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Telecom Notice of Consultation CRTC

2011-77
Call for comments - Review of billing practices for
wholesale residential high-speed access services

Comments of the Public Interest Advocacy Centre


and the Consumers’ Association of Canada
(PIAC/CAC)

March 28, 2011

John Lawford Jean-François Léger


Counsel Counsel
Public Interest Advocacy Centre Jean-Francois Léger Professional
One Nicholas Street, Suite 1204 Corporation
Ottawa, Ontario K1N 7B7 14 Blackburn Avenue
Ottawa, ON, K1N 8A3
(613) 562-4002 x.25
jlawford@piac.ca 613-235-1781
Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011

Table of Contents 
Introduction ......................................................................................................................... 3 
The Commission should oppose usage-based billing as a matter of policy ................... 4 
Usage caps and usage-based billing are Bell's business choice and should not be
imposed on their competitors .......................................................................................... 9 
The Commission’s principles in TNC 2011-77 ............................................................ 13 
How best to implement the Commission’s principles .............................................. 13 
What we are asking for in this proceeding........................................................................ 20 
Other, additional, wholesale solutions .......................................................................... 23 
Consistency with the Policy Direction and with Canada’s telecommunications policy
objectives .......................................................................................................................... 24 
Whether the Commission should set a minimum threshold level for the sale of bandwidth
by large incumbent carriers to the Small ISPs and, if so, what it should be ..................... 27 
Conclusion ........................................................................................................................ 28 
Appendix 1 – BROADBAND SERVICES COMPARISON FOR SELECTED
COUNTRIES PREPARED FOR THE CONSUMER GROUPS, prepared by Andrew
Briggs and filed 22 June 2009, as Appendix 1 to the Consumer Groups’ 22 June 2009
submission in TNC 2009-261 ........................................................................................... 29 

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011

Introduction
1. The Public Interest Advocacy Centre (PIAC) on its own behalf and as counsel
to the Consumers' Association of Canada (CAC) (collectively PIAC/CAC),
submit the following comments further to the directions on procedure set out
in Telecom Notice of Consultation (TNC 2011-77 or the TNC).

2. In TNC 2011-77, the Commission invited comments on:

i. How best to implement the following principles with respect to large


incumbents’ wholesale services used by Small ISPs;

a. As a general rule, ordinary consumers served by Small ISPs


should not have to fund the bandwidth used by the heaviest
retail Internet service consumers.

b. It is in the best interest of consumers that Small ISPs, which


offer competitive alternatives to the incumbent carriers,
should continue to do so.

ii. Whether the Commission should set a minimum threshold level for
the sale of bandwidth by large incumbent carriers to the Small ISPs
and, if so, what should it be;

iii. Whether it is appropriate to hold an online consultation as part of its


review; and

iv. Whether it is appropriate to hold an oral public hearing as part of its


review.1

3. The Commission also issued directions setting out certain expectations


regarding parties’ comments:

In their comments, parties should provide full supporting rationale and all
evidence on which they rely. In addition, parties requesting or proposing
changes to the regulatory approach are expected to demonstrate, as
applicable, how such changes would:

i. Benefit consumers to allow them fulsome access to the Internet;


ii. Respect the principle that ordinary consumers served by Small
ISPs should not fund the bandwidth used by the heaviest retail
Internet service consumers; and

1
TNC 2011-77, paragraph 12.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
iii. Ensure that Small ISPs retain flexibility and continue to be a source
of innovation in the industry.

4. PIAC/CAC welcome the Commission’s initiative in launching this proceeding.


As the Commission is aware, this proceeding was initiated in the midst of
considerable controversy following the Commission’s recent determinations,
notably, in Telecom Decision CRTC 2011-44, Usage-based billing for
Gateway Access Services and third-party Internet access services (Decision
2011-44). Following the issuance of this decision, Canadian consumers —in
large numbers— as well as independent Internet Service Providers (ISPs)2
who compete with the major Incumbent Local Exchange Carriers (ILECs) and
who also depend on the ILECs for underlying services, expressed serious
concerns regarding the impact of this decision on Canadians’ access to the
Internet and on the future of competition in the retail Internet services
marketplace. Canadian consumers’ concern with the Commission’s decision
has, if anything, been growing in recent weeks, as is demonstrated by the
correspondence the Commission received at its on-line consultation website
which, as of 25 March 2011, had logged 2508 comments, overwhelmingly
critical of UBB. We also draw the Commission’s attention to a write-in
campaign launched by Open Media which, as of 25 March 2011, had
received over 95,000 interventions.

5. Before addressing the matters upon which the Commission specifically invited
comments, we consider it important to submit some comments regarding
what has appeared to us to be the Commission’s apparent support for usage-
based billing (UBB). We consider that UBB raises significant policy concerns
which affect all Canadians. We consider that one of the central concerns in
this proceeding arises from the Bell companies’ attempt to impose their retail
UBB-based pricing strategy on their wholesale customers. The Bell
companies’ wholesale strategy is misguided and, more particularly, is anti-
competitive, inconsistent with consumer choice and inconsistent also with
Commission and Government policy.

The Commission should oppose usage-based billing as a matter


of policy

6. As the Commission is aware, PIAC/CAC have on a number of occasions in


the past expressed concerns regarding the impact of the Bell companies’
usage-based billing practices upon Canadians’ ability to fully benefit from the
Internet,3 which the Commission, as recently as in TNC 2011-77, has
described as “a driver of innovation and the backbone of a modern economy”.

2
Namely, ISPs who are not affiliated with either the ILECs or the major cable companies.
3
For example in: proceeding associated with Telecom Public Notice CRTC 2006-16 Review of the
Internet traffic management practices of Internet services providers; proceeding associated with Telecom
Notice of Consultation 2009-261 Proceeding to consider the appropriateness of mandating certain
wholesale high-speed access services.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011

7. One of the basic considerations underlying our concerns with the Bell
companies’ usage-based billing practices was also noted by the Commission
in the TNC when it acknowledged that:

In recent years the way Canadians use the Internet has changed
tremendously, in part because of the convergence of telecommunications
and broadcasting services. It is vital that Canadians be able to access the
Internet.

8. We would add to this that Canadians are not the only Internet users whose
use of this technology has changed in recent years. As the Internet has
become an essential channel for the delivery of education, information and
entertainment as well as a wide and growing range of other goods and
services, users in other advanced economies with which Canada competes
also rely on the Internet. From the enviable position we enjoyed a decade ago
as a leader in accessibility to Internet services, for some years now, Canada
has been losing ground in relation to these other advanced economies. From
several perspectives, we are now only mid-pack (at best) among modern
economies with which we compete.4

9. On numerous occasions, the Government of Canada and the Commission


have each emphasized the importance of the Internet to Canadians and to
the development of the Canadian economy. Broadband access has been
described by Canada’s Minister of Industry as “one of the key elements of
21st-century infrastructure” and “a key component of a digital economy”.5
The Commission itself described access to the Internet in Telecom
Regulatory Policy 2009‐657, Review of the Internet traffic management
practices of Internet service providers) (TRP 2009‐657) as “an engine for
productivity growth”. More specifically, the Commission observed that:

The availability of the Internet has had a profound impact on


Canadians and has fundamentally changed the communications
landscape. The rapidly developing array of Internet services and
applications represents an extraordinary advance in the availability
of educational, entertainment, and informational resources. In
addition, the Internet plays an important role in the economy, as an
engine for productivity growth.6

4
See, for example, BROADBAND SERVICES COMPARISON FOR SELECTED COUNTRIES
PREPARED FOR THE CONSUMER GROUPS, prepared by Andrew Briggs and filed 22 June 2009, as
Appendix 1 to the Consumer Groups’ 22 June 2009 submission in the TNC 2009-261 proceeding. A copy
of this document is attached as Appendix 1.
5
The Honourable Tony Clement, PC, MP, Minister of Industry at the Canada 3.0: Defining
Canada's Digital Future conference, Stratford, Ontario. 8 June, 2009.
6
Telecom Regulatory Policy 2009‐657 at para. 1.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
10. With specific reference to Decision 2011-44, Canada’s Minister of Industry
recently expressed the Government’s concerns regarding the impacts the
tariffs approved in this decision could have on competition and on Internet
service provider choice for Canadians:

On Tuesday, January 25, 2011, the Canadian Radio-television and


Telecommunications Commission announced the latest in a series of
decisions allowing Internet service providers to charge their wholesale
customers for exceeding the monthly usage of data transfer permitted with
their broadband Internet service. This will mean, for the first time, that
many smaller and regional Internet service providers will be required to
move to a system of usage-based billing for their customers.
[…]
The Harper Government is committed to encouraging choice and
competition in the wireless and Internet markets. Increased competition
can lead to more choice, lower prices and better quality services for
Canadians. We have always been clear on our policies in this regard and
will continue on this path.7

11. Soon after the Chairman confirmed the Commission’s intention to reconsider
its determinations in Decision 2011-44, the Minister again encouraged the
Commission to carefully weigh the impact of its decision on competition in the
Internet services marketplace in Canada:

On Monday, the Prime Minister and I signalled very clearly that we have
grave concerns about the ruling of the Canadian Radio-television and
Telecommunications Commission (CRTC) regarding usage-based billing
for wholesale clients and smaller internet service providers (ISP). We are
deeply concerned about how it affects consumers, small businesses,
entrepreneurs, creators and innovators in our society.

Today, we are pleased that the CRTC has followed our government’s lead
and initiated a review of its decision. This means that come March 1st,
those who contract with wholesale and small ISPs will not be hit in their
pocketbooks because of a hike in their broadband bills.8

12. In order to ensure that Canadian consumers can take full advantage of the
digital economy and realize the Internet’s potential, these consumers need to
be encouraged — not discouraged — from making use of new applications
and services delivered over the Internet.

7
Statement issued by the Minister of Industry, 31 January 2011, available at
http://www.ic.gc.ca/eic/site/ic1.nsf/eng/06245.html
8
Statement by Industry Minister Clement, issued 3 February 2011, available at:
http://www.ic.gc.ca/eic/site/ic1.nsf/eng/06259.html

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
13. We believe that UBB is not conducive to encouraging Canadians to make use
of the Internet. We also do not consider that UBB is consistent with several of
the Canadian telecommunications policy objectives set out in the
Telecommunications Act.9 or with the policy direction issued to the
Commission by the Governor-in-Council (GiC) in December 2006 (the Policy
Direction).10

14. In particular, the imposition on Canadians of usage caps which impose


constraints on Canadian consumers’ use of the Internet and information
technologies which depend on access to the Internet is not consistent with the
objective of promoting the development throughout Canada of a
telecommunications system that serves to safeguard, enrich and strengthen
the social and economic fabric of Canada (section 7(a) of the
Telecommunications Act). The imposition of such caps is also not consistent
with the objective of promoting accessibility to affordable and high quality
telecommunications services (section 7(b) of the Act). High quality
telecommunications services include the means to access the rapidly growing
number and range of applications being developed by Canadian and other
firms that inform, educate and entertain Canadians and help make Canadians
more efficient and productive. We also do not believe that the imposition of
usage caps responds to the economic and social requirements of users of
telecommunications services (section 7(h) of the Act). Canadians need
incentives to make full use of the power of the Internet, not disincentives.
When applied not only to the Bell companies’ own retail customers but also to
competing ISPs, usage caps are also not consistent with the objective of
encouraging innovation in the provision of telecommunications services
(section 7(g) of the Act), nor does the imposition of the Bell companies’ own
retail Internet marketplace business model on their competitors enhance the
competitiveness of Canadian telecommunications (section 7(c) of the Act).

15. UBB as imposed by the Bell companies is not consistent with fulsome access
to the Internet and to the innovation, productivity and prosperity new powerful
Internet applications can make possible for Canadians. It is useful, we
believe, to point out to the Commission that the Bell companies themselves
once, not very long ago, strongly advocated the adoption of a policy that
would encourage Canadians to take the lead in the development and
adoption of advanced technologies and applications delivered over the
Internet. In their comments to the Telecommunications Policy Review (TPR)
panel, the Bell companies were strong advocates of promoting access and
use by Canadians of information and communications technologies (ICTs):

9
Which are set out in section 7 of the Telecommunications Act, available at:
http://laws.justice.gc.ca/eng/T-3.4/page-1.html#anchorbo-ga:l_I-gb:s_7
10
Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications
Policy Objectives, P.C. 2006-1534, 14 December 2006.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
ICTs help generate the goods and services that bring jobs and wealth.
They furnish consumers and businesses with a diverse range of goods
and services. They enrich our lives in untold ways, bringing convenience
to banking and commerce, strengthening our national security, simplifying
our dealings with government, opening new export opportunities, and
extending the reach of learning and health care delivery.

ICTs are also the ties that bind us, answering our primal need to connect
with one another. Doing so, moreover, through endlessly creative means.
Think back just 10 years, when the Internet was little more than a
curiosity. Only the most imaginative techno-gurus could have foreseen
today’s instant, mobile and miniaturized world of camera phones and high-
speed video downloads. Conversely, as we look back with today’s
perspective, it’s hard to fathom how individuals and businesses functioned
before e-mail, instant messaging, personal digital assistants and limitless
information at our fingertips.

In short, ICTs are about innovation and opportunity, pillars of a nation’s


productivity, prosperity and growth.11

16. The Bell companies were also strong advocates of policies that recognize the
“immense contribution that ICTs can make to Canada economic welfare”:

A key national priority for Canada, therefore, must be to modernize the


way we think about, promote, regulate, develop and use ICT. And we
must do so quickly. Recognizing the immense contribution that ICTs can
make to Canada’s economic and social welfare, we need to find better
ways to let them achieve their potential.

A comprehensive and forward-looking ICT policy would therefore promote


investment in and development of the broader ICT industry, while
unfettering the natural competitiveness of the telecommunications sector.

[…]

Canada should urgently implement a next-generation regulatory


framework that would enable Canadians to enjoy meaningful choice in
innovative, affordable, high-quality telecommunications services.

[…]

Governments and the private sector must also work together to make fast,
simple and useful applications universally available across this powerful

11
Bell Canada submission of 15 August 2005 to the Telecommunications Policy Review Panel,
pages 6 and 7, available at: http://www.telecomreview.ca/eic/site/tprp-gecrt.nsf/vwapj/A-
Canadian_Connection.pdf/$FILE/A-Canadian Connection.pdf

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
backbone. From telehealth and e-government to financial services and
retail, these applications will improve—in some cases even save—the
lives of Canadians all across this sprawling nation.12

17. We submit that usage caps are not conducive to the adoption by Canadians
of the innovative, affordable and powerful applications made available over
the Internet that exemplify “the immense contribution that ICTs can make to
Canada’s economic and social welfare”. Usage caps and usage-based billing
are not “better ways to let [these ICTs] achieve their potential”.

Usage caps and usage-based billing are Bell's business choice


and should not be imposed on their competitors

18. The Bell companies have clearly stated to their investors and stakeholders
that usage-based billing is an important component of their business plan. In
BCE’s 2009 Annual Report, when it discussed the Bell companies’ overall
strategy for their Internet services, BCE stated that:

Our focus at Bell Internet will centre on expanding our FTTN customer
base, building out FTTH in targeted markets, and pursuing usage based
pricing in order to grow revenues.13

19. More recently, in response to a question from a financial analyst regarding the
Bell companies’ growth in Average Revenue Per User (ARPU) for their retail
“broadband internet” in BCE’s 3rd Quarter results released in November
2010, George Cope, President and CEO of BCE identified UBB as a key
factor in the growth of their ARPU.14 The Bell companies appear to have

12
Ibid., at page 5.
13
BCE Inc. 2009 Annual Report, issued 17 March 2010, page 28, available at:
http://www.bce.ca/data/documents/BCE_annual_2009_en.pdf
14
In the course of the conference call held with financial analysts when it released its 3rd quarter
results on 4 November 2010, Mr. Cope was asked the following question:

I want to ask a question regarding the broadband internet. ARPU up 4.5%. I was
wondering if you can help break down a little bit the drivers between, as you mentioned,
broadband usage, but what about the upgrades to higher tiers to Fibe internet and price.
I’m just wondering, George, how you see this changing over time in terms of the overall
ARPU trends for internet and also each of these drivers.

Mr. Cope responded as follows:

Yeah, it’s a good question. On our slides, we note that FTTN, or our FIBE customers, are
up 28% year-over-year. So, there really are two things happening—well, there’s really
three things, I guess, on the revenue side and the internet that are happening. One is just
the consumer is moving to the Fibe network that we have because of the access to the
quality of the service and the speed of the service, and when they do that, of course, they

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
chosen to make usage-based pricing a focus of their pricing strategy “in order
to grow revenues”. The Bell companies’ commitment to “monetize” growth of
Internet usage for “our shareholders” through UBB has paid off and the
companies appear to expect that their strategy will continue do so.

20. We note also that in the proceeding which led to Decision 2011-44, Canada’s
major cable companies expressed their support for usage-based billing.15

21. Although, as discussed above, we do not believe that the imposition of UBB
on the retail customers of the Bell companies (or those of other ILECs or
incumbent cable companies) is consistent with the Commission’s and the
Minister of Industry’s determinations regarding the importance of ensuring
fulsome access by Canadians to the Internet, we also recognize that retail
Internet service rates, terms and conditions have been forborne for many
years now and decisions regarding the setting of prices for retail Internet
services should reside primarily with the ISPs themselves (including the
ILECs and incumbent cable companies). We also acknowledge the
Commission’s rejection in its 11 March 2011 letter of our request for
expansion of the scope of this proceeding to allow comments regarding the

upgrade to a different rate plan because they’re using a product that’s superior to where
they were before. So, that’s one piece of driving ARPU. The second piece of driving
ARPU is, obviously, as we see a growth in video usage on the internet, making sure
we’re monetizing that for our shareholders through the bandwidth usage charges, is a
second contributor to that growth. So, those two things. Then, I think, earlier in the year
there was a small price increase on the base, but that’s been flowing through over the
entire year. Those are really the three keys and, obviously, to a lesser extent, 22,000 net
adds adds overall revenue, but you’re real question is about, I think, ARPU. So, those are
the mixes. We would anticipate going forward each of those elements to move in our
favour, because we would anticipate over time all of our clients will move to our Fibe
network, and we would expect, obviously, as our FTTN footprint grows, that adds to that,
and we, obviously, do not expect less usage on the internet going forward, we would
anticipate people using the internet more and more over the years. So, we think the
revenue per customer opportunity, through our significant investments, we think could be
quite positive for our shareholders over time. [Emphasis added.]

A transcript of the conference call is available at:


http://www.bce.ca/data/documents/reports/en/2010/q3/BCE_TRANSCRIPT_q3_10.pdf
15
Submission of Cogeco Cable Inc., Quebecor Media Inc., on behalf of its affiliate Videotron Ltd.,
Rogers Communications Inc. and Shaw Communications Inc., issued 29 November 2010, in the
proceeding initiated by Telecom Notice of Consultation CRTC 2010-803, Usage-based billing for
Gateway Access Services and third-party Internet access services. Shaw Communications Inc. in a
presentation to investors at its Annual General Meeting, 13 January 2011, stated its commitment to UBB
in the following terms (see slides 5 and 29):

In the future, we believe our usage based billing plan will enable the further monetization
of our Internet business as data usage becomes more prevalent and common amongst our
customer base (i.e. streaming of video)
The Shaw Communications presentation to investors is available at
http://www.shaw.ca/uploadedFiles/Corporate/Investors/Presentations_And_Meetings/AGM%20Presentat
ion%20-%20January%2013%202011.pdf

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
use of UBB in the retail Internet market. We are not proposing, in this
proceeding, the re-regulation of retail Internet rates, terms and conditions or
the imposition by the Commission of any new restrictions regarding the
imposition by ISPs of UBB for their own retail customers.

22. We take the Commission’s statement that the principles it set out in TNC
2011-77 “do not prejudge in any way the outcome of this proceeding” at face
value. We also take at face value the Commission’s long-standing policy to
favour retail customer choice (and therefore competition) in
telecommunications markets.16

23. It is evident to us that UBB is an important component of the Bell companies’


retail Internet service business strategy. The tariffs at issue in this proceeding
appear to be designed to ensure that UBB is also, forcibly, a component of
independent ISPs’ retail pricing.

24. Choice among competing Internet service providers is, in our view, an
essential component of a working retail Internet services marketplace and
one which, we hope, will provide consumers the ability to choose between
ISPs which offer a variety of pricing and billing arrangements – not just those
selected by the incumbent for its retail customers. Such a marketplace should
ideally provide consumers the ability to select ISPs that offer alternatives to
the ILEC’s usage caps and UBB-based retail pricing schemes. While market
forces may ultimately deliver retail Internet services that do away with usage-
based billing, this will only occur if market forces are allowed to operate.

25. We do not believe that a retail Internet services marketplace controlled by a


duopoly of incumbent telephone and cable companies can, however, deliver
the interplay of market forces consumers need (and which the Policy
Direction calls for). The Commission has already recognized the key role
independent ISPs can play in the retail Internet services marketplace:

The Commission considers that competition in retail service markets


drives innovation and provides end-users with the greatest choice of

16
The Commission has frequently emphasized the importance of customer choice. See for example:
Telecom Decision CRTC 94-19, Review of Regulatory Framework, section II.A.2.a: “… users should have
the opportunity to choose whatever package of services and whichever suppliers best fit their particular
needs”; in Telecom Decision CRTC 97-8, Local Competition, paragraph 205: “The Commission is of the
view that an important objective of local competition is to increase consumer choice. The Commission
considers that, in order to facilitate such choice, it is in the public interest that end-users have the right and
the means to have access to the LEC of their choice in all situations”. The Commission reiterated this view
in Decision 2003-45, Provision of telecommunications services to customers in multi-dwelling units,
paragraph 141. See also, in Telecom Decision CRTC 2005-72, Implementation of wireless number
portability, paragraph 30: “In the Commission's view, customers should be given the widest possible choice
of service providers to meet their needs.” The Consumer Groups submit that choice is as important in the
Internet services marketplace as it is in the local, long distance and wireless telephony marketplaces.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
service providers and service characteristics, including pricing, service
features, and customer service quality. The Commission has recently
noted that the rapidly developing array of Internet services and
applications represents extraordinary advances. It has also noted that
information and communications technologies support education, health
care, and cultural activities; foster communities; and facilitate trade and
commerce.17

26. The Minister of Industry has also emphasized the importance of competition
in the telecommunications services marketplace.18

27. We agree with the Commission (and the Minister) that increased competition
can lead to more choice, lower prices and better quality services for
Canadians. Doing away with the Bell companies’ UBB wholesale Gateway
Access Service (GAS) tariffs and letting market forces, instead of the Bell
companies, determine whether independent ISPs rely on UBB to price their
retail Internet service offerings, would be a significant step in the right
direction.

28. In the proceeding the Commission conducted further to TNC 2009-261 the
Consumer Groups urged the Commission to adopt as an underlying principle
that the wholesale serving arrangements the incumbents provide to
independent ISPs should provide these ISPs a reasonable opportunity to offer
credible retail alternatives to the broadband service offerings of the incumbent
cable and telephone companies and their affiliates. The Consumer Groups
argued, in particular, that the incumbents should not be permitted to impose
constraints on their wholesale ISP customers which artificially hobble these
ISPs in the retail marketplace. In TRP 2010-632, the Commission agreed and
directed the incumbents, particularly the ILECs, provide their wholesale
customers matching speeds.

29. The Commission has acknowledged that small ISPs rely extensively on the
incumbents’ services and facilities:

The Commission notes the significant extent to which competitors use


existing wireline wholesale services to provision their retail Internet
services. The Commission also notes that the incumbents are offering
increasingly higher retail Internet service speeds to consumers. In the
Commission’s view, if speed matching were not required for both the
ILECs’ aggregated ADSL access services and the cable carriers’ TPIA
services, competitors would be effectively prevented from offering higher
service speed options to their own customers.19

17
TRP 2010-632, paragraph 22.
18
For a recent example, see the statement issued 31 January 2011 by the Minister of Industry,
available at http://www.ic.gc.ca/eic/site/ic1.nsf/eng/06245.html
19
TRP 2010-632, paragraph 64.

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Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
30. We are once again before the Commission arguing against another constraint
which threatens to undermine the Commission’s determinations in TRP 2010-
632 and that would hobble competitors by denying them a reasonable
opportunity to offer credible retail alternatives to the ILECs’ own retail service
offerings.

The Commission’s principles in TNC 2011-77

How best to implement the Commission’s principles

31. In TRP 2011-77, the Commission invited interested parties to provide


comments on “how best to implement” the following two principles regarding
the large incumbents’ wholesale services used by independent ISPs:

a. Ordinary consumers served by Small ISPs should not have


to fund the bandwidth used by the heaviest retail Internet
service consumers

32. Regarding the principle put forward by the Commission that “ordinary
consumers served by Small ISPs should not have to fund the bandwidth used
by the heaviest retail Internet service consumers”, we note that the
Commission forbore in relation to the regulation of retail Internet service rates
some years ago.20 Consistent with this, we reiterate that decisions on how
independent ISPs bill their retail customers should be made by those ISPs
themselves and not by the Commission or their large incumbent ILEC and
cable company competitors. We believe that small ISPs should decide how
their “ordinary consumers” –as well as their “heaviest retail Internet service
consumers”— will be billed,21 not the Commission or the incumbents.22 If, as it

20
Telecom Order CRTC 99-592, Forbearance from Retail Internet Services, paragraph 4. The
Commission had reached the same findings in previous orders granting forbearance to Telus
Communications Inc and NBTel Inc. (Telecom Order CRTC 97-471, 8 April 1997); TELUS
Communications (Edmonton) Inc. (Telecom Order CRTC 97-928, 30 June 1997); Maritime Tel & Tel
Limited, Northwestel Inc. and Sogetel inc. (Telecom Order CRTC 98-619, 23 June 1998); NewTel
Communications Inc. (Telecom Order CRTC 97-1667, 14 November 1997); and certain OTA member
companies (Telecom Order CRTC 97-1666, 14 November 1997).
21
Indeed, in directions it issued on 11 March 2011 regarding the conduct of this proceeding, the
Commission reminded parties that “the current proceeding deals with the narrow issue of billing practices
for mandated wholesale residential high-speed access services” and not retail pricing practices.
22
That are currently virtually the only sources of underlying access facilities for independent ISPs in
Canada Indeed, regarding the cable companies’ TPIA service, it is open to question whether those
services are viable alternatives and, if not, as appears to be the case, when they will become so. In TRP
2010-632, the Commission directed most of Canada’s major cable companies (other than Bragg
Communications Inc (operating as “Eastlink”) to file tariffs which make substantial changes to their
existing TPIA terms and conditions. TRP 2010-632 was issued 30 August 2010 and, nearly 7 months
later, the parties appear to still be debating threshold issues regarding the functionality of the service to
be delivered. PIAC and the Consumer Groups have also since filed an application to end the special

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has stated on numerous occasions, the Commission does not consider that it
should be regulating retail Internet service rates, then the Commission should
also not approve the Bell companies’ tariffs which are at the centre of this
proceeding. In those tariffs, the Bell companies have insisted on imposing a
business model on their wholesale customers that would severely constrain
these ISPs from distinguishing their retail service offerings from those of the
Bell companies at the retail level.

33. Furthermore, the principle that “ordinary consumers” served by small ISPs
should not be funding the heaviest users also implies that “ordinary
consumers” served by small ISPs should not be funding the ILECs’ heavy
users. Although we do not have access to the costing information developed
by the Bell companies to support the rates the Commission approved in
Decision 2011-44, we believe that there is a strong likelihood that the Bell
companies’ heaviest retail Internet service users may well be their own IPTV
customers. In our view, there is no evidence on the record of the proceeding
that ordinary consumers served by the Bell companies’ competitors are not
subsidizing the Bell companies’ own IPTV customers.

34. Indeed, the Bell companies have not hesitated at all to draw attention to the
considerable investments they have been making to their networks, notably in
the access component, to enable them to provide advanced new retail
services such as IPTV.23 If the Commission intends to protect competition in
the Internet services marketplace, it needs to be very careful not to allow the
Bell companies to compensate themselves for the network investments they
are making to support their IPTV and other advanced services from their
wholesale Internet service customers. In our view, the Commission should
take a second look at the manner in which the Bell companies have allocated
costs associated with Internet access. In particular, the Commission needs to
ensure that the retail customers of ISPs who depend on the Bell companies’
wholesale Internet access services are not bearing costs associated with the
deployment in the Bell companies’ networks of capacity needed by Bell
companies to support services such as IPTV and other current or future Bell
company retail services.

35. In our view, the Commission needs to be particularly vigilant in this respect. In
their communications with their shareholders and investors, and indeed
before the Commission, the Bell companies have been explicit about the

status inexplicably (in our view) accorded to Bragg excluding it from the application of important
Commission directions regarding TPIA.
23
As we argued in the TNC 2009-261 proceeding, such investments were portrayed by Bell
management to the Bell companies’ investors as essential for the Bell companies to efforts to turn the
tide of customer defections. More recently, see, for example, BCE’s discussion of its Invest in broadband
networks and services “strategic imperative” in its 2010 Annual Report: “We aim to roll out thousands of
new fibre-to-the-home (FTTH) and FTTN network locations serving millions of households and
businesses, enabling new online video, networking and other rich, highspeed IP-based services”,
available at: http://www.bce.ca/data/documents/BCE_annual_2010_en.pdf .

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drivers behind their investments in their networks. The ability to bundle a wide
range of services and to offer powerful and feature-rich IPTV and other future
services appear to be at the heart of the Bell companies’ network investment
strategy. We question the appropriateness of recovering any of those costs
through wholesale rates for services such as GAS. Competitors who rely on
services such as GAS should not be required to fund the recovery of network
development costs that have been incurred to support the Bell companies’
retail services.

b. It is in the best interest of consumers that Small ISPs,


which offer competitive alternatives to the incumbent
carriers, should continue to do so.

36. We also submit that there is substantial doubt that the Bell companies’ tariffs
that are at issue in this proceeding are consistent with the Commission’s
second principle that “[i]t is in the best interest of consumers that Small ISPs,
which offer competitive alternatives to the incumbent carriers, should continue
to do so.”

37. In marketing material on Bell Canada’s website generated seemingly in


response to the controversy surrounding its wholesale UBB tariffs, Bell
Canada has characterized its use of UBB as a matter of fairness “because it
means Internet customers are charged based on what they use”.24 We
submit that the Bell companies’ wholesale UBB tariffs go considerably further
than the Bell companies suggest and much further in constraining competition
and consumer choice than the ILEC needs to go if its concern is simply to
ensure that Internet customers are charged on the basis of “what they use”. If
the Bell companies’ principal concern is really to ensure that their wholesale
customers should be charged based on what they use, then the rate applied
should be designed to recover the costs the Bell companies incur to provide
the capacity these wholesale customers use. The current rate bears no
relationship to the Bell companies’ costs but is set at a discount in relation to
their retail rate.

38. As we have already discussed, under the tariffs at issue in this proceeding,
the Bell Companies’ competitors who must rely on those companies’ GAS
would effectively be forced to replicate the Bell companies’ retail pricing
approach. Just as the Bell companies attempted to stifle competition from
independent ISPs by imposing on these ISPs transmission speed handicaps
(which the Commission rejected in Decision 2010-632), the Bell companies
now appear to be pursuing another tactic to handicap their competitors
through their wholesale GAS tariffs.

24
What is usage based billing? Available at: http://www.bell.ca/shopping/PrsShp_Bell_Internet-
usage_based_billing_UBB.page .

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39. We question whether independent ISPs’ whose collective share of the retail
Internet services marketplace today has declined to 6%,25 are going to be
able to make any progress in this marketplace or even maintain their current
share as long as they are subjected to wholesale tariffs that constrain them as
do the tariffs at issue in this proceeding.

40. We have argued before that the wholesale marketplace for Internet services
is broken. We have also argued that there are no market forces to incent the
incumbents to offer their wholesale customers services which provide them a
reasonable opportunity to offer credible retail alternatives to the residential
broadband service offerings of the incumbent cable and telephone companies
and their affiliates. Wholesale tariffs such as those at issue in the TNC 2009-
261 proceeding and those that are now being reconsidered by the
Commission in this proceeding, in our view provide compelling evidence that
there are insufficient market forces at play to discipline the Bell companies in
their dealings with their wholesale independent ISP customers. The
wholesale tariffs proposed by the Bell companies (and the other incumbents)
do not appear to be tariffs that take into consideration to any significant extent
the commercial objectives of these wholesale customers. We contend that
such tariffs are primarily designed to promote the retail business of the
incumbents, to the detriment of their independent ISP customers. This is
clearly a sign that market forces are not working in the wholesale
marketplace.

41. It also seems obvious to us that already fragile competitors cannot be


expected to survive the repeated shocks that they must face from ILECs.
After almost two years of fighting for matching speeds, the ILECs’
independent ISP competitors now once again appear to find themselves
facing yet another threat to their continued existence. For their part, retail
consumers are faced with a continuing stream of media reports and
government announcements that likely undermine their confidence in
independent ISPs’ ability to continue to compete.

42. The ILECs’ ISP customers have been before the Commission in countless
proceedings for many years seeking service offerings that would enable them
to stem the seemingly relentless decline towards irrelevance that the
incumbents’ wholesale offerings have forced them into and which the
Commission has been rather blithely chronicling in its annual CRTC
Communications Monitoring Report (the Monitoring Report). With only 6%
market share today and an uncertain future, independent ISPs may not
represent, for many consumers, a credible alternative to the incumbents.
This must change. As was the case in the proceeding associated with TNC
2009-261, the current proceeding may provide the Commission an
opportunity to stem the decline.

25
See CRTC Communications Monitoring Report 2010, Figure 5.3.1 “Internet access revenue share,
by type of entity (residential customers)” at p. 139.

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43. The current retail Internet services marketplace is not the vibrantly
competitive retail marketplace in which the Commission issued its
forbearance determinations in the 1990s and, in our view, it is also not a
marketplace that can deliver the advantages of competition.

44. The retail Internet services marketplace today is even less competitive than
was the wireless telephony services marketplace when the Government of
Canada decided to intervene in the middle of the last decade to make
additional spectrum available to new entrants in order to ensure that
Canadians could have access to a more vibrant and competitive wireless
services marketplace. In his announcement in late 2007 of the rules for the
then upcoming wireless spectrum auction, the Minister noted that:

The current wireless market includes a mix of national, regional and local
providers. Three national network operators that are integrated with
wireline telecommunications carriers account for 94% of the national
wireless market. A contributing factor in this market distribution was the
acquisition of wireless only new entrants by integrated carriers. There are
two regionally based wireless network operators also integrated with local
wireline carriers and a few local network operators. There are also Mobile
Virtual Network Operators (MVNOs) which lease capacity from facilities-
based wireless carriers on terms negotiated with those carriers. Many, but
not all, Canadians have access to a choice of three facilities-based
providers.26

45. The Minister further noted the finding of the TPR Panel that:

The smaller number of mobile providers in Canada - and the fact that all
three national wireless service providers are also owned by large
telecommunications service providers that also provide wireline services
may mean that there is less competition in the Canadian wireless market
than in the U.S. market, which consequently has resulted in higher prices,
less innovation, lower uptake and lower rates of usage.

46. These findings prompted the Government to take decisive action to ensure
that new competitors could have access to spectrum to enable them to enter
the marketplace. We believe that it is significant that when it announced its
decision regarding the rules for the auction, the Government made specific
reference to the Policy Direction (and to the consistency of its decision with
the Policy Direction).

26
Industry Canada’s Policy Framework for the Auction for Spectrum Licences for Advanced
Wireless Services and other Spectrum in the 2 GHz Range. Issued November 2007, available at:
(http://www.ic.gc.ca/eic/site/smtgst.nsf/eng/sf08833.html)

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47. Consistent with the Commission’s observation in TNC 2011-77 that it is in the
best interest of consumers that small ISPs, which offer competitive
alternatives to the incumbent carriers, should be able to continue to do so, we
urge the Commission to regain the initiative in the wholesale marketplace
from the incumbents and to commit itself to outcomes.

48. We invite the Commission to consider incentives that would help focus the
Bell companies’ (and the other incumbents’) service development and
marketing prowess towards the development of wholesale solutions that
benefit these customers and promote competition. The current Bell company
GAS UBB rates in our view do not appear to do this.

49. The Bell companies emphasize in their communications with their investors
the importance for BCE of delivering an outstanding customer experience. As
BCE headlined its discussion of its “Strategic Imperative 1” in its 2009 Annual
Report:

As the communications marketplace continues to provide more choices for


customers, delivering exceptional service becomes all the more important
in Bell’s efforts to increase its competitiveness.27

50. We believe that the BCE “Strategic Imperative” referenced above should also
apply to the Bell companies’ wholesale customers, and in particular to
independent ISPs who rely on them for key facilities. There are currently no
competitive market forces to motivate the incumbent telephone companies to
become more “competitive” in their design and pricing of their wholesale
Internet access service offerings to independent ISPs. The ILECs should be
imbued with the same drive in serving these wholesale customers that they
have when they design and deliver services to their large retail customers.
This, in our view, is not the case today.

51. We recognize that the Commission conducted a detailed proceeding to


consider its definition of essential services in the wholesale marketplace and
its pricing principles for essential and non-essential services further to
Telecom Public Notice CRTC 2006-14).28 This proceeding was followed by
another proceeding initiated by Telecom Notice of Consultation CRTC 2009-
261 in which the Commission considered the feasibility and configuration of a
wholesale CO-based access service. During the proceeding, the Commission
altered its scope. This proceeding ultimately led to TRP 2010-632.

27
BCE Inc. 2009 Annual report at p. 7. Online:
http://www.bce.ca/data/documents/BCE_annual_2009_en.pdf
28
Review of regulatory framework for wholesale services and definition of essential service , issued
9 November 2006.

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52. Recognizing also the Commission’s longstanding commitment to competition
and with deference to the Commission’s efforts to promote competition in a
wide range of telecommunications markets over the years, we consider the
regulatory approach exemplified by TRP 2010-632 to be reactive and
incremental. The approach followed by the Commission in the proceeding
which led to TRP 2010-632 consumed an extraordinary length of time.
Indeed, that proceeding followed another lengthy proceeding (that initiated by
Telecom Public Notice CRTC 2006-14) at the conclusion of which the
Commission found that competition in the retail residential Internet services
marketplace was threatened and would not develop on the basis of access
solely to local loops.29

53. We believe that the evidence, including the Commission’s own Monitoring
Report, shows that the Commission has not yet been successful in stemming
the independent ISPs’ decline and in providing consumers a marketplace that
is sufficiently competitive to protect their interests. The incumbent telephone
and cable companies on whom independent ISPs rely for underlying facilities
have, for their part, been very successful at whittling away the independents’
share of the retail Internet services marketplace as the Commission has
documented in its Monitoring Report. In our view, the Commission has
effectively been reduced to responding to attempts by the ILEC to handicap
its independent ISP customers.

54. The Bell companies should not be able to impose UBB on the retail
customers of their wholesale customers. The tariffs at issue in this proceeding
(approved in Decision 2010-255 and modified in Decision 2011-44) deny
competitors the ability to make such decisions. As do many Canadian
consumers, we believe that the Bell companies’ motivation for insisting upon
wholesale GAS tariffs based on usage caps likely stems, at least in part, from
the Bell companies’ realization that such caps are highly unpopular with retail

29
Following a lengthy and detailed examination of the services available to the incumbent telephone
companies’ ISP competitors, the Commission in Decision 2008-17 found (in paragraphs 64-65) that: 1)
with specific reference to the use of unbundled local loops and co-location as a wholesale high speed
Internet service solution:

… new and existing competitors, other than cable companies, face significant
impediments in developing network facilities equivalent to the ILECs' ULLs.
The Commission also considers that as a result of these impediments, which
include construction costs relative to potential revenue and the need to negotiate
municipal and other agreements, it would not be practical or feasible for such
competitors to duplicate the functionality of ULLs.

The Commission also found, 2) that:


...in many situations, co-location [and the use of unbundled local loops] is not
a cost effective alternative for reasonably efficient competitors at this time. In
order for competitors to offer retail high-speed Internet access service, in most
instances they have no option other than to buy the wholesale aggregated
ADSL access or TPIA services.

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customers. It is entirely plausible that the Bell companies have sought to
impose usage caps on their wholesale customers in order to limit retail
customer defections to competitors’ Internet services and the adoption by
consumers of competitive alternatives not only to the Bell companies’ Internet
services but also, perhaps even more importantly, to the Bell companies’ own
IPTV services and other future high bandwidth usage services.

55. The imposition of usage caps on the Bell companies’ competitors is not
consistent with the GiC’s direction in the Policy Direction that, when relying on
regulation, the Commission should use measures that neither deter
economically efficient competitive entry into the market nor promote
economically inefficient entry. Regarding regimes for access to networks, the
GiC directed the Commission to “ensure the technological and competitive
neutrality of those arrangements or regimes, to the greatest extent possible,
to enable competition from new technologies and not to artificially favour
either Canadian carriers or resellers”.

56. The imposition on the Bell companies’ competitors of usage caps and,
perhaps more importantly, of the Bell companies’ choice of business model,
discourages economically efficient competitive entry since such caps
handicap competitors by forcing them to replicate the Bell companies’ own
business model with their own retail customers. This is also regulation that is
not symmetrical or competitively neutral. Forcing competitors to replicate the
Bell companies’ usage caps in their serving arrangements with their own
customers effectively removes, for these competitors, a key potential source
of service differentiation. Regulatory policy that promotes the operation of
market forces should strive to protect service differentiation between ISPs.

What we are asking for in this proceeding


57. We submit, as did the Consumer Groups30 in the TNC 2009-261 proceeding,
that it is now time for the Commission to take a more active role in ensuring
that Canada’s retail Internet services marketplace offers consumers more
than a choice between the ILEC and, where the incumbent cable company is
present, the cableco’s services. In TRP 2010-632, the Commission has
already found that alternatives to the incumbents are essential if the interests
of retail consumers are to be adequately protected in the Internet services
marketplace. We also believe that time is running out for independent ISPs.

58. First, and perhaps most importantly in the short term, we urge the
Commission to do away with the UBB wholesale tariffs under consideration in
this proceeding. We believe that the Commission should replace these
punitive tariffs with a competitively neutral cost-based rate applied on a per-

30
PIAC and Canada Without Poverty.

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unit-of-demand basis (for example a rate per GB). We note in this respect the
response of Mr. Mirko Bibic, Bell Canada’s Senior Vice-President, Regulatory
and Government Affairs, to the following question when he recently appeared
before the House of Comons Standing Committee on Industry, Science and
Technology to explain the Bell companies’ wholesale UBB tariffs:31

Mr. Mike Lake:

Why can't ISPs, the small ISPs, be [billed] on an aggregate basis for their
use, for their customers' use?

Mr. Mirko Bibic:

That solution has been proposed. Now there is a separate CRTC process.
There are lots of ideas that are going to come forward on that separate
CRTC process. That will obviously be one of the ideas, and I'm sure that
others will have other suggestions.

So we're going to put our thinking caps on as well, and see if there isn't a
different way to address this. But we believe fundamentally that what is
ultimately ruled on by the CRTC has got to accept the principle that those
who use the most pay the most, because if we don't, what's going to
happen is everyone's going to have to pay more.32

59. While the Bell companies’ offer to “put their thinking caps on as well” may
have been made in good faith, we do not believe that consumers and
competition should have to continue to wait any longer for wholesale serving
arrangements and rates that are consistent with the objectives of Canada’s
telecommunications policy (as further discussed below).

60. As discussed earlier, we do not believe that competitors’ customers should be


paying for network investments made by the Bell companies for
enhancements these companies have made to accommodate IPTV or any
other of their retail services.

61. We further submit that the service should be priced on the basis of the ILECs’
incremental costs. If the Bell companies’ principal concern is really to ensure
that their wholesale customers should be charged based on what they use,
why not, then, apply a rate which recovers the costs the Bell companies incur

31
10 February 2011, available at:
http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=4953635&Language=E&Mode=1&Par
l=40&Ses=3#Int-3738612
32
See:
http://www2.parl.gc.ca/HousePublications/Publication.aspx?DocId=4953635&Language=E&Mode=1&P
arl=40&Ses=3#Int-3738612

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to provide the capacity these wholesale customers use? The current rate
bears no relationship to the Bell companies’ costs but is set at a discount in
relation to their retail rate. By their own admission, the Bell companies set
their retail rates to maximize the companies’ financial performance for the
benefit of their investors.

62. We also note in this respect that competitor requirements do not appear to
have been a driver for investments in their network to support Internet
services. The Bell companies are driven by their own business needs, not
those of their wholesale customers.

63. We also submit that the Commission should consider an ongoing adjustment
to such rates to reflect the significant productivity improvements which appear
to characterize the operation of IP networks. We note in this respect that
there is ample precedent for the imposition of a productivity offset in the
setting of rates.33

64. The Commission should also consider term and volume discounts. Discounts
based on extent and length of commitment are commonplace in the business
market segment.34

65. In addition to doing away with the Bell companies’ wholesale UBB tariffs, we
submit that the Commission should consider establishing competitive
thresholds –and timelines for their achievement. These could be combined
with incentives in the form of mandated discounts applied to certain wholesale
services35 set at levels that generate results. The Commission could consider

33
See, for example Telecom Decision CRTC 97-9 Price Cap Regulation and Related Issues, paras.
42 and ff.; Telecom Decision CRTC 2002-34 Regulatory framework for second price cap period, paras.
647 and ff.
34
While these services are now largely forborne and examples of pricing designed to stimulate
demand for these services are therefore no longer typically subject to Commission approval and thus no
longer available on the Commission’s public record, we draw the Commission’s attention to examples of
such discounts put forward for the ILECs’ “Megaplan” portfolio of services throughout the 1990s such as
those approved in Telecom Decision CRTC 91-16 MEGAPLAN RATE REDUCTIONS AND RELATED
PROPOSALS;. We also draw the Commission’s attention to the fact that the factors motivating TSPs to
offer discounts and for the Commission to approve some of them included concerns over high rates for
Canadian high speed digital services in comparison with those available in economies against which
Canadian firms compete. Other examples of Commission approvals of ILEC requests for changes to
customer volume pricing plan rating in response to market forces are provided in for example, Telecom
Order CRTC 93-1007, Telecom Order CRTC 94-1234, Telecom Order CRTC 96-1102.
35
At the outset of interexchange voice telephony competition, the Commission granted competitors
contribution discounts based on the following rationale:

the respondents currently hold a market advantage over all competitors in the long distance voice
market, both as a result of their control of the local networks and as a result of their historically
dominant positions. The Commission is of the view that a contribution discount of limited
duration is appropriate in these circumstances.

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the establishment of overall market share objectives for independent ISPs.
The Commission tracks on a periodic basis in its Monitoring Report the
respective retail Internet services market shares held by the ILECs,
incumbent cable companies and independent ISPs. This data (or improved
versions of it) could form the basis for a periodic assessment of progress
made towards the achievement of a marketplace in which independent ISPs
can provide an alternative to the ILEC-cableco duopoly.

66. We also encourage the Commission to look to the example set by other
regulators. As discussed earlier, we have no confidence in the incumbents’
willingness to deploy wholesale offerings that support these wholesale
customers’ business needs and that promote their success in the
marketplace. We draw the Commission’s attention to the initiatives taken by
regulators in jurisdictions such as the United Kingdom, New Zealand,
Sweden, the Netherlands, and more recently Australia wherein the
incumbents have established, to varying degrees, forms of functional
separation of the incumbent’s operations between its retail and wholesale
operations.36 We invite the Commission to consider what appear to be more
effective serving arrangements for wholesale services in other jurisdictions.

Other, additional, wholesale solutions

67. We would also encourage the Commission to consider making use of


industry-wide negotiations fora to help define service offerings that would
provide effective wholesale service offerings.37 We reiterate our concern that

We submit that the circumstances which motivated the Commission to grant to competitors these
discounts share significant characteristics with the current broadband Internet services marketplace. In
particular, as was the case at the outset of interexchange competition, the incumbents hold an
overwhelming share of the market, as a result of their control of the network and as a result of their
historical dominance in this marketplace.
36
These initiatives are examined in The Berkman Centre for Internet & Society at Harvard
University, “Next Generation Connectivity: A review of broadband Internet transitions and policy from
around the world”, 15 February 2010, available at:
http://cyber.law.harvard.edu/sites/cyber.law.harvard.edu/files/Berkman_Center_Broadband_Final_Repor
t_15Feb2010.pdf

37
There are a number of precedents for proceeding in this manner. Following the issuance of
Telecom Decision CRTC 92-12 Competition in the provision of public long distance voice telephone
services and related resale and sharing issues, the Commission directed incumbents and entrants to
jointly engage in the development of interconnection arrangements. In Telecom Decision CRTC 94-19
Review of Regulatory Framework, the Commission invited competitors to make their interconnection
services needs known to the incumbents and then directed the incumbents to develop proposed tariffs. In
Telecom Public Notice CRTC 95- 37Implementation of Regulatory Framework – Local Number
Portability and Related Issues and Telecom Public Notice CRTC 95-48 Implementation of Regulatory
Framework – Local Number Portability and Related Issues, the Commission invited the industry to
establish working groups to address potential local number portability implementation scenarios and to
make recommendations. The Commission subsequently issued directions regarding the functionality that
would need to be developed and directed the industry to develop solutions.

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relying upon the ILECs (and other incumbents) to define wholesale service
offerings presents substantial risk as these incumbents appear to have no
incentives to develop and deploy services that serve the business needs of
the independent ISPs.

68. In a request it made to the Commission in a letter issued 11 February 2011,


the Canadian Network Operators Consortium Inc (CNOC) called upon the
Commission to expand the scope of the current proceeding to include
additional wholesale network access solutions. In directives it issued on 1
March 2011, the Commission rejected CNOC’s request. In doing so, the
Commission noted that:

The current proceeding deals with the narrow issue of billing practices for
mandated wholesale residential high-speed access services. The
Commission also notes that many of the issues raised by CNOC regarding
wholesale high-speed access services were addressed in a recent
Commission decision.

69. In our view, while a decision in this proceeding which did away with the Bell
companies’ attempt to impose their business model on their competitors could
help promote consumer choice in the residential Internet services
marketplace, it is open to question whether such a decision would be
sufficient to adequately protect and promote competition in that marketplace
as the marketplace evolves. We reiterate in this respect that the
Commission’s own Monitoring Report shows that independent ISPs
collectively currently hold only 6% of the market for such services. Moreover,
independent ISPs’ share of the marketplace has been in decline for many
years.

70. We continue to believe that the retail marketplace for Internet services in
Canada is not sufficiently competitive to protect the interests of consumers.
The Commission should consider making available additional wholesale
service arrangements to remedy this situation.

Consistency with the Policy Direction and with Canada’s


telecommunications policy objectives
71. The ILECs will no doubt argue that a more active role by the Commission
would be contrary to the Policy Direction. They may argue, as they have
many times in other proceedings, that the Commission should strive to protect
competition and not individual competitors.

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72. We submit (as discussed earlier) that the current situation in which the retail
market for residential Internet services in Canada is dominated by a duopoly
is inconsistent with the Policy Direction and the telecommunications policy
objectives set out in section 7 of the Telecommunications Act.

73. By contrast, decisive and results-focused action by the Commission to incent


the ILECs (and the other incumbents) to deploy wholesale services that help
rather than hinder their wholesale ISP customers would be consistent with
several of the objectives of Canada’s telecommunications policy.

74. In particular, the promotion of a more dynamic retail marketplace would be


consistent with the objectives set out in subsections 7(a), (b), (c), (f), (g) and
(h) of the Act. Competition from independent ISPs, as the Commission has
already observed in TRP 2010-632 “bring[s] pricing discipline, innovation, and
consumer choice to these retail Internet service markets”.38 This discipline
would promote the orderly development of a telecommunications system that
serves the social and economic needs of Canadians (subsection 7(a)). It can
also promote the affordability, as well as the accessibility and quality of
broadband services offered by Canadian ISPs (subsection 7(b)). The
discipline offered by competition from ISPs that are not members of the
cableco-telco duopoly could also enhance the efficiency and competitiveness
of the marketplace (subsection 7(c)). Greater efficiency and competitiveness
among ISPs can also be expected to make Canadian consumers and small
businesses that rely on the Internet more competitive at the national and
international levels (subsection 7(c)). The presence of strong independent
ISPs would enhance the operation of market forces for the provision of these
telecommunications services (subsection 7(f)). Providing independent ISPs
with effective wholesale services would also encourage innovation in the
provision of telecommunications services (subsection 7 (g)).

75. Decisive and results-focused action on the part of the Commission would also
be consistent with the expectation set out in paragraph 1(a) of the Policy
Direction that, in the exercise of its powers and the performance of its duties,
the Commission should:

(i) rely on market forces to the maximum extent feasible as the means of
achieving the telecommunications policy objectives, and

(ii) when relying on regulation, use measures that are efficient and
proportionate to their purpose and that interfere with the operation of
competitive market forces to the minimum extent necessary to meet the
policy objectives;

76. Regarding item (i), above, as discussed earlier, in TRP 2010-632 the
Commission has already expressed concern that without smaller competitors
38
TRP 2010-632, paragraph 52.

25
Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
(namely, the independent ISPs) an “ILEC and cable carrier duopoly would
likely occur”39 in the retail residential and small-to-medium business retail
Internet services marketplace. In TRP 2010-632, the Commission also found
that if such a duopoly were to occur, retail Internet service competition would
not continue to be sufficient to protect consumers’ interests.40 In TRP 2010-
632, the Commission sought to preserve the operation of market forces by
requiring the incumbents to provide matching speeds.

77. We submit, as discussed earlier, that the Bell companies’ tariffs which are the
subject of this proceeding, present an analogous threat to competition in the
retail residential and small business Internet services marketplace. By
intervening to put a stop to such tariffs, the Commission would be acting to
safeguard the operation of market forces. The Commission would be acting
consistent with several of the policy objectives, as discussed above.

78. Regarding item (ii) (in paragraph 1(a) of the Policy Direction), decisive and
goal-focused intervention by the Commission could be efficient and
proportionate to its purpose. We seek a retail Internet services marketplace
that includes independent ISPs to protect consumers’ interests. Left to their
own devices, the incumbents have already amply demonstrated that they
have no incentive to promote the business success of independent ISPs.

79. In the Policy Direction, the GiC also directed the Commission when it relies
on regulation to use measures that satisfy certain criteria. More particularly,
the GiC directed that the Commission, when it implements measures that
relate to regimes for access to networks, ensure the technological and
competitive neutrality of those regimes, “to the greatest extent possible, to
enable competition from new technologies and not to artificially favour either
Canadian carriers or resellers”. The GiC also directed the Commission when
it implements measures of an economic nature, to neither deter economically
efficient competitive entry into the market nor promote economically inefficient
entry. The GiC further directed the Commission, when it implements
measures that are not of an economic nature, to do so, to the greatest extent
possible, in a symmetrical and competitively neutral manner.

80. To date in our view, the Commission appears to have largely relied upon the
goodwill of the incumbents to develop the services and facilities that
independent ISPs need to continue to operate. The Commission’s reward for
doing this has been a retail marketplace that has very nearly become a
duopoly. The current wholesale Internet services regulatory regime is neither
effective nor efficient. The Commission needed to intervene in 2010 (following
a yearlong proceeding) to stem the ILECs’ efforts to impose crippling speed

39
TRP 2010-632, paragraph 55.
40
Ibid. The Commission also found in TRP 2010-632, that its decision was consistent with the
objectives set out in section 7(a), (b), (c), (f), and (h) of the Act.

26
Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
handicaps on their wholesale ISP customers. Now, consumers and
competitors are again before the Commission to challenge the Bell
companies’ efforts to impose their UBB business model not only on their own
retail customers but also on those of independent ISPs. This is not regulation
of network access arrangements that “to the greatest extent possible […]
enable[s] competition from new technologies”. As mentioned previously, we
question how long independent ISPs can be expected to continue to be able
to attract and retain retail customers – and investors-- when the success of
their businesses is undermined by the imposition of tariffs such as those at
issue in this proceeding. What we are proposing are tariffs for the use of
components of the Bell companies’ network which recover the ILEC’s
incremental costs and which, to a reasonable extent, promote the
continuation of competition from independent ISPs.

Whether the Commission should set a minimum


threshold level for the sale of bandwidth by large
incumbent carriers to the Small ISPs and, if so, what it
should be
81. Given the limited collective market share held by independent ISPs after
years of decline due, at least in part in our view, to ineffective wholesale
service offerings from the incumbents, the Commission should exercise
caution in setting minimum demand requirements, at least at this stage in the
development of the marketplace.

82. That being said, we also believe that the Commission should be encouraging
the development by independent ISPs of market share and promoting growth.
To do this, as discussed earlier, the Commission could consider incentives for
these wholesale customers to grow demand such as have been found in a
variety of tariffed offerings aimed at large and medium business customers,
including volume and term discounts. It is our understanding that the offering
of such discounts has long been commonplace in the marketplace for
services offered to medium and large business customers and has typically
been motivated by market forces. Market forces in the wholesale Internet
services marketplace are largely absent and the Commission’s role in this
marketplace should be to provide a substitute for the inadequate market
forces.

3) Whether it is appropriate to hold an online consultation as


part of its review

27
Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011
4) Whether it is appropriate to hold an oral public hearing as
part of its review
83. In its directions on procedure issued 11 March 2011, the Commission stated
that it “will issue an amendment to Notice 2011-77 shortly to revise the
procedure to include an interrogatory process, an oral hearing, and an online
consultation.”

Conclusion
84. The Bell companies’ UBB wholesale tariffs harm competition and harm
consumers. The Bell companies have designed serving arrangements that
would effectively force independent ISPs to replicate the Bell companies’ own
business model. In our view, these tariffs are inconsistent with the Policy
Direction and with several of the objectives of Canada’s telecommunications
policy.

85. Reversing the long-term trend will require decisive action on the
Commission’s part. First, the Commission should do away with the wholesale
UBB tariffs that are at issue in this proceeding. We recommend that the
Commission consider replacing these tariffs with a simple cost-based rate per
unit of bandwidth (for example, on a per Gb basis). We also recommend that
the Commission consider decisive means to re-establish competition from
independent ISPs. The Commission should also consider the establishment
of objectives for the incumbent’s wholesale operations. The Commission
could also consider implementing functional separation. This appears to have
proven successful in several other jurisdictions in promoting competition. The
Commission could also consider soliciting input from the ILECs’ wholesale
customers themselves to encourage the development and deployment of
wholesale services that promote competition.

28
Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011

Appendix 1 – BROADBAND SERVICES COMPARISON


FOR SELECTED COUNTRIES PREPARED FOR THE
CONSUMER GROUPS, prepared by Andrew Briggs and
filed 22 June 2009, as Appendix 1 to the Consumer
Groups’ 22 June 2009 submission in TNC 2009-261
[See next page]

29
BROADBAND SERVICES COMPARISON
FOR SELECTED COUNTRIES

PREPARED FOR THE CONSUMER GROUPS

JUNE 22, 2009

Andrew Briggs
AGBriggs Consulting Inc.
Andrew Briggs
AGBriggs Consulting Inc.

Mr. Briggs is an independent consultant providing financial, economic and


regulatory advisory services to clients in the telecommunications, broadcasting and
media industries since 1999. Mr. Briggs has participated in numerous CRTC
telecommunications and broadcasting proceedings over the years. He was also a
member of the Telecommunications Policy Review Panel Secretariat.
Mr. Briggs has previously worked with Star Choice, the Canadian Cable
Telecommunications Association (CCTA) and AT&T Canada (Unitel
Communications). Mr. Briggs is a Certified Management Accountant and holds an
MBA from McMaster University, as well as a B. A. (Economics) from University of
Western Ontario.
Broadband Services Comparison for Selected Countries June 2009

Table of Contents

1.0 Introduction ...................................................................................................1

2.0 Countries Characteristics and Penetration....................................................2

3.0 Competition and Consumer Choice ..............................................................5

4.0 Prices for Broadband Services......................................................................8

5.0 Services and Speed ....................................................................................12

6.0 Wholesale Broadband Access and Unbundling Policies .............................15

7.0 Conclusion ..................................................................................................17

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Broadband Services Comparison for Selected Countries June 2009

Broadband Services Comparison for Selected Countries

1.0 Introduction
1. The following report was prepared at the request of the Consumer Groups for CRTC
Telecom Notice of Consultation 2009-261 - Proceeding to consider the
appropriateness of mandating certain wholesale high-speed access services. It
provides a comparison of broadband services and broadband unbundling policies
among a number of OECD countries, including Canada. Broadband services for these
countries are compared across several criteria. The information presented in the
report is intended to assist in comparing and contrasting the relative performance of
Canada to the selected countries.
2. As a result of the growing importance of broadband for social and economic purposes,
the OECD regular reports on a range of broadband-related statistics. 1 The OECD
identifies five main categories which it considers important for assessing broadband
markets 2 :
¾ Penetration
¾ Coverage
¾ Prices
¾ Services and speeds
¾ Choice and competition
3. The report reviews the available data and statistics for these categories from the
OECD and other sources. In addition, the report provides a summary of the current
broadband unbundling policies for each selected country.
4. While there are challenges to comparing broadband services across countries, such
comparisons are relevant for understanding the similarities and differences between
broadband services, performance and regulatory policies. In addition to the OECD’s
work on comparing broadband services across member countries, other examples
include:
¾ The CRTC reports on Canada’s relative performance across a number of
telecommunications sectors in its annual Communications Monitoring Report.

1
See OECD Broadband Portal at: http://www.oecd.org/sti/ict/broadband
2
OECD Report, “Broadband Growth and Policies in OECD Countries”, July 2008, page 21. Public version of
pre-publication version of report available at: http://www.oecd.org/dataoecd/32/57/40629067.pdf. Published
version available for purchase at: http://www.oecd.org/sti/ict/broadband/growth.

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Broadband Services Comparison for Selected Countries June 2009

¾ U.S., where new federal legislation directs the FCC to undertake extensive
international comparisons as part of its assessment and reporting
requirements. 3
¾ Ofcom, the UK national regulatory agency (NRA) annually publishes a report on
the developments in international communications, including broadband.
¾ The European Commission annually issues a report on the European electronic
communications market, including broadband.

2.0 Countries Characteristics and Penetration


5. The OECD countries included in the comparison have broadly similar levels of GDP
per capita in comparison to Canada. While a number of factors are important in
determining broadband penetration rates 4 , the OECD has identified the correlation
between GDP per capital and broadband penetration as being relatively high. 5
6. The countries included in the comparison include:
¾ Canada
¾ United States
¾ United Kingdom
¾ France
¾ Denmark
¾ Netherlands
¾ Finland
¾ Sweden
¾ Switzerland
¾ Germany
¾ Australia
7. Figure 1 below illustrates the broadband penetration across the selected countries in
December 2008 and GDP per capita from 2007. Among the countries included in the
comparison, Canada has the 6th highest broadband penetration rate and 4th highest per
capita GDP.

3
Broadband Data Improvement Act of 2008. The FCC recently issued a PN to gather comments on how to
effectively implement the international comparison of broadband service capability (GN Docket No. 09-47).
4
OECD penetration rates are reported as broadband subscriber per 100 inhabitants to allow for a relative
comparison of penetration across different sized countries. Alternate penetration methods could include
number of households using or subscribing to broadband. It should be noted that the OECD subscriber data
includes both residential and business broadband subscribers.
5
OECD report, “Broadband Growth and Policies in OECD Countries”, page 26.

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Broadband Services Comparison for Selected Countries June 2009

Figure 1

Broadband Penetration and GDP Per Capita


Subscribers per 100 inhabitants (December 2008) and GDP per capita (2007 USD PPP)
Subscribers
40

38
Denmark

36 Netherlands

34
Switzerland

32 Finland

Sweden
30
Canada
United Kingdom
28 France
Germany
United States
26
Australia

24

22

20 GDP
$30,000 $32,000 $34,000 $36,000 $38,000 $40,000 $42,000 $44,000 $46,000 $48,000

Source: OECD

8. Population density and concentration of population are other factors that have been
suggested as impacting broadband penetration. Higher population densities and
population concentrations are thought to positively impact broadband penetration
levels as the costs and associated challenges of deploying broadband networks are
generally lower with higher densities and population concentrations.
9. Figures 2 and 3 below illustrate that these relationships may hold true in some
instances, but do not apply to all countries. Figure 2 compares the relationship
between broadband penetration and population density, as measured by population
per square kilometer, while Figure 3 compares broadband penetration and population
concentration as measure by the percentage of population living in urban areas.

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Figure 2

Broadband Penetration and Population Density


Subscribers per 100 inhabitants (December 2008) and Population Density per sq. km (2005)
Subscribers
40

38
Denmark

36 Netherlands

34
Switzerland

32 Finland

Sweden
30
Canada
United Kingdom
28 France
Germany
United States
26
Australia

24

22

Population
20
- 50 100 150 200 250 300 350 400 450
Source: OECD, UN World Population Prospects

Figure 3

Broadband Penetration and Population Location


Subscribers per 100 inhabitants (December 2008) and % Urban Population (2004)
Subscribers
40

38
Denmark

36 Netherlands

34
Switzerland

32 Finland

Sweden
30
Canada
United Kingdom
28 France
Germany
United States
26
Australia

24

22

Population
20
50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Source: OECD, World Bank Report, 2006

10. The selected countries range considerably in population densities from a low of 3
persons per square kilometer for Canada and Australia, to a high of 393 persons per

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Broadband Services Comparison for Selected Countries June 2009

square kilometer in the Netherlands. There is also a range in the percent of population
living in urban areas from a low of 61% in Sweden to a high of 92% in Australia.
11. Figure 4 below provides historical information on the broadband penetration rate
among the selected countries, along with the country ranking. While Canada had the
highest ranking at the end of 2002, by the end of 2008 its ranking slipped to 6th among
the selected countries, notwithstanding that its broadband penetration increased from
12.1 to 29.0 broadband subscriptions per 100 inhabitants. This change reflects the
rapid growth in broadband among a number of the selected countries.
Figure 4
Historical Broadband Penetration Rates an Ranking Among Selected Countries
(Subscriber per 100 inhabitants)

2002 2003 2004 2005 2006 2007 2008


Country Penetration Rank Penetration Rank Penetration Rank Penetration Rank Penetration Rank Penetration Rank Penetration Rank
Australia 1.8 11 3.5 11 7.7 11 13.6 10 18.3 10 22.8 11 25.4 11
Canada 12.1 1 15.1 1 17.6 4 20.7 6 24.3 6 27.2 6 29.0 6
Denmark 8.2 2 13.1 2 19.0 2 24.9 2 31.8 1 35.8 1 37.2 1
Finland 5.5 7 9.5 7 14.9 5 22.4 4 27.1 4 30.7 4 30.7 5
France 2.8 9 5.9 8 10.5 8 15.1 9 20.1 9 24.6 8 28.0 8
Germany 3.9 8 5.6 9 8.4 10 13.0 11 18.2 11 23.7 9 27.4 9
Netherlands 7.0 4 11.8 3 19.0 1 25.2 1 31.0 2 34.4 2 35.8 2
Sweden 8.2 3 11.2 4 14.9 6 20.8 5 26.4 5 30.6 5 32.0 4
Switzerland 5.6 6 10.6 5 17.7 3 23.8 3 27.7 3 32.3 3 33.5 3
United Kingdom 2.3 10 5.4 10 10.4 9 16.3 8 21.4 7 25.8 7 28.5 7
United States 6.7 5 9.6 6 12.8 7 16.3 7 20.3 8 23.4 10 25.8 10

Source: OECD

12. In terms of broadband coverage, the OECD data from 2005 (the latest available from
the OECD) indicates that with the exception of Canada, Australian and the U.S., the
selected countries had DSL coverage of at least 90%. More recent data indicates that
DSL coverage for the selected European countries is at least 96%. 6 CRTC data for
2007 indicates that broadband coverage with DSL or cable was 89% for Canada. Data
for Australia indicates that DSL coverage is 91% as of June 30, 2008. The FCC
estimates DSL coverage at 82% as of December 31, 2007. It should also be noted
that a number of countries have implemented or are in the midst of implementing plans
to extend broadband coverage to unserved or underserved areas, as well as upgrade
available broadband service speeds. 7

3.0 Competition and Consumer Choice


13. The OECD acknowledges the following benefits from competition and consumer
choice: “the fastest connections, lowest prices and most innovative service are in areas
where there is a range of consumer choice for broadband.” 8

6
European Commission report prepared by IDATE, “Broadband Coverage in Europe”, December 2008.
http://ec.europa.eu/information_society/eeurope/i2010/docs/benchmarking/broadband_coverage_2008.pdf
7
Governments in UK, Finland, Germany, US and Australia have all recently announced broadband plans. See
“Digital Britain, Final Report,” Department for Culture, Media and Sport, pages 53, 60 and 61.
http://www.culture.gov.uk/images/publications/digitalbritain-finalreport-jun09.pdf
8
OECD Report, “Broadband Growth and Policies in OECD Countries”, page 49.

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Broadband Services Comparison for Selected Countries June 2009

14. One measure of the relative competition and consumer choice available across
countries is the share of subscribers by broadband technology. Differing shares by
technology indicates higher levels of infrastructure based competition. 9 Figure 5
provides the share of each major technology of broadband subscribers in the selected
countries.
Figure 5
Technology Share - Based on Subscribers
(December 2008)

Country DSL Cable Fibre/LAN Other Total


France 95% 5% 0% 0% 100%
Germany 93% 7% 0% 0% 100%
Finland 84% 13% 0% 2% 100%
United Kingdom 78% 21% 0% 0% 100%
Australia 78% 17% 0% 5% 100%
Switzerland 69% 29% 1% 1% 100%
Netherlands 61% 37% 2% 0% 100%
Denmark 61% 27% 10% 3% 100%
Sweden 60% 19% 20% 1% 100%
Canada 45% 54% 0% 1% 100%
United States 42% 51% 4% 3% 100%

Source: OECD

15. In many European countries and Australia, DSL technology is the most prevalent form
of broadband. For example, in France 95% of broadband subscribers are served by
DSL technology. By comparison, Canada and the U.S. have significant cable
television networks upgraded to provide broadband services with the majority of
broadband subscribers served by this technology, and as a result have comparatively
low levels of subscribers served by DSL. Fibre based broadband services are still
relatively limited with Sweden and Denmark having 20% and 10% of broadband
subscribers served by fibre respectively. 10
16. Another measure of the relative competition and consumer choice available is to
examine the market shares of between the incumbent telcos, cable companies, as well
as service providers using unbundled/wholesale services from the incumbent
operators. This comparison reflects the relative market shares by various types of
operators, regardless of the network technology being deployed.

9
This generally presumes that different technology platforms are owned by different competitors, thus
indicating the extent of infrastructure competition. While this is generally the case, there are exceptions. For
example, in Denmark the incumbent telco also owns a significant cable tv network in its territory that also offer
cable based broadband services.
10
In Sweden, a significant number of municipally-owned companies have invested in fibre networks.

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Broadband Services Comparison for Selected Countries June 2009

17. Figure 6 provides a comparison of the market share for broadband services broken
down by the incumbent telephone companies, cable companies, competitors using
unbundled/wholesale services and other. This figure captures the use of incumbent
operators’ networks by competitors to offer broadband services, as well as the
prevalence of competing infrastructures such as cable networks.
Figure 6

Broadband Market Shares


Estimated Market Shares at End of 2008 (Canada and US End of 2007)
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% United United
Finland Australia Denmark Netherlands Switzerland Germany France Canada Sweden
States Kingdom
Competitor Other Networks 2% 5% 11% 2% 1% 0% 0% 2% 0% 16% 1%
Competitor Cable Broadband 7% 6% 12% 37% 29% 7% 5% 52% 55% 19% 21%
Competitor - Unbundled / Wholesale Broadband Access 27% 32% 21% 11% 20% 46% 48% 2% 5% 25% 53%
Incumbent Network* 65% 58% 57% 50% 50% 47% 47% 44% 41% 40% 25%

* Incumbent market shares include all network types (DSL, cable, fibre)
Source: OECD, National Regulatory Agency Reports, Australian Burea of Statistics and company reports

18. Incumbent telcos’ market share ranges from a high of 65% in Finland to a low of 25%
in the U.K. Competitors’ use of unbundled/wholesale access services from the
incumbent operators ranged from a high of 53% in the U.K. to a low of 2% in the U.S.
As indicated above, cable networks account for the majority of subscribers in both
Canada and the U.S., with the Netherlands reporting the 3rd highest share for cable.
19. In a recently released Global Information Technology Report 2008-2009 by the World
Economic Forum, countries were ranked on the numerous enabling factors that permit
countries to benefit from information and communication technology (ICT) advances. 11
For factor 2.07 Quality of competition in ISP sector, an executive opinion survey
question asked respondents “Is there sufficient competition among Internet service
providers in your country to ensure high, quality, infrequent interruptions and low
prices? Canada ranks 26th out of 134 countries on this factor and is 9th of the 11
countries included in the broadband comparison for this report. Figure 7 below
provides the ranking for all eleven countries included in the comparison.

11
Global Information Technology Report 2008-2009, World Economic Forum, March 26, 2009. Available at:
http://www.weforum.org/pdf/gitr/2009/gitr09fullreport.pdf

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Broadband Services Comparison for Selected Countries June 2009

Figure 7

Quality of Competition in the ISP Sector


"Is there sufficient competition among Internet service providers in your country to ensure high qulity,
infrequent interruptions, and low prices?"

United States (6) 5.81

Germany (7) 5.78

Netherlands (9) 5.73

Sweden (10) 5.71

Finland (11) 5.6

Denmark (14) 5.55

Switzerland (15) 5.49

United Kingdom (21) 5.31

Canada (26) 5.17

France (28) 5.08

Australia (35) 4.87

1 2 3 4 5 6 7
Note: 1= no, 7 = yes, equal to the best in the world. Global ranking provided in brackets.
Source: World Economic Forum, Executive Opinion Survey 2007, 2006 in The Global nformation Technology Report 2009-2009 (page 314)

4.0 Prices for Broadband Services


20. Comparing prices across countries is a challenge as broadband services are not
necessarily homogenous. The pricing of broadband services may vary based on a
number of attributes including connection speed, upload/download limits, excess
usage charges and the like. In addition currency differences as well as differences in
purchasing power need to be addressed.
21. In order to compare prices across countries, it is useful to compare using a variety of
metrics to address these challenges. In its statistical reporting, the OECD provides
information on the average monthly subscription price (reported in US $ using
purchasing power parity 12 ). Figure 8 illustrates the average monthly subscription
prices for the selected countries, ranging from $29.22 in Sweden to $56.21 in Australia.
Canada has the fourth highest average monthly subscription price.

12
Purchasing Power Parities (PPPs) are currency conversion rates that both convert to a common currency
and equalise the purchasing power of different currencies, eliminating the differences in price levels between
countries in the process of conversion.

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Broadband Services Comparison for Selected Countries June 2009

Figure 8

Broadband Average Monthly Subscription Price


(Oct. 2008, USD PPP)

Sweden $29.22

Finland $30.61

United Kingdom $30.63

Switzerland $32.71

France $35.60

Denmark $37.08

United States $45.52

Canada $45.65

Germany $48.22

Netherlands $53.86

Australia $56.21

Source: OECD $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00

22. Another commonly used price comparison metric is to compare prices based on a
common unit of measure - price per speed measure, such as the price per advertised
Mbps of download speed. This information is presented in Figure 9.

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Figure 9

Average Broadband Monthly Price per Advertised Mbps


(October 2008, USD PPP)

France $3.30

United Kingdom $4.08

Germany $5.64

Denmark $7.11

Netherlands $8.83

Finland $9.63

United States $10.02

Switzerland $14.80

Australia $15.74

Sweden $17.79

Canada $26.11

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00

Source: OECD

23. The latest OECD statics on the average monthly price per advertised Mbps 13 indicates
that Canada has the highest price by a considerable margin – almost 50% greater than
the next closest country, Sweden. However, this latest OECD data for Canada does
not appear to be accurate or reasonable based on the current pricing of broadband
services in the country.
24. A calculation of the average monthly price per advertised Mbps based on broadband
Internet service currently available in Toronto for Rogers and Bell indicates a price in
the range of US$13.30 for Canada, nearly half of the reported price. 14 This result
would place Canada with the fourth highest average price per Mbps after the US.
25. Furthermore, information included in the CRTC’s annual Communications Monitoring
Report indicates that Canada’s pricing is not as high as the OECD data on price per
advertised Mbps would indicate. The CRTC report includes a comparison of
broadband prices for three usage baskets: low, medium and high (Figure 10). 15

13
OECD notes that the advertised speeds are typically the theoretical maximum for the employed technologies
and users commonly experience lower speeds. Furthermore, it is often the case that only parts of country have
been upgraded to allow for faster speeds.
14
Calculated based on advertised standalone prices from company web sites at June 15, 2009. Average price
based on total of nine offerings, converted to US$ at 0.822 and adjusted for PPP.
15
Low usage – lite service < 1 Mbps; Medium usage – high speed approx. 5 Mbps; High usage - > 10 Mbps.

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Figure 10

International Broadband Pricing Comparison - Monthly by Usage Level


(June 2008, $CDN PPP)

$76

Australia $63

$43

$67

US $56

$25

$69

Canada $47

$33

$49

France $46

$42

$53

UK $44

$30

$- $10 $20 $30 $40 $50 $60 $70 $80


Low Usage Medium Usage High Usage

Source: CRTC 2008 Communications Monitoring Report

26. The CRTC pricing comparison across five countries indicates that Canadian rates are
very comparable for the medium usage basket (high speed at approximately 5 Mbps)
to the lowest rate among the four comparison countries, but that the rates for Canada
are significantly above the minimum rates for the low and high usage baskets (though
not as pronounced as the OECD data on Mbps would indicate).
27. Another price comparison provided by the OECD data examines the minimum and
maximum price per advertised Mbps, illustrating the range of pricing within a country.
Figure 11 shows the range of prices (on logarithmic scale). Canada has the highest
minimum price per advertised Mbps among the selected countries. It should be noted
that the maximum broadband price per advertised Mbps for Canada appears to suffer
from the same data issues as identified above for the average price per advertised
Mbps. Based on the current information referenced above for Rogers and Bell in
Toronto, the maximum price per advertised Mbps is likely more in the range of US$40
per advertised Mbps. 16

16
The Rogers and Bell broadband service pricing is comparable to the OECD reported minimum price per
Mbps for Canada.

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Broadband Services Comparison for Selected Countries June 2009

Figure 11

Range of broadband prices per Mbit/s


(October 2008, all platforms, logarithmic scale, USD PPP)

France $0.25 France $27.91

Sweden $0.35 Sweden $98.80

Finland $0.41 Finland $68.76

Australia $0.92 Australia $160.96

Denmark $1.02 Denmark $26.07

Netherlands $1.15 Netherlands $45.20

United Kingdom $1.16 United Kingdom $13.16

Germany $1.44 Germany $19.17

Switzerland $1.72 Switzerland $74.60

United States $2.65 United States $26.66

Canada $3.85 Canada $110.51

0 1 10 100 1,000

5.0 Services and Speed


28. Comparative information regarding the fastest advertised speed among broadband
service providers provides an indication of the breadth of broadband services offered
and the level of advancement in broadband networks. Faster advertised speeds may
indicate the availability of more advanced broadband service products.
29. Figure 12 provides the OECD data for the fastest advertised connection speeds
available among all operators survey by technology for each of the selected countries.

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Broadband Services Comparison for Selected Countries June 2009

Figure 12

Fastest Advertised Speed by Technology


(September 2008, Mbps)
100
Finland 110
30

100
Sweden 24
24

100
France 100
28

100
Denmark 26
50

60
Netherlands 24
20

50
United States 16
20

0
Germany 32
50

0
Australia 30
24

0 DSL Cable Fibre


Switzerland 25
20

0
Canada 25
16

0
United Kingdom 20
Mbps
24

0 20 40 60 80 100 120
Source: OECD

30. While Canada reported among the lowest advertised download speeds, there have
been some announced increases. For example, in February 2009 Shaw announced
the availability of a 100 Mbps offering in Saskatchewan for $249.95 per month.
31. Another measure of the breadth of services available is the average advertised speed
across countries. The OECD information in Figure 13 is based on a selection of
broadband service offers available within each country. 17 The OECD indicates that the
average advertised download speed across OECD countries is 17.4 Mbps (average
based on over 600 service offers). Canada is reported as having the lowest average
download speeds.

17
For example, the OECD data indicates that the data for Canada is based on an average of 16 service offers.

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Broadband Services Comparison for Selected Countries June 2009

Figure 13

Average Advertised Broadband Download Speed


(September 2008, Mbps)

France 51.0

Finland 19.2

Netherlands 18.2

Germany 15.9

Australia 15.5

Denmark 14.6

Sweden 12.3

United Kingdom 10.7

United States 9.6

Switzerland 7.9

Canada 6.2
Mbps

Source: OECD - 10 20 30 40 50 60

32. Another measure of the speed of services is to look at the actual take-up of services by
speed, not just by examining the advertised broadband offers. Figure 14 provides a
comparison of the relative take-up of broadband services by speed for selected
countries (where the information is available). This relative take-up of broadband
services by speed is impacted by both the availability of various speed offerings and
the relative pricing of these services. UK and Australia have relatively high proportions
of subscribers with speeds below 1.5 or 2.0 Mbps, while 94% of subscribers in
Germany have broadband services with speed greater than 2.0 Mbps.

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Broadband Services Comparison for Selected Countries June 2009

Figure 14

Broadband Subscriber by Speed


(Canada December 2007, Australia June 2008, all others January 2009)

Australia

United Kingdom

Canada

Sweden

Denmark

Finland

Germany

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
> 144 Kbps and < 2 Mbps >2 Mbps and < 10 Mbps > 10 Mbps
Canada - 256 Kbps to 1.5 Mbps; Australia - 256 Kbps to 1.5 Mbps, 1.5 Mbps to 8 Mbps, > 8 Mbps
Source: European Commission, CRTC, ACCC

6.0 Wholesale Broadband Access and Unbundling Policies


33. Another consideration in comparing broadband services across countries is the
regulatory policies in place regarding broadband access. While it is generally accepted
that inter-platform or facilities-based competition brings the greatest and most
sustaining benefits, intra-platform competition via unbundling/access regulation also
delivers benefits.
34. Unbundling policies are impacted by the market conditions and regulatory frameworks
in place within each country. Access to unbundled local loops and wholesale
broadband access services provide alternate competitors with access to incumbents’
networks and services to provide competing broadband services to consumers.
35. The OECD report on broadband growth and policies points out that certain countries
with infrastructure-based competition and unbundling rules have competition from not
only the cable operators and incumbent telephone company, but also additional market
players who rely on unbundling. 18 According to the OECD, this approach has reduced
the danger of duopoly market structure. 19

18
OECD Report, “Broadband Growth and Policies in OECD Countries”, page 51.
19
As an example, the OECD notes that the Netherlands has strong infrastructure-based competition between
cable and DSL, but also leads in main distribution frames upgraded with competitive DSL equipment (based on
ECTA – European Competitive Telecommunications Association analysis).

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Broadband Services Comparison for Selected Countries June 2009

36. Figure 15 below provides a summary of the current unbundling policies impacting
broadband services for the selected countries using the European Commission’s
classification of broadband access services. 20
Figure 15

Summary of Unbundling Policies impacting Broadband Services

Unbundled access to local Wholesale Broadband


loops Access

Country LSS LLU Resale Bitstream

Australia R R NR NR

Canada R R NR R*

Denmark R R NR R **

Finland R R NR R

France R R R R

Germany R R NR R

Netherlands R R R PR

Sweden R R NR R

Switzerland NR PR NR PR

United Kingdom R R PR PR

United States NR R NR PR

R - Regulated; PR - Partially Regulated; NR - Not Regulated

* Includes incumbent cable carriers mandated to provide TPIA service


** Includes mandated access to telco incumbent's cable TV network to provide
wholesale cable broadband access

Source:
"International Regulation of Wholesale Regulation in Canada", Report prepared for Bell
Canada, March 2007 (PN 2006-14)
National Regulatory Agencies for each country and the European Commission

37. It should be noted that the above chart does not reflect the details regarding the
availability, pricing and other terms for unbundled access.

20
LSS (line sharing service) – access to the higher frequency portion of copper line connecting the end user
premises to the local exchange (end office).; LLU (local loop unbundling) – access to the facility (typically
copper) connecting the end user to the local exchange; Resale – resupply of incumbent’s retail broadband
service; Bitstream – unbundled broadband origination service connecting end user premises to an aggregation
point higher in the network.

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Broadband Services Comparison for Selected Countries June 2009

38. Recent notable developments regarding unbundling policies in the selected countries
include the following:
¾ Australia – in its June 4. 2009 draft decision, the ACCC decided to extend regulation of
LSS and LLU services for five more years. Comments are currently being solicited on
the draft decision.
¾ Canada – in Decision 2008-17, the CRTC classified local loops (ULL) and ADSL
access (LSS line sharing) as conditional essential service; Aggregated DSL access
and TPIA (bitstream) classified as conditional mandated non-essential services.
Decision 2009-19 permits incumbents to enter into forborne negotiated agreements
with competitors for conditional essential and mandated non-essential services.
¾ Denmark – in March 2009, the EC accepted the NRA’s (NITA) proposal to regulate the
provision of wholesale cable broadband access over the incumbent telco’s cable TV
network.
¾ France – in 2008, for the incumbent operator the NRA (ARCEP) imposed access to
copper local loops and bitstream over copper, but not fibre.
¾ Netherlands – beginning in 2009, the NRA imposed unbundled access on the copper
and fibre network of the incumbent telco; in addition, existing regulation for wholesale
broadband access was extended to fibre access
¾ Switzerland - under revisions to Telecom Act of April 2007, the incumbent telco must
provide access in transparent and non-discriminatory manner at cost-based prices for
ULL and bitstream access (for four years only for bitstream access) with any disputes
regarding access conditions shall be settled by the Federal Communications
Commission (ComCom); in November 2007, ComCom determined that Swisscom is
dominant in the provision of wholesale bitstream access and is subject to the access
requirements; Swisscom presented details of its proposed bitstream offer in June 2009
and has indicated it expects the service to be available to competitors by November
2009.

7.0 Conclusion
39. Broadband services can be compared and assessed across countries along a number
of categories including penetration, coverage, pricing, services and speeds, and
competition and consumer choice. This report compares Canada’s performance
across these categories to ten other OECD countries.
40. Based on a review of the currently available data from the OECD and other sources,
the following observations can be made regarding Canada’s relative performance to a
selected set of countries:
¾ Canada’s broadband penetration rate ranks 6th among the eleven selected
countries at 29.0 broadband subscriptions per 100 inhabitants, down from 1st at
the end of 2002; Denmark reported the highest penetration rate at 37.2
subscriptions per 100 inhabitants;

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Broadband Services Comparison for Selected Countries June 2009

¾ Canada has the highest proportion of subscribers served by a competing


telecommunications technology other than DSL with 54% cable high speed
subscribers; Canada also had one of the lowest levels of broadband subscriber
shares for competitors deploying incumbent unbundled/wholesale broadband
access services;
¾ Pricing for Canadian broadband services is in the mid- to higher-end in
comparison to the selected countries;
¾ Canada’s broadband service speeds are towards the lower end of the range
based on advertised service speeds; Canada is in the mid range for subscribers
to broadband service > 2 Mbps
¾ Canada’s unbundling policies are broadly similar to many of the selected
countries.

AGBriggs Consulting Inc. Page 18


Telecom Public Notice CRTC 2011-77
Call for comments - Review of billing practices for wholesale residential high-speed access services
Comments of PIAC/CAC
March 28, 2011

***End of Document***

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