Rogers VP calls CNOC’s arguments on wholesale rates ‘absurd’

GATINEAU, Que. — Rogers Communications Inc.'s senior vice-president of regulatory affairs, Ken Engelhart, on Tuesday attacked some of the arguments made on behalf of smaller Internet service providers during CRTC's hearing on wholesale wireline services. For example, VMedia Inc., an Ontario-based provider of Internet protocol-TV (IPTV) services, told the hearing on Friday that usage rates for companies using incumbents' infrastructure were too high and an obstacle to the rollout of data-heavy services like VMedia’s TV offering. On Tuesday, Engelhart said that in order for the CRTC to address VMedia’s assertion with any action, the commission would have to hold a different proceeding focused on competition in the TV-service market because television delivery by broadcast distribution units (BDUs) and wholesale Internet access are two different areas of regulation. He didn't address whether the hearing on the TV industry held in September would have been the appropriate forum for dealing with competiveness among TV-service providers. “If the commission is going to unbundle networks and make wholesale changes that allow people to provide BDU services, I think that public policy requires that first there be a finding that BDU services are not competitive,” he said. “Here, it would be a little bit weird that you'd be saying because the BDU market isn't competitive, the ISP market has to make some changes.” Engelhart told the hearing that in a new proceeding, the CRTC would be hard pressed to find that TV isn’t a competitive market, considering the churn in customer numbers among the major providers. When asked if wholesale-usage charges were a barrier to so-called “triple-play” offerings of Internet, home phone and television by third-party providers, Engelhart noted that VMedia and Distributel already offer such services. “The ISP network is not ideally suited for a network service,” he said. “It really is hard — not impossible, but hard — to do a BDU service over an Internet network.” Yet, Engelhart said ISPs’ inability to offer TV service doesn’t make it harder for them to compete. Rogers itself has difficulty signing people up to its bundles. CRTC commissioner Tom Pentefountas asked Engelhart how he could square Rogers’ position that current wholesale prices, based on the capacity-based billing (CBB) rates, are too low with last Tuesday’s presentation from the Canadian Network Operators Consortium (CNOC) that suggested these rates are too high. “I thought that their explanations were a bit absurd,” Engelhart said. “They were saying if you look at the prices they pay for inter-city facilities, they’re a lot lower than prices we’re being charged for last-mile facilities. Well, no fooling.” Inter-city connections are “wildly competitive” and have been for decades, Engelhart said, while last-mile facilities are “the expensive part” for ISPs to build. “It’s crazy for them to be comparing last-mile with something else,” he said. In his opening remarks before the hearing, Engelhart stopped short of calling for the end of wholesale access rules, yet urged the commission to adopt a more market-based approach to pricing in much the same way other infrastructure owners, including Bell, Cogeco Cable Inc. and Shaw Communications Inc., have suggested during the hearing. On the unbundling of so-called middle-mile services and the possibility of small ISPs getting closer to the last-mile, Engelhart did partially agree with CNOC. “I always thought it should be disaggregated; that's how we set it up originally,” Engelhart said, explaining that Rogers had initially wanted its wholesale connections to be last-mile only. Yet, a 2010 CRTC decision, taken after a 2009 proceeding similar to the current one into the regulations for wholesale Internet access, compelled Rogers to adopt the same aggregated connections before the middle mile for those wanting wholesale access as Bell had, in order to maintain regulatory “symmetry” in the words of the decision. Now, to reverse that decision would be “a huge pain,” he said, and the commission should maintain its current policy because of the expense of switching back. He admitted that, for the foreseeable future, most of Canada will only have two competing facilities-based wireline broadband providers for the last mile, and that the CRTC will be regulating those connections. “Accordingly, the commission should not view the wholesale regime as a temporary regime until a third wire is built,” he said. “Rather, they should view the regime as permanent and design it so as to further the interests of Canadian consumers." Despite the rule change for middle-mile connections, Engelhart noted that wholesale regulations have a tendency to stick around once implemented and therefore it is important to get them right. “In years of observing the regulatory process, sunset never happens,” he said. “When things are put into place, they tend to stay in place forever because people become dependent on them and it becomes very hard to remove them.” The CRTC also heard Tuesday from Heather Burnett Gold, president of the Fiber to the Home Council Americas. A text of her opening statement to the commission said that, since first appearing in the United States about 15 years ago, the deployment all-fibre networks has "grown substantially." Burnett Gold said Federal Communications Commission's decision 10 years ago not to mandate wholesale access to fibre-to-the-home (FTTH) networks is a big reason why this kind of infrastructure has become more common. "It has resulted in 80 per cent of homes in the U.S. having access to networks with download speeds of at least 50 Mbps, and these speeds continue to increase as do the number of providers offering this kind of capability," she said. Tuesday marked the end of the first phase of the CRTC's wireline wholesale hearing. On Wednesday and Thursday, all parties that have presented so far in this hearing that started Nov. 24 will have the opportunity to reply to other arguments made during the proceeding. Rogers, Shaw, BCE Inc. and Telus Corp. are among those scheduled to present Wednesday. — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Rogers VP calls CNOC’s arguments on wholesale rates ‘absurd’

News | December 2, 2014

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