And then there was two: Bell Canada seeks to wipe out ISP competitors

(First published on IT World Canada blog)

This seems to be the week when core Internet issues are being discussed. While much of it is under the phrase “Network Neutrality”, that term is confusing enough that opponents are able to distract policy makers and citizens. This is why my article on Saturday focused on separating the competitive access issues from the Net Neutrality issues, and my earlier article discussed An ideal future communications infrastructure, how do we get there, and what is stopping us!.

The last few days saw Charlie Angus raise this issue during question period, and an article from CBC talking about Bell Canada going to court to seek to wipe out all ISP competitors. That is, except the cable companies who manage a separate connection to the customer premises.

The link between these two events can be seen in the non-reply that Charlie Angus got from Industry Minister Jim Prentice. After being asked a question about throttling, the Minister stated:

“Mr. Speaker, for the edification of my friend, the Internet is not regulated in Canada. We continue to monitor the discussion that is taking place, but there is no regulation of the relationship between Internet providers and consumers.”

This answer is wrong on two fronts.

First, the issue is a third party (the last mile monopoly) inserting their own policy between Internet providers and consumers. In these cases the phone company is not the Internet provider at all. The Minister cannot leave this to market forces given market forces only work in a competitive market, and there is a natural monopoly on that “last mile” to the customer premises. The only way a market can exist at all is if the government regulates (or outright owns and manages, as I proposed earlier) that last mile connection.

Second, the question related to the throttling of wholesale customers of the phone companies, with the wholesale market created by CRTC regulation in 1997. You can read the CRTC release from March 3 titled “Revised regulatory framework for wholesale services and definition of essential service” to get an idea of how this regulation works.

Without the CRTC stepping in and mandating that competitors have access to the facilities and certain services from the incumbent phone companies, these competing ISPs could not exist.

In the CBC article, Bell is claiming that there is adequate competition without the CRTC mandating access to their “networks”. This too is wrong on two fronts:

First, it is not access to the wider networks that is the issue, but access to that “last mile” connection into the customer premises. When a company like Teksavvy hires Bell as a wholesale DSL provider it is only hiring a connection between the customer premises and the Teksavvy facilities. Within this connection it isn’t really “Internet” traffic at all yet, but a point-to-point connection (not unlike a leased line or other type of connection) between the customer and the ISP (Teksavvy — Bell isn’t acting as an ISP at this point at all!). From that point onward the competing ISP builds their own network, and through various business decisions sets the policy for that network.

It is misleading for Bell to suggest that these competitors are not building their own networks. If it costs less money for a competitor to hire connectivity from Bell for services unrelated to competitive access than to light up some dark fiber, then why wouldn’t they be expected to utilize that service? By suggesting that competitors would always build out their own networks (everything except the last mile monopoly), Bell is almost suggesting they should be treated as an inferior supplier of these services — bad enough that customers would be driven elsewhere.

The second aspect of the claim from Bell is familiar, which is that because cable and cellular companies exist, that between them there is adequate competition. The cable companies only represent a second “last mile” connection into the customer premises, and most of the cellular towers are owned by the incumbent phone and cable companies.

This argument is familiar to me. I was a witness in front of the Standing Committee on Industry, Science and Technology on May 4, 2004 to discuss Bill C-2. The discussion was about satellite television broadcasting, and the duopoly of Bell ExpressVu and Star Choice Communications Inc.

At least one parliamentarian had a concern with the word “duopoly”. Hon. David Collenette said that, “The last time I ran into duopolies, two major airlines were artificially keeping prices up and limiting choices for Canadians.”

The “answer” from Mr. Phil Rogers was: “the Canadian broadcasting system consists of a large number of distribution undertakings. We have two satellite undertakings that are authorized and several hundred cable companies that are all authorized to distribute that type of programming, whether it be Canadian or foreign programming.”

He was including the various cable companies (almost always one per region) as competition to the satellite. That is equivalent to including all the municipal bus systems (almost always one per region) in the discussion of the duopoly that existed in the airline industry. The suggestion that someone is going to move to a new city to get better municipal bus or cable service (or that either had anything to do with airline or satellite services) is absurd, but it was the basis of Mr. Rogers answer.

It is also the absurd suggestion that Bell Canada is making today. For any given customer premises there will be wires into the premises of at most one cable company and at most one phone company, with many locations outside of the urban core not even having both choices. We do not have, nor does it make sense to have, separate physical wires for each possible competitor under the roads in every municipality.

Bell’s challenge of the CRTC regulation (yes, the regulation that Minister Prentice doesn’t seem aware exists) brings up an interesting question that the CRTC needs to answer. If the phone companies which manage “last mile” connections to customer premises are mandated, then why is the same regulation not being applied to cable companies as well? Both the phone and cable companies talk about convergence, suggesting that phone and cable companies are increasingly offering the same services. If this is the case (and I agree it is), why are they not regulated the same way with cable companies mandated to offer competitive access to facilities and wholesale services to competitors as well?

Please note that I use the phrase “manage last mile connections”. These connections travel under our municipalities, and can only be put there with the permission of the municipality. I believe the superior ownership right is that of the municipality, not the company who “paid for” (often subsidized/protected by taxpayers/governments) and then manages the wires/fiber/etc. While the municipality can easily put their own connections under our streets without needing to involve a phone or cable company, the phone and cable companies can do nothing without the permission of either the municipality or the intervention of the provincial or federal government. I fully reject the suggestion that the phone/cable companies “own” the last-mile connections and thus should be able to do anything they want with them.