Telus says network unbundling would hobble its ability to compete with cable TV services

GATINEAU, Que.--Telus Corp. told the CRTC Tuesday that regulations forcing it to unbundle its high-speed Internet infrastructure to third-party wholesale buyers would hobble its ability to compete with cable television using Internet protocol television (IPTV). “If we were forced to unbundle and provide a certain amount of fixed bandwidth to an ISP , what that does is it limits our ability to offer TV as a service into that same home,” David Fuller, Telus’ chief marketing officer, told the commission. “To put it simply, there’s not enough room left on the pipe.” The CRTC is holding hearings this week to consider how it should regulate access to wholesale high-speed Internet in Canada. Telus told the commission that its investments in broadband infrastructure are based on the idea that it can generate several streams of revenue from those investments through Internet access, television and other services. “The business case for the network is predicated on the ability to provide an advanced TV service on the same pipe and using the same frequencies or spectrum as the Internet service,” Michael Hennessy, Telus’ senior vice-president of regulatory and government affairs, told the commission. “When you lose the revenues from one stream because the broadband wholesaler has taken the pipe, you’re actually affecting a much larger investment picture.” Telus has signed up more than 200,000 customers to its new IPTV service in Alberta, British Columbia and parts of Quebec. The technology delivers television over the same broadband network Telus customers use to access their home Internet. But other parties argued Tuesday that IPTV technology splits the Internet and television streams without a loss of quality to either service. François Ménard, speaking on behalf of the Coalition of Internet Service Providers (CISP), told the commission that work has been done in Europe to share the same fibre line between television and the Internet without any degradation in quality. He said the technology can give smaller, third-party ISPs wholesale access to Telus’ network infrastructure without affecting the company’s ability to compete for television customers. “We are privy to the ongoing design and architecture of FTTH and DSL undertakings, whereby the functionality in the most recent firmwares are being tested in the labs for unbundling multicast functionality,” Ménard said, adding that the solution would not involve the costly installation of a second fibre line to the home. Telus maintained that there are no affordable ways to offer its IPTV service if it is required to unbundle its high-speed Internet infrastructure to competitors. “The IPTV dilemma can’t be resolved because it’s economically unfeasible to solve it,” Hennessy said. “The only way you can actually do it is to put in another line and to actually install new inside wiring in the home.” Eros Spadotto, executive vice-president of technology strategy with Telus, said engineers work to optimize returns on investment. “While somebody can come and say that the various objectives can be technically feasible, they are not feasible based on returns,” he said. Telus also argued before the commission Tuesday that unbundling of its network is not required because there is sufficient facilities-based competition between incumbent telecommunications companies, cable providers, and now, wireless Internet providers. “Not only is there no evidence that unbundling increases competition or investment, there is substantial evidence that facilities-based competition has contributed to lower prices and increased choice in virtually all markets,” Hennessy said. Robert Crandall, an expert witness brought in by Telus and a non-resident senior fellow with the Brookings Institution, told the commission that the European model of network unbundling is flawed and hobbles network investment. “Network investment in Canada and the United States has consistently exceeded network investment by European carriers,” Crandall said. The Public Interest Advocacy Centre told the commission Tuesday that Canada has fallen to the middle of the pack among Organisation for Economic Co-operation and Development (OECD) countries' rates of network penetration and speed. “Canada’s growth in penetration over time, its ranking among a selected group of OECD countries, has fallen from first in 2002 to sixth in 2008 as the number of broadband subscribers in other countries has grown more rapidly than in Canada,” Andrew Briggs, an independent consultant hired by PIAC, told the commission. Michael Janigan, executive director of PIAC, said Canada could improve its international standing on broadband services by opening the wholesale market to the high-speed Internet infrastructure of the incumbent companies. Jean-François Léger, legal counsel working with PIAC on the proceeding, said the incumbent local exchange carriers (ILEC), or phone companies, will continue to invest in their infrastructure even if they are mandated to give access to small competitors. “The ILECs are getting trounced in the retail Internet services marketplace by the cable companies and, in the consumer group’s view, this is all the incentive they need to build next generation facilities,” he said. Janigan acknowledged that more wholesale competition would cause the ILECs to lose market share to the cable companies. “What is required is a workably competitive market, and that may mean that ILECs lose market share,” he said. “Even with the competition between the ILEC and the cable company, do you really have a workably competitive market? When you analyze that market, is there still market power that is being exerted by cable or the ILECs? If there is, you adopt a policy that mandates access by other players on appropriate terms to both the ILECs and the cable companies.” jmigneault@thewirereport.ca

Telus says network unbundling would hobble its ability to compete with cable TV services

Broadcast | June 2, 2010

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