Intervention: Canadian Cable Systems Alliance Inc. (Intervenor 296)

Document Name: 2015-134.223997.2394524.Intervention(1fbmk01!).html

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Intervention: Canadian Cable Systems Alliance Inc. (Intervenor 296)

Document Name: 2015-134.223997.2394522.Intervention(1fbm$01!).pdf
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July 14, 2015
VIA GCKEY
Mr. John Traversy
CRTC
1 Promenade du Portage
Les Terrasses de la Chaudière
Central Building
Gatineau, QC
*** ***
**** Mr. Traversy:

Subject: Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services

1. CCSA represents independent communications distributors across Canada. CCSA speaks on regulatory matters for over 115 companies operating in all Canadian jurisdictions except New Brunswick and Prince Edward Island.

2. CCSA wishes to appear at the public hearing of this matter.

Executive Summary

3. CCSA intends to focus on only one issue in this proceeding: the significant barriers to expansion and upgrade of broadband services outside the major urban areas.

4. The result of these barriers is that many Canadians living in more remote and rural areas of the country are denied the crucial services which broadband can deliver either because no service exists or because the service they have available is not sufficient to support their social and commercial needs.

5. Fundamentally the problem is that the large incumbents thwart the expansion and upgrade of facilities by denying or impeding access to the internet backbone. As a result of their market power they can refuse to disclose where fibre exists, deny R

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access to it outright, price access significantly above market levels, or use administrative and permitting processes to delay access by their smaller competitors.

6. Much of the fibre connecting communities is owned by the incumbent ILECs who installed it with revenue from their monopoly telephone businesses. In other cases it has been heavily subsidized by various government programs.

7. The public which has actually paid for much of this infrastructure should be allowed to benefit from it through competitive providers which would result in improved service and lower prices.

8. In recent years the CRTC has forborne from regulating tariffs for most of the high speed data links that connect smaller communities to larger centres. This was based on the premise that there was sufficient competition or would soon be, and that the market would regulate access and rates. This has not been the case for many communities served by CCSA member companies.

9. CCSA submits that the Commission should require the incumbents to provide transparency to show where fibre interconnections exist, the capacity of those links, and how the fibre is being used.

10. In addition where no competitive source of access to the internet backbone exists the CRTC should regulate the rates that can be charged by the incumbents.

11. It is only through this approach that these large companies can be prevented from abusing their dominant position to the detriment of Canadians living outside major urban areas.

12. CCSA thanks the Commission for the opportunity to make these submissions.

Sincerely,
**** Townsend
President and CEO
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CANADIAN CABLE SYSTEMS ALLIANCE INC.

Telecom Notice of Consultation CRTC 2015-134:

Review of Basic Telecommunications Services Initial Comments

July 14, 2015
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Introduction

1. CCSA represents independent communications distributors across Canada. CCSA speaks on regulatory matters for more than 120 companies operating in all Canadian jurisdictions except New Brunswick and Prince Edward Island.

2. The stated purpose of this proceeding is to “examine which telecommunications services Canadians require to participate meaningfully in the digital economy and the Commission’s role in ensuring the availability of affordable basic telecommunications services to all Canadians”.

3. Included in that examination is the question of “whether any areas in Canada are underserved or unserved”. Throughout the Notice of Consultation, the Commission raises questions about how best to supervise the system to deliver affordable, effective telecommunications services to Canadians in the **** and in “other rural and remote areas in Canada”.

4. In designing a policy framework for the future the Commission needs to put the needs of consumers first and consumers are demanding access to increased broadband capacity and faster speeds.

5. In the digital environment, differing content services – voice, data and video – really amount to applications riding on the networks. The delivery mechanisms do not differ in any fundamental way.

6. The central challenge, then, is how to extend competitive broadband services to Canadians throughout the country.

7. Full participation by all Canadians in a digital economy and society requires their ability to benefit from services like e-government, e-education and e-health. Many such applications require significant bandwidth. As a simple example, remote diagnostic imaging applications demand considerable capacity.

8. Such capacity demand is not on the downstream alone. Again using the diagnostic imaging example, Canadians who require remote access to such a service must be able to upload large files to the health provider.

9. On the presumption that Canadians will need to access more and more such services using both downstream and upstream capacity, we consider that a target of 5MB/S down and 1MB/S up is already insufficient to respond effectively to demand.

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10. Realistically, the targets, today, should be more in the order of 10MB/S downstream and 3MB/S up. Looking five to ten years into the future, reasonable targets might be 25MB/S downstream and 5MB/S up.

11. The central question becomes, “how can Canada’s networks be leveraged and developed so as to deliver those kinds of capacities and speeds to Canadians, no matter where they live?”

12. In CCSA’s view, the answer is less about creating new basic service obligations and more about ensuring that there is meaningful competition in the distribution of communications services. Such meaningful competition must include open wholesale access to existing broadband networks at affordable prices.

13. Specifically, existing independent distributors must have reasonably priced access to inter-community “backbone” connectivity if they are to upgrade and extend the networks they already operate in many rural and remote communities throughout the country. For this reason this will be the only issue we address in this submission as we believe it is the one most critical to the communities served by our member companies.

Leverage What We Have

14. The independent operators that CCSA represents provide TV, Internet, data and telephone services to about 750,000 Canadian residences and businesses in more than 1,500 separate communities throughout Canada.

15. Canadian citizens in all regions of the country rely on these locally-based independent distributors to connect them to the world. Canadians rely on them to provide alternatives to communications services from the major incumbents like Bell and Telus and to keep prices in check through healthy competition.

16. These independent distributors have built and operate existing networks that can be leveraged to support the government’s vision of a “Digital Canada”. In addition, they have unique experience and expertise in responding to the special challenges of delivering cost-effective communications services to Canada’s least populated regions.

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17. Those local communications providers serve Canadians in many high-cost areas of the country that will not attract focused network investment and service from the major incumbents.

18. Locally-based companies, on the other hand, have a huge stake in developing, improving and extending their networks and the services they offer to the communities in which they live. That includes many surrounding areas that, today, lack any level of broadband service.

19. The independent distributors are a vital component of Canada’s communications system. Public policy should leverage their existing networks and expertise by helping them to upgrade and extend their existing networks.

Opportunities

20. The challenge for those locally-based network operators is to find economically viable ways to upgrade and extend the broadband services they offer which requires much more capacity to meet the increasing demands of the residents and they serve.

21. Technology improvements offer one means for smaller companies to respond to the significant problem of the high capital cost of network extension. It is now possible for example, for such companies to extend the reach of their existing coaxial or fibre networks through the use of fixed wireless facilities.

22. We are also hopeful that these smaller network operators will have greater success than in the past in securing targeted government funding for their capital projects.

23. Over the past year, CCSA has done a considerable amount of work with Industry Canada and with its own members to facilitate member applications for project funding under the government’s $300 million “Connect Canada” program for extension of rural broadband facilities.

24. A large number of members did apply for project funding and some are starting to receive notice that they will receive funding. We remain hopeful that other member proposals will be approved. While this is a very good start only capital costs were eligible for funding. The cost of leasing fibre capacity to access the internet backbone to upgrade and expend service was excluded.

25. In Telecommunications Regulatory Policy 2011-291, the Commission said:

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The Commission considers that the deployment of broadband Internet access services, including deployment in rural and remote areas, should continue to rely on market forces and targeted government funding, an approach which encourages private and public partnerships.1 26. Based on the developments just described, CCSA believes that progress is being made with respect to both the costs of network extension and effective application of “targeted government funding”, at least so far as CCSA members are concerned.

Barriers

27. We are far less sanguine about the proposition that “deployment in rural and remote areas should continue to rely totally on market forces”.

28. As matters stand today, independent communications companies face significant cost and access challenges in two basic areas; development of the outside plant they use to connect customers to their facilities and access to the “trunk” bandwidth they require to serve those customers.

29. With respect to the first area, CCSA members face significant hurdles and increasing costs in attaching their facilities to support structures, many of which are owned by their ILEC competitors. They now pay new charges for access to service poles and, as the Commission is aware, some incumbents are rolling as much cost as possible into the provision of such access.2

30. The incumbents are also able to use permitting requirements and processes to delay the smaller companies’ outside plant improvements needed to deliver new and better services to their customers.

31. Such actions, some of them clearly anti-competitive, drastically increase the cost of plant improvements for independent providers and slow down their ability to offer new and improved communications services to existing and new customers.

1

Telecom Regulatory Policy CRTC 2011-291, “Obligation to serve and other matters” (Ottawa, 3 May 2011) at preamble.

2

Here, we refer, in particular, to TELUS’ attempts to charge competitors for access to customer-owned poles on private property and for audit costs in relation to such poles.

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32. However, it is the second area – access to inter-community bandwidth, free of use restrictions and at reasonable prices – that most concerns CCSA members in the context of the present proceeding.

33. That is because, with respect to inter-community broadband capacity, market forces do not govern access to – or pricing of –wholesale services at all and regulatory constraints do not exist.

34. Rather, the market is skewed such that the incumbent ILECs are free to deny access to facilities such as dark fibre or even to deny that fibre exists and are free to price such access as they wish.

35. In part, the issue is the same as the one the Commission has just addressed in its “Let’s Talk TV” proceeding: the large incumbents most of which are both horizontally and vertically-integrated, have the incentive and the ability to act anti-competitively and they will do what they can to make life as difficult as possible for competitors.

36. Such behaviour is the most significant barrier to the independent operators’ ability to improve and extend their networks.

Pricing of Broadband Facilities

37. A concrete example of the problem arose in the context of the current federal broadband funding program. “Connect Canada” will fund only allowable capital costs. As such, it addresses only one part of the challenge of delivering broadband to smaller markets.

38. As CCSA learned from its members during the Connect Canada application process, the high ongoing costs that independent distributors pay for access to to the internet backbone, especially in rural and remote areas, can still frustrate otherwise promising projects.

39. Members on Vancouver Island have been particularly frustrated by the exorbitant rates Telus has been demanding for access to sufficient capacity to allow them to upgrade their broadband services to meet growing customer demands. One member, **** Island Cable in **** Renfrew was quoted $ 29,000/month for 100 MB of capacity to serve approximately 300 customers. Only after the intervention of the BC government which provides Telus with a great deal of business was the R

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quote reduced to $1750/month which made the provision of higher speed service feasible.

40. A second member, Sayward Valley Cable, north of Campbell River, was initially informed by Telus that no excess capacity was available to meet their request for 100 MB of capacity. Subsequently Telus discovered there was capacity but it would cost $11,500/month. And this was to serve only 260 customers. Obviously no business case could be made to upgrade the service at these rates. Again it took action by the provincial government through BC Networks and a subsidy to arrive at a reasonable rate, $1800/month.

41. On mainland BC Mascon Cable wanted to provide broadband service to **** Shuswap. To serve the entire community they needed 1000MB of capacity. When Telus quoted $17,000/month Mascon inquired why such a high rate. The response was that was their rate where there was no competitor.

42. It is also interesting to note that while Telus actively tries to thwart competition within its own territory it embraces it elsewhere. In Saskatchewan where Access Communications has been refused access to fibre or charged exorbitant rates by crown-owned SaskTel Telus is providing access in some communities at rates 80% lower than SaskTel. It would be very difficult to believe that SaskTel’s costs are actually that much higher.

43. In other parts of the country Bell and Bell Aliant engage in similar practices to impede competition and deny customers, particularly those in smaller centres, access to better and more affordable broadband services.

44. CCSA member Astrocom Cablevision in Geraldton has been dealing with Bell to secure bandwidth for many years. He was paying $6800/month for capacity to serve less than 500 customers but two years ago he was able to get the same service $1200/month with no explanation other than that they had a new rate. Recently when he requested additional capacity to meet the increasing demands of his customers he was stonewalled while Bell launched their own service in Geraldton at a lower price.

45. In another case it took the intervention of the Competition **** when Bell Aliant was acquiring Ontera last year to prevent a re-monopolization of transport access by a competitor to many northern Ontario communities. The **** determined that without safeguards “the transaction would likely substantially lessen and/or prevent competition in the sale of wireline telecommunications services in up to 16 R

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Northern Ontario communities by providing Bell Aliant with the ability and incentive to exclude competitors from access to high-bandwidth telecommunications transport services or raise the cost of those services.” The solution was a 20 year agreement with the competitor for the lease of fibre on the entire Ontera network south of Kapuskasing. Aliant is of course now entirely owned by Bell.

46. It is also interesting to note that Bell operates the same way as Telus when providing service outside its own territory. In Saskatchewan, rates charged to Access Communications by Bell for bandwidth to access the internet backbone have declined 85% since 2009 while those charged by Sasktel for a similar service for other communities have remained unchanged and much higher.

47. These situations are not just isolated cases.

48. While some CCSA members can connect to the major exchanges, such as TORIX in Toronto and QIX in Montreal, either directly with their own fibre or through facilities they lease from the larger players, other distributors in more remote areas are entirely dependent, usually on the incumbent telephone company with whom they compete, for broadband connection to the world.3 49. It is readily apparent that at the prices being charged for access to the internet backbone in many areas, extension of broadband service at 5MB/S, either as a speed upgrade to existing customers or as a network extension to customers in new service areas, is prohibitive for smaller network operators.

50. Such pricing for bandwidth access is, in itself, an anti-competitive behaviour.

Access to Broadband Facilities

51. However, pricing is not the only issue. There are problems, as well, with disclosure of available facilities and with denial of access to certain types of facilities.

52. As a general proposition, the independent communications companies face a continuing struggle to get information about what facilities are available and where those facilities might be. The large incumbents simply are not interested in sharing such information.

3

That is, the satellite-based transmission environment identified in the Commission’s recent Satellite Inquiry Report.

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53. In addition, even when CCSA members know what facilities are available to them, they can face denials of access to those facilities.

54. While the incumbents may make managed bandwidth available to CCSA members, it is common for them to refuse to deal with those members with respect to the dark fibre resources. Those are the resources that the competing provider requires to provide the range of services and functions that it needs to deliver to its customers and, in so doing, to manage its own network resources.

55. For meaningful competition to exist, for the benefit of consumers in the regions CCSA members serve, those members must be able to control the allocation of resources and services in their networks. For those purposes, access to dark fibre is essential.

56. For example, even in serving the metro Vancouver market, Novus Entertainment Inc. has attempted to find an economic fibre link between Vancouver and Toronto and been unable to do so as the integrated service providers and the incumbents will provide only “managed circuits” at prices that are not supportable.

57. For so long as independent communications companies are denied access to inter-community broadband capacity – whether because of price, lack of information or denial of access – their ability to extend their existing networks further into Canada’s remote and rural areas is severely constrained.

58. Moreover, improved access to Federal capital project funding does not fully address that problem. Rather, the ability of such funding programs to deliver communications service to Canadians in rural and remote areas is actually frustrated by the anti-competitive behaviours that create the problem.

The Regulatory Context

59. In response to the Government’s 2006 Policy Direction, the Commission has de-regulated rates and terms for wholesale access to certain of the ILEC’s “non-essential” facilities in a large number of markets across Canada. Inter-community bandwidth access is one such “non-essential” service.

60. As a result, the incumbents are free to charge high rates for access by smaller, competing distributors to broadband “backbone” facilities. In fact, the incumbents remain free to deny access to such facilities altogether.

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61. The classification of such connection services as “non-essential” has not taken into consideration the special conditions that exist in smaller markets. It is a very common situation, in rural areas where it is not economical to install a second fibre network to connect small communities together, that a single large incumbent is the only available provider of inter-community bandwidth.

62. However, the incumbent that has built the facilities remains able to price bandwidth access so as to effectively foreclose competition from independent distributors in communities where competitive broadband access depends on those same facilities.

63. The problem, then, is one of when and how forbearance should apply in respect of such facilities and how to force the incumbents to enter into good faith negotiations to provide timely access to those facilities.

64. These inter-community broadband resources are vital components of a network that must serve all Canadians: they are an “essential service”. If the Government and the Commission are to achieve the laudable goal of ensuring that all Canadians can participate in the digital economy, then these facilities should be regulated as such.

65. Where such facilities are concerned, forbearance should apply:

 only where there are two or more competitors in a market; that is, when real, meaningful competition exists; and

 on a geographically specific basis.

66. In CCSA’s view, it is necessary to examine the issues raised in these submissions in relation to each high-cost serving area where the potential exists for pricing and denial of access to be used as barriers to extension and improvement of the existing networks that serve such areas.

67. Where the potential for denial exists, regulatory intervention is justified. In such cases, the Commission should:

 require publicly tariffed pricing for access to ILEC inter-community fibre resources;

 require public disclosure of maps of existing network facilities; and R

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 prohibit denial of access to available inter-community fibre resources.

Conclusion

68. Independent providers such as those served by CCSA operate networks in urban, rural and remote communities throughout this country. Those companies have a unique expertise – and stake – in delivering and extending cost-effective communications solutions in the rural and remote regions they already serve.

69. Those independent providers can stretch a dollar of investment in their local networks in a way that the large, highly structured incumbents simply cannot match.

70. It makes abundant good sense that the path to a fully “Connected Canada” should leverage those existing, locally-based resources, expertise and economics.

71. The Government of Canada and the Provinces are investing to extend the reach of Canada’s broadband networks into the more remote, high-cost serving areas. CCSA remains hopeful that many of its members’ proposed projects will attract such investment and that there will be more such funding to follow.

72. However, government capital funding is only part of the solution. A lack of meaningful competition and inflated prices for inter-community broadband capacity continue to frustrate the build-out of networks in those high-cost areas.

73. The Commission can address that problem by ensuring that meaningful competition exists in all parts of the country. That can and should be done by regulating open, cost-effective access to these essential inter-community broadband facilities where it is necessary to do so to promote meaningful, sustainable competition.

74. CCSA thanks the Commission for the opportunity to provide these comments.

***** END OF DOCUMENT *****