Public interest groups call for more network investments

GATINEAU, QUE.—The incumbent telcos aren’t investing enough of their revenues into their networks, Steve Anderson, executive director of OpenMedia.ca, the group whose Stop the Meter petition played a significant role in the commission’s review of its wholesale usage-based billing policy, told CRTC commissioners Tuesday. “Functional marketplaces meet demand by increasing supply—not by quashing demand and seeing who can gouge Canadians most,” he said. “It is not OK for big telecom companies to invest less of their revenue than their global peers and then claim they need to gouge Canadians to make up for this waning investment.” But OpenMedia and the Canadian Internet Policy and Public Interest Clinic (CIPPIC), which appeared together on a panel before the CRTC Tuesday, received some tough questions from commissioners. CRTC vice-chair of telecom Leonard Katz asked how business risk should be assessed when determining the cost of transporting data over a network, adding that he worries all of the risk could be shifted from small reseller ISPs to incumbents. “What are looking for is facilities when they want it, how they want it, delivered at the time they want it, at cost-based rates. But when you’re running a business, there’s inventory costs, there’s obsolescence costs, there’s delivery delays, there’s all sorts of things…” Katz said. “The question is what’s included in there as well, because from my perspective, there was a huge transfer of business risk going from the independent ISPs back to whoever delivers the service to them.” Tamir Israel, staff lawyer with CIPPIC, said BCE Inc.’s aggregated volume pricing proposal shifts the risk the opposite way onto competing providers and customers. Tom Pentefountas, the vice-chair of broadcasting, questioned Israel and Anderson on the relationship between incumbents’ profits and investments as well as the incentives for independents to invest in networks. “Isn’t part of the issue that the deal is so good and can piggyback on these incumbent … Internet providers and still be tremendously profitable, and there’s no need for them to invest in networks on their own?” he asked the groups. Ken Engelhart, Rogers Communications Inc.’s senior vice-president of regulatory affairs, told commissioners that he sympathizes with their attempts to share the risk of network investment, but said it isn’t possible. “The very nature of a wholesale tariff means that the person who is investing in the network bears the risk. Higher rates would certainly be beneficial to the network builder but even a higher rate doesn’t compensate us for the risk that we incur,” Engelhart said, Appearing on a panel with other cable providers Quebecor Media Inc. and Cogeco Cable Inc., Engelhart said independent providers come along after the network is built and pay a lower rate than the incumbents charge for retail. “The very nature of a wholesale tariff means that the person who is investing in the network bears the risk,” he said. “Higher rates would certainly be beneficial to the network builder but even a higher rate doesn’t compensate us for the risk that we incur.” The Canadian Network Operators Consortium Inc. (CNOC), a coalition of small, reseller ISPs, also faced questions about its members’ incentives to invest in networks and grow market share. Chris Tacit, counsel for CNOC, said small ISPs need revenues to invest, which they don’t earn if they’re paying too much for wholesale. He said they are investing indirectly in the incumbents’ networks because they earn revenues from the resellers’ wholesale fees. The incumbents have the market power and the regulator’s role is to ensure the resellers not are overpaying for network access such that it prevents them from investing, Tacit said. The commission also heard responses about whether there is a bandwidth crisis after Bell said Monday that Internet traffic growth has “exploded.” Echoing the comments of Telus Corp. on Monday, Engelhart said no such crisis exists. “We make the investments to avoid congestion. We work very hard so that there is no congestion. This is not a bandwidth crisis. This is not about a crisis at all,” he said. “There are some costs that are usage sensitive. When costs are usage sensitive, that means that the more you use, the more you spend, and it’s appropriate to send the right economic signals. It’s appropriate to charge for usage-based costs on a usage basis. If people want to pay that price and use tons and tons of bandwidth, we’re happy to supply it. We don’t see any crisis. We just think pricing should involve the correct signals.” mburgess@thewirereport.ca

Public interest groups call for more network investments

News | July 13, 2011

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