Bell, Allstream spar over wholesale Internet services with deregulation coming

BCE Inc.’s efforts to prohibit its wholesale Internet access and transport customers from reselling those services on a wholesale basis will put competing businesses at an undue disadvantage and will lead to a “re-monopolization” of the wholesale market, MTS Allstream Inc. says. The transport links, called competitor digital network services, allow smaller, third-party Internet service providers (ISPs) to pay for access and expand their networks by connecting one network to another. The CRTC designated the services as non-essential in decision 2008-17 and scheduled them for deregulation on March 3, 2013, so that they no longer face CRTC rate regulation. In regulatory documents filed with the commission this month, Allstream, a Manitoba Telecom Services Inc. subsidiary, said conditions Bell inserted into contracts for the soon-to-be deregulated services seek to limit Allstream’s enterprise business by preventing it from reselling the access and transport services on a wholesale basis. “he operational impacts of Bell’s proposed prohibition on the resale of forborne wholesale services to other telecommunications services providers (TSPs) virtually immediately prevents MTS Allstream from fulfilling orders for additional access and transport to existing customers,” Allstream wrote in a Jan. 8 complaint to the CRTC. The outcome, the company added, would have a “profound negative consequence” on Allstream's relationship with its customers and would prevent those customers from serving their own retail subscribers.” “This prohibition provides Bell with a significant undue advantage as it will ultimately force all wholesale customers to lease all transport … from Bell,” Allstream wrote. Chris Pierce, Allstream's chief corporate officer, said in a telephone interview last week that Bell’s attempt to ban resale of its wholesale services is a sign that the wholesale transport and access markets are not yet competitive enough for deregulation. He said a contract Bell presented to Allstream that proposed to double the wholesale rates of the transport and access services after March 3 was evidence that Bell is not concerned that its wholesale customers could flee for other providers. “In a competitive market, presumably, different providers are competing to provide service,” he said. “But in this instance, the incumbent, Bell, in a freshly competitive market, is able to double its price or more, and is also able to insist on conditions that have never been in place before.” In comments filed with the commission on Monday, Bell said its ban on wholesale resale of its transport and access services was an effort to cut down on arbitrage at the company’s expense by “preventing third-party carriers from free-riding on the negotiated ‘success’ of others.” Bell said it traditionally includes wholesale resale restrictions in more complex, long-term contracts with individual carriers. It said it has also included those restrictions on services that were offered on a month-to-month basis, but would no longer do so following the Allstream complaint. “In those cases, the rates, terms and conditions for a service do not present much opportunity for arbitrage,” Bell wrote. It added that it would no longer impose the restriction on any month-to-month wholesale service agreement, regardless of whether that agreement is for services coming under deregulation in March, or for other unregulated services. Longer-term agreements, it said, will still include the prohibition. Bell said Allstream’s request that the CRTC ban wholesale resale prohibitions and “grandfather” regulated rates, in some circumstances, for the transport and access services coming under deregulation would “fundamentally undermine” the commission’s 2008 decision to stop regulating those markets. It rejected Allstream’s argument that the markets for those services were not competitive enough to merit deregulation, and cited the commission’s 2008 decision that said Ethernet services are a viable alternative. The company added that the CRTC rejected an Allstream application to review and vary that decision in 2008, and that the federal cabinet also rejected an Allstream application to rescind or vary the decision in 2009. It noted that the CRTC also rejected in September 2012 an Allstream application to reclassify Ethernet services, which would have maintained rate regulation of the services. “This is a tired, previously rejected argument from MTS Allstream, since it represents the fourth regulatory proceeding it has initiated where it argues for the re-classification of services subject to ,” Bell said of Allstream’s complaint that the services should not become deregulated. “No matter that MTS Allstream still disputes the availability of substitutes for … access services, the Commission has now confirmed three times that these services were properly forborne.” In reply comments filed with the commission Friday, Allstream said it “continuously seeks out” alternatives to Bell’s transport and access services, “but has been unable to find any, except on a very limited basis.” It said this justified its request that the commission grandfather Bell’s rates and service terms for the disputed wholesale transport and access services. Allstream also reiterated its request, first made in its Jan. 8 complaint, that the commission move up to this year a review of its essential service regime, which is currently scheduled to take place in the 2014-2015 year. Pierce said the review would give the company the opportunity to demonstrate how deregulating the disputed wholesale services will impact Canadian businesses and competition in the telecommunications service market. “We think we can satisfy the test for Ethernet, access, and transport services to be mandated, as being essential, and we want a chance to prove our case,” he said. “We aren’t purporting to prove it here, we understand that we have to do that during an essential services review … so let’s get on with the review.” -- CLARIFICATION: An earlier version of this story did not clearly differentiate between Allstream and its parent company, Manitoba Telecom Services Inc. (MTS). —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Danika Grenier at dgrenier@thewirereport.ca.

Bell, Allstream spar over wholesale Internet services with deregulation coming

News | January 25, 2013

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