GATINEAU – The current wholesale broadband access regime has made it very difficult for new IPTV providers to compete against incumbents, argued independent ISP/IPTV provider VMedia in appearance before the CRTC’s Fibre Hearing on Friday.
Company representatives said that costing under capacity-based billing (CBB) doesn’t make sense for them and the resulting inconsistent rates affect its ability to offer a triple-play bundle of voice, Internet and TV at prices that are competitive with the incumbents.
In its opening remarks, VMedia provided details about rates it would be required to pay to access facilities from an incumbent to replicate current incumbent IPTV services. The company would have to spend nearly $100 per month ($25.60 fixed costs and $10.36 X 7 Mbps) per subscriber on a wholesale basis. With these types of rates, its retail offering would cost approximately $140 per month.
“In effect, by including a constant 7 Mbps use with the IPTV service, the incumbent IPTV customer is getting the video related capacity for free, capacity for which VMedia is required to pay $72.52 ($10.36 X 7 Mbps) wholesale,” said Alexei Tchernobrivets, CEO of VMedia, in his opening remarks. “This raises questions regarding undue preference shown by the incumbent’s wholesale Internet service in favour of its IPTV division, and discriminatory pricing imposed on VMedia and other potential competitors.”
CBB rate setting is the central issue for the emerging Internet and IPTV company, said George Burger, an adviser to VMedia. He noted it’s less about the methodology of Phase II costing and more about a lack of transparency of the process. Added transparency and clarity will help competitors understand how rates are established and whether they are just and reasonable and cost-based.
“When we look at the range in prices that were arrived at in the CBB process, I mean that was a head scratcher at the time.” – George Burger, VMedia
“When we look at the range in prices that were arrived at in the CBB process, I mean that was a head scratcher at the time,” he said referring to rates ranging from $3 to $24 per MB. “We want to reinforce that it should be centered completely on transparency. Once we have a complete understanding, once we have the ability to really beat up the numbers that are presented to the commission, then I think that a model will fall out of that pretty rapidly.”
Asked by vice-chair of broadcasting Tom Pentefountas if the company wanted the actual figures from the incumbents, VMedia pointed to certain elements as being able to provide a clearer picture on CBB rates. Tchernobrivets pointed to equipment upgrades costs and the cost of laying fibre as two.
“If the proceedings result in a framework in which ISPs have access to bandwidth at prices which will allow them to offer internet and IPTV services at competitive prices,” said Tchernobrivets, “consumers may yet experience robust choice in their bundles and services.”
Shaw Communications kicked off the day arguing while it believes the retail market is highly competitive and that wholesale access services should therefore be forborne from regulation, it suggested a five-year phase out period for speeds of 25 Mbps or less may help independent ISPs get used to the new environment. But the media and communications firm noted that if the CRTC were to mandate access, it must done in a symmetrical manner.
“If there is mandated TPIA on next generation services, then absolutely there needs to be mandated reseller access on fibre to the premise." – Jay Mehr, Shaw Communications
“If there is mandated TPIA on next generation services, then absolutely there needs to be mandated reseller access on fibre to the premise,” said Jay Mehr, executive VP and COO of Shaw.
The cableco also noted in its appearance that re-regulating Ethernet would be a bed move and would jeopardize its investment to serve the business market. Shaw spent $225 million to acquire Enmax Envision, a provider of fibre-based facilities to office buildings throughout the downtown core of Calgary. “We understand that it may be in the interest of some providers (to get mandated access to those facilities),“ said Mehr. “We understand why people like Allstream would want that … but we’re prepared to invest and we’re spending tens of millions of dollars at this moment building fibre into those buildings. We think the economics are there not just for us and a telco but for others.”
MTS Allstream, on the hand, said it needs access to those facilities to serve its customer base, particularly those with multiple locations.
“If we’re unable to obtain access to services such as Ethernet, that enable us to leverage our network investments, our ability to bid on contracts with governments and other large businesses would be severely restricted,” said Mike Strople, president of Allstream.
Prices for these services would be settled through commercial negotiation and not through cost-based tariffs, he added.
“We believe that such an approach is efficient, minimally intrusive and relies on market forces to the extent possible,” he said. In the event the two parties can’t arrive at an agreement, they should be able to use the Commission’s dispute resolution mechanisms, Strople added.
Telus Communications, PIAC/CAC and OpenMedia.ca will appear on Monday.
