunch of reasons why this isn’t practical," he said. The commission also heard from Saskatchewan Telecommunications (SaskTel), the province's incumbent phone company, Monday. SaskTek, a crown corporation, asked the CRTC to put in place a 10-year "regulatory holiday" to prevent any wholesale access to its build out of fibre-to-the-home. “For us, it takes a 10-year period for our business case for fibre-to-the- to turn positive,” John Meldrum, SaskTel’s vice-president of regulatory affairs and corporate counsel, told the commission. Fibre-to-the-home, connections that Internet providers builds directly to its customers’ homes, is costly because of it involves a network of individual fibre optic lines. “Not only is this a lot of fibre, we also are no longer running it down highways, ditches and conduit,” Kym Wittal, SaskTel’s chief technology officer, said. “Now, we are digging up Mrs. Smith’s tulips. Except she won’t let us do that, so we have to directionally bore the fibre to her house. This, of course, costs even more.” Keith Stevens, chairman of Execulink Telecom, a small phone and Internet service provider, told the commission that he is strongly against the idea of a 10-year regulatory holiday for incumbents to experiment with fibre-to-the-home. “I think it’s a terrible position to have,” Stevens said. “There’s always going to be the next technology. What’s new today will be old tomorrow. If you’re always saying that the competitors have to wait 10 years, then we’ll never have competitors.” jmigneault@thewirereport.ca

Primus warns it would leave residential Internet services if no unbundling

News | June 1, 2010

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