GATINEAU – The increasing of usage-sensitive rates such as capacity-based billing (CBB) as a tool to incent competitors to build their own high speed networks, as was suggested by Rogers Communications on Tuesday, would have a disastrous impact on the independent ISPs, the Canadian Network Operators Consortium (CNOC) argued in its oral reply on Thursday.
Even using current Third Party Internet Access (TPIA) rates from Rogers, combined with its own projected data usage growth of 60% annually, wholesale customers would be saddled with unsustainable prices over the next decade, the group told the CRTC’s hearing into access to next generation facilities.
“Using this number applied to peak capacity, in only five years, the average CBB costs for a TPIA end customer on the Rogers network will increase by $159.36 relative to the present,” explained Bill Sandiford, CEO and chair of CNOC’s board of directors.
Under questioning Peter Rocca, the CEO of Start Communications and chair of CNOC’s regulatory committee, provided a more fulsome account of how per-user TPIA rates would rise over the Commission’s full 10-year costing cycle. To start, he explains that the Rogers per-Mbps CBB rate is $16.80 (1.2 Mbps per customer average peak demand with each 100 MB costing $1,400, or $14 per MB).
Taking that rate and factoring in the 60% projected growth in capacity adds up to $176.16 after five years. Assuming a growth rate of 50%, as was mentioned in the CRTC’s 2014 Communications Monitoring Report, the rate after five years would be $110.78. Even in an “ultraconservative” scenario where the growth rate is only 40%, “if you take that out over the entire 10-year costing cycle it’s $485.95 … per user CBB component actual cost,” Rocca pointed out. (He actually said $179.16 during his explanation. The difference between $176.16 and $16.80 is $159.36.)
“A critical mass of consumers on FTTP will bolster the business case to deploy the technology in areas where it does not yet exist.” – Bill Sandiford, CNOC
This type of situation needs to be fixed in the very short term if independent ISPs who may have aspirations of offering IPTV services and triple-play bundles are going to be able to compete with the incumbents for the long haul, the CNOC presenters said.
Getting access to fibre to the premise (FTTP) is also on the wish list for CNOC. It noted in its oral reply that contrary to comments from the telcos, mandating access to fibre will actually help them grow their businesses and bring FTTP to more homes.
“The greater choice in FTTP services provided by competitors will increase penetration, which will then lead to the increased development of services and applications that rely on higher speeds and capabilities. Ultimately, a critical mass of consumers on FTTP will bolster the business case to deploy the technology in areas where it does not yet exist,” said Sandiford in his opening remarks.
He added it’s important to understand that prior to speed matching, independent ISPs’ market share was decreasing, but once speed matching was mandated for FTTN, they were able to begin growing their market share. Expanding mandated access to FTTP will see greater adoption of these higher speed services by more Canadians.
“But if we’re denied access to FTTP, those numbers will start going the other direction again very quickly,” argued Sandiford.
Vice-chair of telecommunications Peter Menzies wondered though if CNOC was implying that competition can exist without network investment.
Chris Tacit, legal counsel to CNOC, acknowledged that fibre investments may be delayed as a result of granting access to competitors but said they won’t stop. The key question is about the trade-off and it should be on the competition side rather than on investment even if there is a slight increase in risk for the incumbents.
“We think the risk of not investing is much greater for them than investing.” – Chris Tacit, CNOC
“We think the risk of not investing is much greater for them than investing,” he argued. “But even if you were to believe that there is an additional risk, you can compensate for that in a rate rather than delaying or denying access.”
Primus Canada also weighed in on FTTP its oral reply, with CEO Michael Nowlan noting that the Commission need only refer to its speed matching decision for evidence that based on competitive neutrality this higher bandwidth service “is already mandated for wholesale services, and that does not and should not change.”
The company also focused on rising CBB costs and therefore the need to obtain disaggregated high speed services like Broadband Access Service or BAS. Nowlan argued that access to BAS would enable the company to leverage its existing facilities, co-locations and unbundled local loops, while also stimulating greater competitor investments in networks.
“BAS will provide a logical next step for us, one that builds on our colocation infrastructure, and our existing aggregated high speed services, to better control costs, service quality and overall customer experience,” he said.
Final written submissions are due into the Commission December 19th.
