Use deferral accounts to deploy wireline DSL, not HSPA, CRTC tells Bell

The CRTC denied an application by Bell Canada Tuesday to use its deferral account funds to deploy an HSPA+ broadband Internet service in 112 rural and remote communities in Ontario and Quebec. The commission instead directed Bell to deploy a DSL service comparable to what it offers in urban areas. As of May 31, 2010, incumbent phone companies Bell Canada, Bell Aliant, Telus Corp. and MTS Allstream had collected deferral account funds amounting to roughly $770 million, with interest, originating from a surcharge phone customers paid in urban areas during an inflated price cap period from 2002 to 2006. Extra revenues earned in urban areas during the price cap period were placed in deferral accounts and later allocated to support rural and remote broadband expansion. On Feb. 26, 2010, Bell Canada submitted its rural broadband rollout plan, proposing to use deferral account funds of about $463 million to expand its HSPA+ service in 112 rural communities in Ontario and Quebec. The plan drew sharp criticism from Bell’s competitors, including Rogers Communications Inc., Wind Mobile and Videotron Ltd., a division of Quebecor Media Inc., which argued that the plan would give Bell an unfair competitive advantage in the wireless market. Dennis Béland, Quebecor’s senior director of regulatory affairs for telecom, told reporters Tuesday that he was “quite pleased” with the CRTC decision. Béland said allowing Bell to use the funds for an HSPA+ would have amounted to a “subsidy” and distorted a competitive market in Quebec. “The idea that the commission would step into that context—a highly competitive context—and give a half billion dollar subsidy to one of the four competitors, to us was just inconceivable,” said Béland, whose company, Quebecor, is expected to launch its new wireless service this month. But Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, told reporters at the CRTC Tuesday that the decision capped off a “bad week for broadband.” “Today the commission decides to deny 112 unserved communities access to the latest and greatest wireless technology, the best that you can find anywhere in the world,” Bibic said. “It reflects further, classic out-of-touch CRTC thinking.” Bibic said the CRTC’s vice-chairman of telecom, Len Katz, made important points in a dissenting opinion he attached to the decision. Katz wrote that Bell’s plan to rollout broadband with alternative technologies was consistent with the commission’s determinations in previous deferral account decisions. “By limiting the rollout of broadband services to DSL technology, the commission has taken a static view of technology and failed to recognize the dynamic changes taking place in functionality and cost from newer technologies,” Katz wrote in his dissenting opinion. But CRTC chair Konrad von Finckenstein told The Wire Report in an interview Tuesday that Bell’s mobile wireless proposal did not meet the objectives the commission set out for deferral account funds. “These technologies constantly evolve. It may be very well that there is another way of doing it but before us there were only two alternatives,” von Finckenstein said. “We had clearly established the criteria in 2008 on what you had to do. ADSL met it and HSPA did not.” In its decision Tuesday, the CRTC said Canada’s incumbent phone companies must rebate $310.8 million to their urban home phone customers and, over the next four years, deploy broadband Internet service to 287 rural and remote communities across the country using their deferral account funds. Of the roughly $770 million in the deferral accounts, $310 million will be rebated, $35 million will be set aside for accessibility initiatives, and $421.9 million will be spent on deploying wireline DSL broadband services in rural and remote communities. Leading up to the decision, Quebecor had argued that Bell’s plan to use the deferral account funds represented an inefficient use of the money. The company said Bell’s $463-million plan to extend coverage to 61,000 households would amount to a cost of $7,590 per household. The company said Industry Canada’s Broadband Canada program to connect rural Canadians costs $76.7 million for 161,000 households, amounting to $454 per household. But Bell had written in a reply that Industry Canada’s broadband plan covers only half the cost of deploying the network infrastructure. In its decision Tuesday, the CRTC determined that the 2 GB download cap under Bell’s proposed HSPA+ service would not be sufficient for rural customers. The commission said that 90 of the 112 approved communities are already partially or fully served by HSPA wireless. Following a review of cost estimates, the commission approved $306.3 million for Bell’s broadband expansion to the communities using DSL technology. Bell’s total balance in its deferral account, including inflation, amounted to $583.3 million as of May 31, 2010. Mark Goldberg, head of telecom consultancy Mark H. Goldberg & Associates Inc., told The Wire Report Tuesday that the CRTC-approved plan for Bell’s ADSL service will still amount to a subsidy of around $5,000 per household. Goldberg said the uncertainty over the past four years about how the deferral account funds should be spent has constrained the marketplace from expanding broadband Internet access in rural and remote areas. “All of the smaller competitors, the people who specialize in rural broadband, have had this uncertainty as to whether they should spend money in markets because they don’t know if the ILEC is going to receive public funds to compete against them,” Goldberg said. Goldberg suggested that the deferral account funds may have been better spent as a complete rebate to the customers who paid into it during the price cap period. C.J. Prudham, Barrett Xplore Inc.’s chief legal officer, agreed, telling The Wire Report Tuesday that the CRTC should have found a more effective way to fund initiatives for rural broadband Internet access—or simply refund customers the entirety of the deferral account funds. Prudham said New Brunswick’s rural broadband plan cost $333 per household using fixed wireless and satellite to deliver broadband to rural communities. In its decision, the CRTC also directed Telus and MTS Allstream to proceed with their proposals to provide ADSL Internet service in rural and remote communities in Alberta, British-Columbia, Quebec and Manitoba. Telus’ deferral accounts totalled $156.5 million by May 31, 2010. The company was directed to spend $99.4 million on expanding broadband Internet access in 148 rural communities in Alberta and British-Columbia and $3.4 million on 11 communities in Quebec. The remaining funds are to be set aside to improve accessibility for persons with disabilities and rebates for urban customers. MTS Allsteam had $21 million in its deferral accounts as of May 31, 2010. The commission gave the company a green light to direct $12.8 million of those funds toward expanding broadband Internet services in 16 rural communities in Manitoba. Phone customers in urban areas in Quebec, Ontario, Manitoba, Alberta and British Columbia are expected to receive rebates of $20 to $90 from the telcos over the next six months. jmigneault@thewirereport.ca

Use deferral accounts to deploy wireline DSL, not HSPA, CRTC tells Bell

News | August 31, 2010

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