Teresa Griffin-Muir

Vice President, Regulatory Affairs

Vice-présidente des Affaires réglementaires
MTS Allstream Inc.
 

28 March 2011 by Access Key

Mr. Robert A. Morin

Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, ON K1A 0N2

Dear Mr. Morin:

Subject: TNC 2011-77, Call for comments – Review of billing practices for wholesale
residential high-speed access services – MTS Allstream comments

1. Pursuant to paragraph 18 of Telecom Notice of Consultation CRTC 2011-77, Call for

comments – Review of billing practices for wholesale residential high-speed access
services, 8 February 2011 (TNC 2011-77), MTS Allstream Inc. (MTS Allstream) is
providing the following comments regarding the terms upon which large incumbent
carriers should be allowed to provide wholesale high-speed Internet access to
independent Internet service providers (ISPs).

2. In its 22 February 2011 comments on the scope of the TNC 2011-77 proceeding,
MTS Allstream indicated that the Commission needs to address the fundamental issues
regarding the nature of wholesale broadband access services. As the Commission
noted in its 11 March 2011 letter addressing requests to modify the scope and terms of
the proceeding, MTS Allstream requested that the TNC 2011-77 proceeding be revised
to include additional questions regarding such issues as network congestion and
capacity. In the letter, the Commission also agreed that the issues raised by
MTS Allstream can be addressed in the context of the proceeding.

3. During the two years since Bell Aliant Regional Communications, Limited Partnership
and Bell Canada (collectively, Bell) filed tariff notices (TNs) 242 and 7181, requesting the
ability to apply usage-based billing (UBB) to residential accesses on Bell’s wholesale
Gateway Access Service (GAS), it has become increasingly apparent that there is no

P.O. Box 6666, MP19C, 333 Main Street, Winnipeg, MB R3C 3V6 Tel: (613) 688-8789 Fax: (613) 688-8303 email: iworkstation@mtsallstream.com
Suite 1400, 45 O’Connor Street, Ottawa, Ontario K1P 1A4 Tel: (613) 688-8789 Fax: (613) 688-8303 email: iworkstation@mtsallstream.com 
 
Mr. Robert Morin
28 March 2011
Page 2 of 9

common understanding of the facts and the rationale for wholesale access has become
obscured.

4. As Minister Clement stated in his comments to the Industry Committee, affordability and
choice are central to the ongoing dialogue. Only a robust wholesale framework that
provides competitive local exchange carriers (CLECs), independent ISPs and all other
competitors with economically viable access to broadband facilities will ensure this.

5. Therefore, the Commission needs to ensure that:

a. any rating structure for wholesale high-speed Internet access services reflect the
cost of providing that access, plus a reasonable mark-up, irrespective of whether
a flat-rated or usage-sensitive pricing approach is used; and

b. if a usage-based approach is implemented for wholesale accesses any

applicable usage cap must be based on the aggregate capacity purchased by an
independent ISP and it must be based on verifiable metrics, not simply the whim
of the ILEC.

6. Independent ISPs, like CLECs, are competitors equal in stature to incumbent carriers.
Bell has mischaracterized competitors that use GAS to provide the end-user access for
their respective Internet services as resellers of Bell’s retail Internet services. This is just
not the case, as is clear from a reading of the Commission’s definition of “simple resale”,
which it defines in Decision 2005-6 “as resale without added value and notes that simple
resale includes rebilling.” 1

7. CLECs and independent ISPs, on the other hand, add substantial value and are
responsible for all the ancillary components that make up an Internet service and that
are included in Bell’s retail rates. These include such things as email addresses and
storage capacity, security features, parental controls and portal services. GAS only
Mr. Robert Morin
28 March 2011
Page 3 of 9

provides the “last mile” access and the aggregation necessary for competitors to reach
the end-users.

8. As MTS Allstream and others have repeatedly pointed out, aggregated broadband
access services, such as GAS, are the only way in which competitors can reach all of
the end-users that the incumbent carriers are able to serve with their retail broadband
services. The Commission, like other regulators around the world, has consistently
found that access is not economically duplicable on a widespread basis. Therefore, in
the Internet services market independent ISPs, like CLECs in the local exchange
market, need to be recognized as competitors equal in stature to incumbent carriers. 2

9. As Industry Minister Clement noted during his appearance before the Industry
Committee:

The question of network congestion, whether it in fact exists, and if it

exists at a level incumbent ISPs claim, is a subject of some debate. What
is clear, however, is that there is nothing transparent about applying or
imposing usage-based billing on independent ISPs. There's nothing
transparent about how the imposition of this business model has
any direct correlation to the real costs of provision of wholesale
services. 3

The latter part of this statement points to several significant problems with Bell’s
proposed implementation of UBB on GAS.

10. CLECs and independent ISPs purchase both access and aggregate network bandwidth
(capacity) when they use Bell’s wholesale GAS. How an ISP distributes this capacity
between individual end-customers should be its own prerogative, not that of Bell. Yet
under its UBB proposal, Bell would treat each ISP's end-customer that is served over a
                                                                                                                                                                                           
1
Telecom Decision CRTC 2005-6, Competitor Digital Network Services, 3 February 2005 (Decision 2005-6),
paragraph 248.
2
In Telecom Decision CRTC 97-8, Local competition, 1 May 1997 (Decision 97-8), the Commission adopted the
principle that CLECs are not simply customers of incumbent local exchange carriers (ILECs) but are carriers
equal in stature to the ILECs in the local exchange market. This same principle needs to be adopted with
respect to independent ISPs.
Mr. Robert Morin
28 March 2011
Page 4 of 9

GAS access as though the customer were Bell’s own retail end-user. As a result, an
independent ISP would be required to pay usage charges for each one of its
end-customers that exceeds Bell’s arbitrary usage cap. This payment would have to be
made even when the ISP is already purchasing more than sufficient capacity to handle
its retail volumes in aggregate. In effect, Bell would be allowed to charge an ISP
multiple times for the same capacity.

11. Furthermore, not only are independent ISPs paying Bell for aggregate capacity on GAS
through the flat-rated monthly charges, but those rates are based on costs developed
using estimates of average peak period demand, as Bell described in
The Companies(CRTC)20Aug09 8 TN 242 & 7181. Therefore, independent ISPs are
already paying their proportionate share of Bell’s costs to provide peak period bandwidth
on its network. The Commission has acknowledged as much, noting that under Bell’s
UBB proposal it would continue to recover its access costs and all usage costs from the
flat-rate component. 4 Since the flat-rate component of GAS already recovers Bell’s
costs to provide the service, independent ISPs would simply be contributing money to
Bell’s bottom line, if forced to pay UBB charges consistent with Bell’s proposal.

12. In light of this and as outlined in MTS Allstream's 22 February 2011 letter, the
Commission, at a minimum, must assure itself of the following facts prior to
implementing wholesale UBB:

i. The existence of congestion on the Bell network;

ii. The configuration of the Bell network, the traffic that rides on the shared
network and the location of choke points within that network and the
hand-off of traffic from the Bell network to the “Internet”;

                                                                                                                                                                                           
3
Emphasis added.
4
Telecom Decision CRTC 2010-255, Bell Aliant Regional Communications, Limited Partnership and Bell Canada
– Applications to introduce usage-based billing and other changes to Gateway Access Services, 6 May 2010,
paragraph 54.
Mr. Robert Morin
28 March 2011
Page 5 of 9

iii. The Bell GAS service including the differences between GAS and retail
internet access service, the structure of the Bell GAS tariff and the fact
that within the current tariff competitors pay for access and capacity, the
current mark-up incorporated in the price of GAS, and the implication of
the proposed wholesale UBB on retail pricing;

iv. The actual cost of capacity and whether the imposition of UBB on
wholesale access, and in this instance specifically GAS as proposed by
Bell, actually even addresses the so-called “subsidization” by low volume
Internet users of higher volume Internet users; and

v. The relationship between increasing demand and network costs.

13. Congestion is specific to time and place. No properly provisioned telecommunications

network is congested everywhere or at all times. Detailed scrutiny of Bell’s claims that
there is congestion in its network during peak periods, is required to pinpoint to exactly
where and when this alleged congestion is occurring.

14. Even the existence of congestion on an ongoing basis has not been adequately
established. During his appearance before the Industry Committee, Bell Canada’s
Senior Vice-President Regulatory and Government Affairs made the claim that in a
2008 decision the Commission was satisfied that Bell had established that there was
congestion in its network during peak periods. The Commission appears to be taking
this on faith, seemingly on the basis of Bell’s assertion that:

… P2P file-sharing applications are designed to make the maximum use

of downstream and upstream bandwidth and to use up additional capacity
in the network as it becomes available. The Commission considers that
intensive use of such applications could, during periods of high Internet
Mr. Robert Morin
28 March 2011
Page 6 of 9

traffic, result in network congestion and degrade the performance of

Internet services for other end-users. 5

15. However, this is far from proof that congestion actually existed. Nor, even if there were
periods of congestion at that time, that there continues to be today. As Bell itself is quick
to point out, it has been investing heavily in upgrading its broadband networks. Failure
to do so would put it at a disadvantage relative to the cable incumbents.

16. As many parties have noted, applying UBB in the manner Bell is proposing, irrespective
of whether the excess usage is during the peak period or not, does nothing to solve what
Bell claims is the problem requiring it to implement UBB in the first place – congestion
during the busy period. Nor is there any indication, other than Bell’s own statements,
that CLECs’ and independent ISPs’ customers, which Bell admits are few in number, are
contributing any more heavily to peak period demand than Bell’s own retail customers
which form the vast bulk of end-users.

17. Finally, just as the newer technologies being deployed today are increasing the speeds
at which data can be transmitted and the capacity of the networks over which that data is
transported, they are also substantially reducing the associated costs. The Senior
Vice-President Regulatory Affairs for Shaw Communications Inc. (Shaw) alluded to this
during his appearance before the Industry Committee, indicating that when Shaw
launched its retail high-speed Internet service, it had a download speed of 1.5 Mbps for
under $55 per month, while that same service today has a download speed of 7.5 Mbps
for under $40. The reason for this is not that Shaw has altruistically decided to give its
retail customers a break, but rather is predicated on the fact that costs have fallen
dramatically along with the increase in speed.

18. In other words, although the amount of data being transmitted across the Internet is
growing rapidly, the time required to transmit that data is decreasing at least as quickly,
since service and network speeds are increasing at the same time, as service providers
                                                           
5
Telecom Decision CRTC 2008-108, The Canadian Association of Internet Providers' application regarding Bell
Mr. Robert Morin
28 March 2011
Page 7 of 9

upgrade to newer technologies. Congestion is a function not just of the amount of data
being transmitted, but also of the speed at which it is transported. As a recent graphic in
the Globe and Mail demonstrated, a 120 MB music file that takes more than 13 minutes
to download over a 1.5 Mbps Internet connection would take only 18 seconds at
70 Mbps. Similarly, the time to download a 700 MB video file would be reduced from
79.7 minutes to 103 seconds – less than 2 minutes. 6

19. The solution lies in ensuring that there is adequate competition. As long as this is the
case, incumbents, like all other service providers, may implement whatever type of
pricing options they wish for their retail Internet plans. However, there is no valid
rationale for allowing incumbents to do the same with respect to wholesale access.
Permitting Bell to implement its UBB proposal, regardless of any level of discount for the
UBB charge relative to the analogous retail charge, would be tantamount to sanctioning
retail price fixing – allowing Bell to dictate the price structure and levels that its
competitors, independent ISPs, can charge in the retail marketplace. In order to have
any control over its costs, an independent ISP would have to be satisfied with
addressing a small, and shrinking, segment of the market – those end-customers that
can be served directly over an unbundled local loop – or follow Bell’s lead and
implement the same usage caps and additional usage charges.

20. This is especially pernicious since retail Internet prices are not rate regulated, so the
Commission has neither the oversight nor the visibility to Bell’s pricing. Yet, in effect,
Bell would be able to “regulate” the retail prices of its competitors by setting a price floor
for its competitors, while Bell itself can target potential retail customers with whatever
types of deals it wants with no regulatory oversight on retail. The Commission would
have no way of determining whether Bell was behaving in an anticompetitive manner
until it was far too late.

                                                                                                                                                                                           
Canada's traffic shaping of its wholesale Gateway Access Service, 20 November 2008, paragraph 30.
6
Globe and Mail Infographic, Our growing data appetite, 6 February 2011,
http://www.theglobeandmail.com/news/technology/tech-news/ubb-internet/our-growing-data-
appetite/article1896708/?from=1938694.
Mr. Robert Morin
28 March 2011
Page 8 of 9

21. Wholesale pricing for mandated access must be based on the cost of making the service
or facility available to independent ISPs, not on “retail equivalency” or some notion of
“value of service”. This is true whether the pricing model used is a flat-rated one or a
usage-sensitive one. There has to be recognition that it is not economically possible to
duplicate incumbent broadband networks and the regulatory framework must provide for
competitor access to those networks at reasonably economic rates. In order to incent
competition in the retail Internet market, CLECs and independent ISPs need access to
broadband capacity on the same basis as the incumbents – on a competitively and
technologically neutral basis.

22. Anything other than cost-based rates is untenable. Cost-based rates allow incumbents
to make an adequate return on their investment in broadband facilities, while allowing
competitors to develop their own service offerings without being restricted by a structure
forced on them by the incumbent. Bell’s UBB proposal would impose a pricing structure
on competitors' retail broadband services and stifle competition. Cost-based wholesale
access to broadband facilities, on the other hand, will stimulate competition, which in
turn will encourage innovation.

23. In his statement to the Industry Committee, Minister Clement noted:

… But if we lose sight of the consumer I think we lose sight of something

critically important to the success of the digital economy strategy and of
the economy more generally.

Now what do I mean by that. Well it's clear that more competition and
more choice for consumers help the adoption of the digital economy, it
helps us to be competitive. It helps us to be innovative. It helps us to be
creative as citizens and it also helps our small businesses to succeed. All
of these things are going to be necessary for a society that is built on the
knowledge economy.
Mr. Robert Morin
28 March 2011
Page 9 of 9

24. As was made clear during the proceeding leading up to the Broadband Access Policy, 7
independent ISPs are an important source of innovation in the Canadian economy.
Often times these smaller competitors are able to develop new niche applications that
would not be worthwhile for an incumbent to address. If access to broadband facilities at
reasonable rates is not guaranteed, this important source of innovation could be lost.

25. It is also important to note that Bell’s UBB proposal for wholesale GAS is flawed not only
in that the proposed usage rates are excessive, but in that the usage caps are totally
arbitrary, being based on what Bell deems to be acceptable in the retail market. This is
not appropriate in the wholesale market. Any usage cap must be based on the
aggregate capacity that a competitor purchases from the incumbent. There must also
be some valid rationale for the cap, not simply an arbitrary decision by the incumbent
that can be changed at will.

Yours truly,

for Teresa Griffin-Muir

Vice President, Regulatory Affairs

c.c.: Pauline Jessome, MTS Allstream (613) 688-8791

Lynne Fancy, CRTC lynne.fancy@crtc.gc.ca
Tom Vilmansen, CRTC tom.vilmansen@crtc.gc.ca
Parties to TNC 2011-77

* * * End of Document * * *

                                                           
7
Telecom Regulatory Policy CRTC 2010-632, Wholesale high-speed access services proceeding,
30 August 2010 (the Broadband Access Policy).