North needs backhaul, not wireless infrastructure, small competitors say

The CRTC should require Northwestel Inc. to improve the availability and cost of its Internet backhaul infrastructure, not its last-mile wireless services, the company’s smaller competitors said in regulatory documents this week. In an intervention filed with the commission Wednesday, SSi Micro Ltd. said the CRTC should also replace its existing regulatory framework for the North with a new, “utility backbone” approach to support new market entrants and provide better and more competitive services to northern communities and consumers. “This goes far beyond the ability to stream video entertainment or have 3G/4G wireless access,” SSi Micro, a Yellowknife-based provider of satellite Internet in the North, said in the regulatory filing. “To ensure broadband access is available for all Northern consumers in sustainable fashion, backbone services—the satellite and fibre transport that link Northern communities to the rest of the world—must be affordable.” In a $233 million “modernization plan” filed with the commission in January, Northwestel, BCE Inc.'s northern subsidiary, said it aims to expand its third-generation fixed wireless service—currently available in 16 northern communities—to cover 99 per cent of Canada's northern population. It said 41 of those communities will be upgraded through the modernization plan while another 26 will require additional funding. Northwestel president and CEO Paul Flaherty told The Wire Report in December that the company’s modernization plan would focus on rolling out additional wireless services due to northerners’ increasing reliance on them. SSi Micro said in its intervention that Northwestel’s focus on upgrading fixed wireless services, which provide home Internet connections, was a “shell game” that avoided the more important issue of Internet backhaul, or transport links that support network capacity and expansions. As the North’s incumbent telecom and cable provider, SSi Micro said, Northwestel has the power to stifle competition by “egregiously" over-charging for its currently unregulated backhaul services, which competitors like SSi Micro use to carry their Internet-based data and voice traffic from remote northern communities to the rest of the country. The company, which competes with Nortwestel, said the commission should impose a new utility backhaul or “split rate base” regulatory regime that would regulate Northwestel’s backhaul services separately from its commercial services. “While only one possible solution, a Utility Backbone would imply that all competitors along with Northwestel would have open access to backbone connectivity services with the same technical parameters and at the same cost-based rates,” the company wrote. “nder a split rate base regime, which we view favourably, services would be treated differently if they were ‘utility’ services—such as backbone transport—or ‘competitive’ services—such as retail Internet.” Under the new system, SSi Micro said, the commission would regulate any Northwestel service that relies on its backbone infrastructure, including those previously unregulated. It said the commission should designate broadband Internet as an “essential service” in the North and require Northwestel to make Internet speeds of 5 Mbps or better available to all of its customers as part of its “basic service obligation" under the regulations. Telecommunications services classified as “basic" by the CRTC can involve price and access regulations. The Telecommunications Act says the CRTC can establish a fund to support services it defines as basic to ensure Canadians have access to it at affordable rates. “Broadband must be recognized as an essential service in the North, part of one’s ‘basic service,’ and must become eligible for contribution subsidies,” SSi Micro said. The CRTC ordered Northwestel to file a plan to modernize its aging and in many places outdated telecommunications equipment in December 2011. The company’s initial plan, filed in July 2012, sought to roll out 3G mobile services to all 96 of the communities in Northwestel's operating territory, but was contingent on receiving $40 million in benefits money flowing from Bell's $3.38-billion bid to acquire Astral Media Inc. The CRTC said it would allow Northwestel to file a revised modernization plan after, in October, it blocked Bell's bid to acquire Astral, citing concerns about competition and Bell’s market power. SSi Micro criticized Northwestel’s new plan as failing to meet the commission’s objective for meeting minimum, national broadband speeds, and for saying it needs additional, third-party partnership funding to roll out advanced wireless services in some communities. SSi Micro said much of Northwestel’s wireless plans would “overbuild” competitors’ infrastructure. In a separate intervention submitted to the commission Wednesday, small, competing telcos Iristel Inc. and Ice Wireless Inc. said Internet backhaul is the “the most pressing problem” impacting competition in the northern telecom market, and reiterated their request that the commission amend a northern subsidy regime that currently provides Northwestel more than $20 million in annual subsidies to serve high-cost, remote areas. The companies said the CRTC should allow companies to compete for those subsidies. “A competitive environment cannot thrive where the incumbent can obtain subsidies that it can use in competitive market segments against unsubsidized competitors,” Iristel and Ice Wireless said. The companies asked the CRTC to suspend for at least five years its “price cap” regulatory regime for the North, which caps the prices of Northwestel’s services regardless of how much it costs the company to provide them, and provides a “rate base rate of return." They also asked the commission to reduce the price Northwestel can charge for its “long haul” backhaul services by 10 per cent per year for the next five years. The SSi Micro and Iristel/Ice Wireless submissions said it is difficult to critique the costs associated with Northwestel’s new modernization plan because the majority of the costs were filed with the commission in confidence and not on the public record. The CRTC said in a Feb. 4 letter that it is considering a request by the Public Interest Advocacy Centre (PIAC) to place some of that confidential information on the public record under new rules for public disclosure. The commission will hold a public hearing to conduct a “holistic” review of Northwestel’s services and the regulatory regime in June. Northwestel argues that its plans will better serve the North and that the CRTC should look at how to support newer technologies like advanced mobile and fixed wireless services. “Lots of people are going to talk about the interest of having more wireless and higher speed Internet and things like that,” Paul Flaherty, Northwestel’s president, told The Wire Report in December. “But that doesn’t really fall under the regulation we have today, so are we going to expand the form of regulation?” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

North needs backhaul, not wireless infrastructure, small competitors say

News | February 8, 2013

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