‘Good day’ for small ISPs as CRTC mandates FTTH access

GATINEAU, Que. — Small ISPs and advocacy groups praised a move by the CRTC Wednesday mandating wholesale access to fibre-to-the-home (FTTH) networks and allowing small Internet service providers (ISPs) to build their own “middle mile” connections. “We think it’s great,” Canadian Network Operators Consortium (CNOC) president Bill Sandiford said in an interview following the release of the CRTC’s decision on its wholesale wireline review. “The majority of CNOC members, as this decision gets implemented, will have access to fibre-to-the-home services. … It’s a good day,” he said. The CRTC’s current wholesale regime does not require large telecom companies to make their FTTH networks, in which companies like BCE Inc. have been investing in recent years, available to smaller competitors. Sandiford said that a lot of CNOC members are starting to provide TV services over broadband networks, and “the current regime made it very difficult and expensive.” “The wholesale rate structure was set up in a way such that it would cost us more to deliver the service than you could ever reasonably expect to actually derive in revenue from the customer. Once we’re able to provision the middle mile ourselves … we’ll be able to offer these services at a competitive manner for the customers.” CRTC Chairman Jean-Pierre Blais said in an interview Wednesday that the CRTC hopes the decision will “maintain and encourage and foster continued competition” in the market. He said the decision also says to small ISPs that, “in a couple of years … if you want to keep being in this business, you’re going to have to find your way to supplying your own transport. So that will drive investment in transport facilities” by the smaller companies. With access to FTTH networks, smaller ISPs will have a chance to “play in the bigger, higher-speed marketplace,” Blais added. In its decision, the commission noted that it has, in recent years, had in place an aggregated system that allows small Internet providers to lease all the facilities they need to provide Internet access to their customers. That includes the access facilities, or the “last mile” connections that connect directly to the customers’ home on one end and to the telco’s central office or cableco’s head-end facilities, which contain switching and routing equipment, on the other. It also includes the transport, or “middle mile” connections that connect the central offices with each other and to the ISPs’ points of presence, the physical locations where they then connect to the rest of the Internet. There can be hundreds of central offices within a province, and a lot fewer points of presence. Under this system, small ISPs could provide Internet service without investing substantially in their own networks, the CRTC said. It added that one of the drawbacks of an aggregated system “is the high cost incurred by competitors when transporting large amounts of traffic over incumbent carriers’ facilities.” That’s because under the aggregated system, the small ISPs can only connect their point of presence to the large ISPs’ network at one central office per province, and must pay the large ISPs to transport traffic from that central office to their customers’ houses over their network. The CRTC added that those “costs are expected to exacerbate as consumption increases over time, given that a competitor must pay for all of its data traffic to be routed back to a central point of aggregation, no matter how far away a subscriber is located. The result is an expensive and often inefficient use of the network that will challenge the sustainability of competitors in the years ahead.” It said Wednesday that the provision “of aggregated services will no longer be mandated and will be phased out in conjunction with the implementation of a disaggregated service.” Access to FTTH networks will only be mandated under the new disaggregated system, which the regulator expects to be in place by the end of 2016. Under that new disaggregated system, small ISPs would have access to the “last mile” connections between the central office and the customers’ homes. They would be responsible for building their own transport, or “middle mile” infrastructure to carry the traffic between the central office and their own point of presence, where they then connect to the Internet. That means they can connect to multiple central offices closer to their customers. If they do not want to build their own connections, they can also lease the middle-mile infrastructure separately from another carrier, the CRTC said. That also means smaller providers who build their own infrastructure can lease it to other providers in turn. “In a word? Pretty good,” TekSavvy Solutions Inc. chief regulatory officer Bram Abramson said in an interview when asked about the decision. “What this says to folks like us is ‘we heard you. Now we’re looking to you to take the game to the next level. We think we’re up to the challenge.’ We’re looking forward to it, and it’s going to be very interesting.” He said the decision means TekSavvy will no longer be “locked in to bundled transport at tariffed rates ... instead we can look elsewhere. We can go with the transport that makes sense. We can build our own, we can go in others to aggregate demand. We can choose the path that makes sense, exactly as one would expect in a competitive market.” Michael Nowlan, CEO of Primus Telecommunications Canada Inc., said in a phone interview that the CRTC issued a “very forward looking, positive-looking decision. I thought the CRTC really indicated a very strong pro-consumer, pro-choice viewpoint in this ruling.” Advocacy groups also praised the decision Wednesday. Activist group OpenMedia said in a release that the decision will help provide Canadian Internet subscribers with more options at affordable prices. The Public Interest Advocacy Centre (PIAC) said in a separate press release that it will benefit customers. “The CRTC has boldly revised wholesale Internet and telephone access market … it appears the Commission has opted for a new approach that requires and expects more investment in fibre and transport by both incumbents and smaller competitors,” Jean-Francois Leger, counsel to PIAC, said in the release. During the hearing, it was the large telecom telecommunications companies who were opposed to a disaggregated system, “generally indicating that this would not materially impact competition, and that it would introduce network complications and substantial costs,” the CRTC noted in its decision. Cogeco Cable Inc., Rogers Communications Inc., Shaw Communications Inc., Telus Corp., and Bell all declined to comment Wednesday, indicating they would issue comments on Thursday. Quebecor Inc. spokeswoman Marie-Claude Asselin said in an email that Quebecor would not issue any statements or do interviews regarding the CRTC decision. When the issue of FTTH came up during the hearing, while small providers asked for mandated access to fibre-the-the-home networks, many of the large companies said that doing so would reduce their incentive to invest in networks. On Wednesday, Blais said that the CRTC considered those arguments, “but we were not persuaded by their position that somehow there would be less investment in fibre, in large part because, particularly the incumbent telcos, if they want a fighting chance to get market share in competition even with the cablecos… they’re going to have to make that fibre investment one way or another.” The CRTC said Wednesday that it would hold a separate proceeding “to consider the appropriate configurations of a disaggregated wholesale” system in Ontario and Quebec. It directed Bell, Cogeco, Rogers, and Quebecor to file “updated configurations for their proposed disaggregated wholesale HSA service for their Ontario and Quebec serving territories within 30 days of the date of this decision.” In its decision Wednesday, the CRTC also said that it will phase out and no longer mandate unbundled local loops, a “legacy service used primarily to support retail competition for local phone services and lower-speed Internet access.” TekSavvy’s Abramson said that one interesting aspect of the decision “is that they’re really mandating and full-on supporting an evolution. Telecom regulation used to be all about the sustaining and supporting competition for voice services. Voice used to be the basic element of teleco. … Now it’s not. Now it’s broadband.” What the CRTC has done with the decision is “in a sense pivot some of the old regulatory concepts, like the unbundled local loops, over to their equivalents in the broadband environment.” Blais said the decision has to be looked at in the context of the CRTC’s recent decisions on similar proceedings on television and wireless services. “There’s a recurring theme, and it’s not just about modernizing our frameworks, but modernizing in light of broadband,” he said. “We have our eyes firmly on the future, and we’re trying to set the frameworks based on where we’re going … what we’re trying to do is set the course for the next five and 10 years.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and reporting and editing by Shruti Shekar at sshekar@thewirereport.ca CORRECTION: A previous version of this story incorrectly explained the location of central offices within a network. It has been corrected to clarify and offer more detail about the various components of the network.

‘Good day’ for small ISPs as CRTC mandates FTTH access

News | July 22, 2015

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‘Good day’ for small ISPs as CRTC mandates FTTH access

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