Monday, August 17, 2009

CRTC Decision on Usage-Based Billing (UBB) for Gateway Access Services (GAS)

The first wave of reaction to the CRTC decision on UBB is done, making this a suitable time to review how it came about and what it tells us about the future for broadband competition in this country. If you are looking for rant, sorry. You can find plenty of that here and here, and in many other forums. I will cast emotion aside and look into this decision as well as I can considering that I can not read the Commissioners' minds. Besides, those minds could change in the future, making that fictitious procedure largely pointless.

First, I would like to hearken back to a point I made in an earlier article on pure-play VoIP providers. When your business is absolutely and utterly dependent on your fiercest competitor, you live in a state of constant jeopardy. This is equally true for ISPs that depend on GAS. It is only sustainable if you have a big brother (the CRTC in the present case) that is able and willing to beat up on the local bully. This is necessary for two reasons: providing GAS is not in the business interests of the large corporations compelled to sell it, and; the totality of small ISPs that subscribe to GAS are only a small portion of the market, and thus have little market power of their own.

With that understood, we are in a position to look closer at the CRTC, the power broker in this conflict, and its decision on UBB. Within the scope of the law governing it, the CRTC has wide-ranging power to set and implement policy. They could rigourously slant GAS to favour the small ISPs if they wished to do so. The way to accomplish that is to treat the providing ISPs, the facilities-based carriers, as utility providers of an essential service for which they have a dominant (not monopoly!) position. The essential service in this case is DSL (of a specified generation) over copper telephony loops.

In the past, the CRTC has made it clear that it is very reluctant to declare as essential copper loops and the services provided by the incumbent telcos over those loops, except in select situations. This policy goes back to the 1990s when they opened the telephony market in Canada to competition, breaking the monopoly held by a fairly small set of telcos. As happened in the US, Canadian CLECs (competitive local exchange carriers) demanded access to the incumbents loops so that they could connect those loops to their own switching equipment. The CRTC did provide that access, but the restrictions and pricing they set down made that access far less favourable to the CLECs here when compared to what the FCC and state PUCs approved in the US.

The CRTC strongly favoured (and still seems to favour) facilities-based competition, not competition dependent on facilities and services from the incumbents. In contrast, Congress and the FCC chose to give the competition a strong, initial, but not perpetual boost by mandating aggressive availability and pricing. The US incumbents were also required to offer telephony services at wholesale rates, which CLECs could choose to wrap in their own branding and billing, but at the cost of low margins. The CRTC was very hostile to this idea (resale) since it was anathema to their policy of promoting facilities-based competition.

This last idea is very pertinent to DSL and GAS. If you have only read the articles about the UBB decision (and the many rants in the comments), I suggest that you read the actual decision. It won't take long. What comes across in this short document time and time again is that the CRTC perceives, but does not explicitly state, GAS as effectively being resale of the telcos' low-speed DSL retail service. In every instance where Bell Canada and the other telcos impose restrictions or conditions on their own retail subscribers, the CRTC agreed that the same should apply to the GAS subscribers' users. They even went so far as to allow impositions on individual users, despite the fact that those users are not the telcos' DSL customers. This is an interpretation of the GAS tariff that is quite opposite to the perception (or wish) of those adversely affected of GAS as a wholesale service that is provided bulk (no visibility of individual DSL users) and neutral (raw transport of bits through incumbents' access networks).

Say what you will about the CRTC, they are consistent. Over almost two decades, several governments and numerous changes of Commissioners, they continue their preference for facilities-based competition, while only tolerating competitive dependence on the incumbents as a brief-as-possible transition phase. They know very well that facilities-based competition is an exceedingly-expensive proposition where cable/wire/fibre must go in the ground, but I imagine they believe that there is no point in delaying the chance for progress by giving competitors easy access to the incumbents' networks, whether it be for basic telephony or broadband. The policy message is becoming clearer with every CRTC action: they will not be the small guys' big brother to ensure that GAS is provided unencumbered.

Competitive alternatives are regrettably elusive. These are currently limited to dry copper loops (unbundled by the telco), mobile wireless and fixed wireless (e.g. Wi-Max). Dry loops aren't cheap, but they are largely unencumbered since everything at the network-end of the loop belongs to the competitive provider of telephony and DSL. However, if you are far from a central office, you may see poor data rates; this is overcome by the telco with the deployment of remote DSLAMs, but these access points are unavailable to competitors.

With no relief expected, ever, for GAS encumbrance, perhaps this will give a small boost to emerging wireless providers. I say 'perhaps' since, as noted earlier, the number of potential subscribers most adversely affected by throttling, privacy and UBB on GAS are a small minority of broadband users. This will change as more people use the internet to access higher-bandwidth media sources, but it could still take some years before those numbers become sufficiently attractive to justify investment in new wireless and fibre networks. If you are one of that small, high-usage minority at present, I have little hope to offer for the next few years.

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