25 November 2011 - dslreports.com66527180c72473454e3… · Part I Application for reclassification...

25 November 2011 by Access Key

Mr. John TraversySecretary GeneralCanadian Radio-television and Telecommunications CommissionOttawa, ON K1A 0N2

Dear Mr. Morin:

Subject: Application for the Reclassification of Ethernet Services and Ancillary Relief

MTS Allstream Inc. (MTS Allstream) is hereby filing an application requesting the

reclassification of wholesale Ethernet services and certain ancillary relief, pursuant to

Part I of the CRTC Rules of Practice and Procedure.

Since the normal period for comments would require a response during the holiday

period, MTS Allstream is proposing that respondents be given until 16 January 2012 to

reply to this application.

Yours truly,

for Teresa Griffin-Muir

Attachment

c.c. Justin To, MTS Allstream, 613-688-4507Lynne Fancy, CRTC [email protected] list

* * * End of Document * * *

P.O. Box 6666, MP19C, 333 Main Street, Winnipeg, MB R3C 3V6 Tel: (613) 688-8789 Fax: (613) 688-8303 email: [email protected] 1400, 45 O'Connor Street, Ottawa, Ontario K1P 1A4 Tel: (613) 688-8789 Fax: (613) 688-8303 email: [email protected]

Before the Canadian Radio-television and Telecommunications Commission

Part I Application for reclassification of Wholesale Ethernet Services and Ancillary Relief

Submitted By

25 November 2011

TABLE OF CONTENTS

Mr. John Traversy25 November 2011 of 20

EXECUTIVE SUMMARY

ES.1 The Commission's decisions, particularly those dealing with competitor access to

wholesale IP infrastructure and IP interconnection, have a crucial impact on

Canada's domestic and global success in the digital economy. These decisions

are the underpinning of the future competitiveness of the telecommunications

market and they will either facilitate Canada’s productivity growth and

international competitiveness by stimulating competition, or stifle these benefits

by limiting competition.

ES.2 For some time now Canada’s productivity record has been poor. Canada’s

lagging competitiveness has been linked to low information and communications

technology (ICT) adoption rates, which in turn has contributed to Canada's

declining productivity.

ES.3 The International Telecommunications Union, the agency that allocates global

radio spectrum and develops the technical standards for telecommunications

interconnections, found in its most recent report that Canada has dropped 6

spots to 26th in the world in ICT development.1 Since 2008 Canada has

continued to fall behind in global rankings in terms of ICT availability and number

of per capita users of Internet and mobile technology.

ES.4 Competition is the driver of investment and innovation. The Commission has

recognized this and much of the groundwork for competition and success has

already been laid by the Commission through the Broadband Access Policy and

the decisions on billing practices for residential and business high speed digital

subscriber line (DSL) access services.2

1 International Telecommunications Union, Measuring the Information Society, September 2011, http://www.itu.int/ITU-D/ict/publications/idi/2011/Material/MIS_2011_without_annex_5.pdf.

2 Telecom Regulatory Policy CRTC 2010-632, Wholesale high speed access services proceeding, 30 August 2010 (the Broadband Access Policy) and Telecom Regulatory Policy CRTC 2011704, Billing


ES.5 While much of the focus has been on consumer retail services, business services

require equal attention. During the recently concluded interconnection framework

proceeding,3 the role that near-ubiquitous deployment of an internet protocol (IP)

access infrastructure plays in driving the telecommunications industry to

ubiquitous IP interconnection was brought to light. While the discussion in that

proceeding focussed on incumbent local exchange carrier (ILEC) deployment of

fibre-to-the home, the reality is that deployment of Ethernet – the business IP

access equivalent – is also underway and is a crucial piece of the competitive

puzzle.

ES.6 At the moment competition is particularly lacking in the small and medium-sized

business (SMB) market and waning in other sectors of the business market. This

is because competitors do not have access to Ethernet access and transport

facilities and services - the IP generation of "last mile and middle mile" facilities

on reasonable or sustainable terms. These Ethernet facilities and services are

the essential unbundled local loops and competitor digital network (CDN) T1

access and transport of the IP telecommunications network infrastructure

required to serve business customers.

ES.7 In the decisions referenced above the Commission recognized that competitors

cannot be constrained to older, obsolete technologies and that if competitor

access was restricted from higher speeds, "competitors would be effectively

prevented from offering higher service speed options to their own customers"4

and "competition in retail Internet service markets would be unduly impaired."5

This conclusion is also true for Ethernetbased business services. As ILECs

practices for wholesale business high-speed access services, 15 November 2011 (TRP 2011704).

3 Telecom Notice of Consultation CRTC 2011206, Proceeding to review network interconnection matters, 23 March 2011 (TNC 2011206).

4 Broadband Access Policy, paragraph 54.



inevitably migrate their network and existing retail customers onto broadband IP

based voice and data services, legacy circuits will first become increasingly

costly forcing the ultimate decommission of these facilities that are currently

mandated as conditional essential.

ES.8 The fact that Ethernet access and transport are not mandated is contributing to

the lack lustre competition in the business market.

ES.9 However, as has been the case with the wholesale broadband DSL decisions,6

the Commission has the ability to address this situation and increase the

competitiveness of the Canadian business sector through the:

a. Reclassification of wholesale Ethernet Access and Transport services from

the "non-essential subject to phase-out" category as follows:

a.i. Ethernet Access services (EAS) to the "conditional essential"

category of wholesale services; and

a.ii. Ethernet Transport services (ETS) to the "conditional mandated

non-essential" category of wholesale services.

b. Unbundling of wholesale EAS and ETS services, so that competitors can

obtain the services either individually or together; and

c. Variance of the Commission's determination to forbear from exercising

certain of its powers in respect of wholesale EAS and ETS, all as set out in Telecom

Decision CRTC 2008-17, Revised regulatory framework for wholesale services and

definition of essential service, 3 March 2008 (the Essential Services Decision).

6 The Broadband Access Policy, Telecom Regulatory Policy CRTC 2011703, Billing practices for wholesale residential high-speed access services, 15 November 2011 (TRP 2011703) and TRP 2011704.


ES.10 Reclassification of wholesale Ethernet access and transport will provide

competitors with the essential underlying access and transport facilities and

services used for IP technology and will push the entire industry to more rapidly

deploy IP network infrastructure and innovative IP-based solutions.

I. ETHERNET – RECLASSIFICATION UNDER THE ESSENTIAL SERVICES FRAMEWORK

MTS Allstream hereby applies for the reclassification of wholesale Ethernet

services, and for other ancillary relief described above, pursuant to Sections 7,

24, 25, 27, 34, 47, 50, 51, 55, 60, 61 and 62 of the Telecommunications Act (the

Act) and Part I of the CRTC Telecommunications Rules of Procedure (the Rules).

In the Essential Services Decision the Commission defined six categories of

services: essential, conditional essential, conditional mandated non-essential,

public good, interconnection and non-essential subject to phase-out, and outlined

three conditions for the definition "essential" services:7

1) The facility is required as an input by competitors to provide

telecommunications services in a relevant downstream market;

2) The facility is controlled by a firm that possesses upstream market power

such that withdrawing mandated access to the facility would likely result in

a substantial lessening or prevention of competition in the relevant

downstream market; and

7 Using this definition, six categories of wholesale services were outlined (essential, conditional essential, conditional mandated non-essential, public good, interconnection and non-essential subject to phase-out) and the corresponding mandates for wholesale access detailed.


3) It is not practical or feasible for competitors to duplicate the functionality of

the facility.

In the following sections we will demonstrate that Ethernet access and transport

meet the tests used by the Commission to determine conditional essential and

conditional mandated non-essential.

Ethernet is a Required Input

To understand the importance of Ethernet services it is necessary to understand

the nature of Ethernet and its trends in the marketplace. In technical terms

Ethernet is a routing protocol that governs the transmission of voice and data

over an IP-enabled network. The IP/Ethernet routing protocol is a means of

transmission that breaks up data into small packets, finds the optimal path of

transmission from one point on the network to any other and then reassembles

the data at the final destination.

"Ethernet access" as referred to within the Commission's ruling in the Essential

Services Decision refers strictly to the "last mile" telecommunications

infrastructure to buildings and business customers, and the speed and capacity

of transmission services. "Ethernet access" within this context refers to the

transmission of data between an ILEC's central office (CO) and an end-

customer's premises at speeds of 10, 100 or 1000 Mbps, most commonly on

fibre.

In this same context, “Ethernet transport” refers to the Ethernet intra- and inter-

exchange channels or pathways that make up the metropolitan aggregation and

regional transport components of the ILEC’s network. The intra-exchange

pathway or metropolitan aggregation component is a local transport facility which

is used to carry customer traffic between COs within an exchange or a larger


metropolitan area. The inter-exchange pathway or regional transport component

is a transport facility which carries customer traffic between exchanges or

metropolitan serving areas. The multipoint network infrastructure on which these

components ride is shared by many ILEC services (e.g., Internet, IPTV, digitized

voice), not just those using Ethernet protocol.

Because competitors have neither the ubiquitous network infrastructure nor the

ability to replicate such infrastructure on a widespread basis, there are many

areas within which a competitor will require metropolitan aggregation and/or

regional transport in order to bring the “last mile” access facility back to that

competitor’s nearest point of presence (POP). Typically, an ILEC will aggregate

all of its IP-based traffic to only one or a very few COs within an exchange,

metropolitan area or region. Depending on the addressable market, a single CO

could serve and entire region. It is most efficient, for both ILECs and

competitors, if the competitors co-locate in and interconnect at these aggregation

points.

Attached as Appendix A to this Application is a series of diagrams illustrating why

it is necessary to mandate both Ethernet access and transport and the

consequence on competitors, and ultimately the business market, if these

services are not mandated.

In the downstream, retail business market, a steady and significant shift from

legacy to IP and Ethernet based broadband services has been under way for

close to a decade (Figure 1).8

Figure 1: Legacy Data, Ethernet and IPVPN Service Revenues ($M)

Source: CRTC Communications and Telecommunications Monitoring Reports, 2005 – 2011.

8 Figure 1 is based on data provided in the Commission's annual industry monitoring reports.


In 2002, legacy data services, a market in which MTS Allstream was one of the

leading providers of national Frame Relay, represented 73% of all data revenues

in Canada. However, by 2010 the share of legacy data services, including Frame

Relay, had fallen to just 10%. Today, 90% of the $2 billion market for business

data services is now IPbased using the more efficient, higher speed capabilities

of Ethernet as the underlying access and/or transmission facility.9 Ethernet

technology is now widely considered a bedrock requirement for an adequate

offering to all but the smallest of business customers.

The transport backhaul portion of data services has seen similar trends.

Increasingly data transport services in the marketplace have been replaced by

more efficient and cost effective IP-based backhaul. Since 2002, private line

service revenues have declined by 39%. The Commission itself noted that this

decline "could be attributed to, among other things, the newer data protocols,

such as IPVPN, that can replicate the functionality of private lines."10

However, while the retail market has increasingly shifted to IP-based transport

services, competitors are being forced to continue to use legacy private line

services. Wholesale accounts for an ever growing proportionate share of private

line services (Figure 2). The marked difference in observed trends for retail and

wholesale private line services is a direct result of the existing wholesale services

regime. To continue to be able to offer retail competing services competitors are

left to compete using technologically inferior and more costly legacy wholesale

services and retail interexchange private line (IXPL) services.

Figure 2: Retail and Wholesale Private Line Revenues ($M)

Source: CRTC Communications and Telecommunications Monitoring Reports, 2005 – 2011.

9 CRTC Communications Monitoring Report, July 2011, Table 5.4.2, page 151.

10 CRTC 2008 Communications Monitoring Report, page 221.


In Canada, apart from the ILECs there is no significant source of third-party

supply of Ethernet facilities and services that can be obtained on a widespread

basis.11 This is because the only ubiquitous network infrastructure serving the

business market is the ILEC network within each of the respective ILEC

operating territories. In no uncertain terms, today and in the future, Ethernet is

required as an input by competitors to provide telecommunications services to

the business market.

The ILEC Ethernet infrastructure is not duplicable

In the Essential Services Decision the Commission determined the classification

of both Ethernet Access and Transport services largely using the third branch of

the essential services test, duplicability. Under the Commission's essential

services framework, "feasibility of duplication relates mainly to any significant

legal, technical or other non-economic impediments that would prevent a

reasonably efficient competitor from self-supplying or using alternative supply

sources for an upstream facility with a reasonable period of time." In turn,

"practicability of duplication relates predominantly to the economic ability of

competitors to self-supply or use third-party supply for upstream facilities. The

Commission considers that a facility can be practically duplicated if a reasonably

efficient competitor could expect to earn sufficient revenue to justify investing in

the construction of a given facility."12

MTS Allstream has invested billions of dollars building an advanced national

network infrastructure, including significant roll-out of the fibre access rings

11 MTS Allstream obtains just 1% of its Ethernet Access facilities from third party providers. Third party suppliers do not offer comparable or compatible Ethernet services.

12 Essential Services Decision, paragraph 41.


necessary to offer state of the art Ethernet-based services. In the spring of 2010,

MTS Allstream announced its plan to extend Allstream's metropolitan fibre

network to about 675 additional multi-tenant buildings over the following three

years.13 By the end of Q3 2011, MTS Allstream had fibre deployed to a total of

2,313 buildings14 in various cities across Canada. Once this expansion is

completed in 2012 MTS Allstream will have increased the proportion of its

customers that it will be able to serve entirely on its own network. This number

however, pales in comparison to the ILECs reach. ILECs, including

MTS Allstream in Manitoba, start from a position where they are already

connected to every business within their operating territory. Therefore even after

significant and continued investment MTS Allstream's reach is still dwarfed by the

ILECs capability to provide "last mile" access.

The Commission recognized the challenges faced by competitors and the

advantages enjoyed by incumbents in the CDN Decision,15 stating:

In the Commission's view, ILECs can more readily expand their networks given the ubiquitous nature of the copper-based network and the widespread deployment of their fibre facilities in their serving territories. By contrast, the size and reach of the competitors' networks are significantly less, which places the competitors at a disadvantage with respect to the expansion of their networks. In addition, ILECs can rely on existing support structures such as poles, conduits and entrance conduits to more readily expand their networks. On the other hand, the competitors have significantly fewer support structures, and accordingly rely on the ILECs' support structures to expand their networks. The use of the ILEC support structures is subject to availability and provisioning intervals, which in turn will generally impact the competitors'

13 See Telecom Notice of Consultation CRTC 2009-261 Transcript, Vol. 3, 2 June 2010, paragraph 3905.

14 Manitoba Telecom Services Inc., 3rd Quarter Supplementary Financial Information, for the period ending 30 September 2011, page 3.

15 Telecom Decision CRTC 20056, Competitor Digital Network Services, 3 February 2005 (the CDN Decision).


provisioning intervals with respect to their own customers. In the Commission's view, such considerations constitute an additional constraint for competitors.16

In addition to the incumbency advantages conferred by their network

infrastructure, incumbents also benefit from the economies of scale and scope

generated by their interritory share of the market. Unlike competitors, when the

ILEC deploys fibre it is doing so knowing that it will be providing service to the

majority of businesses at each location, often pursuant to a long-term contract.

Therefore, the investment is significantly less risky for the ILEC and the per

customer cost of adding a new building to an ILEC fibre ring is far less than that

of a competitor.

This is easily illustrated by TELUS' proposal, made during the BSO Proceeding,17

to relieve ILECs from the basic service objective in new developments.18 The

rationale provided to justify this proposal was that the cost to overbuild in these

situations makes no sense from an economic perspective, if the MDU owner or

the builder has already locked up a significant portion of the potential customers

through alternate marketing arrangements.19

16 CDN Decision, paragraph 76.

17 The hearing conducted in November 2010 pursuant Telecom Notice of Consultation CRTC 201043, Obligation to serve and other matters (formerly Proceeding to review access to basic telecommunication services and other matters), 28 January 2010 (the BSO Proceeding).

18 TELUS proposed that an ILEC should be relieved of its obligation to provide local exchange service to any residential customers in multi dwelling units (MDUs) with 10 or more units or new sub-divisions with 10 or more lots in forborne exchanges.

19 For example, at Transcript, Vol. 8, 5 November 2010, paragraph 10224, TELUS' witness stated :The reason that we tried to make the compromise at subdivision or the multi-dwelling unit is the problem that if there are marketing agreements or the condo owners choose a particular supplier at the beginning, you can be left with as little as 10 percent of the remaining customers that may demand service. And the cost in those situations to provision the area to serve what might be, you know, a customer you are not aware of yet, really require you to put in more facilities than for 10 percent of the customer. So it's that cost that we are trying to avoid.


Each time a competitors deploys fibre to another multi-tenant building it must do

so knowing that the ILEC generally has the majority of the businesses locked into

long-term contracts and existing relationships. So even in cases where the initial

capital layout is similar for both the ILEC and a competitor, the return on that

capital for the competitor is generally only a fraction of what the ILEC can expect

from the same or an even smaller investment. Furthermore, unlike the ILEC,

even when a competitor's fibre passes a given building, its network does not

necessarily connect to that building because investment to connect to buildings

where the competitor does not have any customers has a significant risk of being

stranded.

Absent mandated wholesale Ethernet access and transport there will be a substantial lessening of Competition:

Ultimately competitors like MTS Allstream must rely on the ILEC for "last mile"

Ethernet access facilities. While MTS Allstream uses its own facilities to provide

services to customers wherever possible, and alternatives to the ILECs' facilities

wherever it can practically do so, there is not sufficient source of third party

supply, leaving the bulk of MTS Allstream's annual wholesale spend with the

ILECs. Less than half of MTS Allstream's customer base can be served entirely

over its own facilities, even in major centres. This is the case despite the billions

of dollars MTS Allstream has invested building its advanced network national

infrastructure.

Contrary to the Commission's expectations in the Essential Services Decision,

and despite vigorous attempts to do so in the period since that decision and the

phase-out of wholesale ETS and CDN transport services on 3 March 2011,

MTS Allstream has been unable to find alternate sources of supply in a large

number of locations. Therefore, it must continue to rely on the ILEC in these

locations as the only viable source of these facilities.


Looking at market data the trends are becoming clear. As the data market

continues to shift to IP-based technologies it is the ILECs that are regaining or

winning a disproportionate share of new data business. In the early stages of IP-

based service deployment competitors were able to develop innovative solutions

using underlying legacy facilities (i.e., CDN) to win customers and drive demand

for IP-based services. However, as Ethernet became more widely deployed in

the ILEC networks and competitor access to the underlying Ethernet access and

transport facilities was limited, inroads made by competitors have been reversing

steadily since 2007 (Figure 3). This trend will continue if competitors without

Ethernet access on a conditional essential basis and Ethernet transport on a

mandated essential basis.

Figure 3: Trends in new data protocol services

In the Broadband Access Policy decision the Commission emphasized a

technologyneutral approach to wholesale services noting that the wholesale

framework relies not on the label given to a facility but rather an analysis of the

relevant market and the conditions in that market within which the facility is used

to provide service. In this regard, the Commission stated:

Based on the record of this proceeding, the Commission considers that there is no utility in determining what, if any, facilities could be identified as "next generation." In the Commission's view, the real issue is to establish those wholesale obligations, if any, that should apply to identified facilities. In this decision, the Commission has determined that competitors continue to require access to wholesale services currently offered by the incumbents over their digital subscriber line and DOCSIS platforms in order to ensure that sufficient competition exists in the provision of retail Internet services. In the case of the ILECs, the facilities that are subject to


wholesale obligations include FTTN and, in the case of the cable carriers, DOCSIS 3.0 facilities."20

In business markets competition comes from competitors that both own and

lease facilities, like MTS Allstream. Indeed, under the forbearance regime for

local business services, the presence of a facilities-based competitor like

MTS Allstream permits the Commission to forbear from regulating the ILECs'

retail rates. If that competitor is then not provided access to the essential

facilities needed to compete effectively then the ILEC has little or no competition

and, given the extent of retail forbearance, the customer has no recourse.

Absent the relief requested in this Application, ILEC market share will continue to

rise. In Canada’s business market competitors can only offer genuine choice if

they have cost-effective access to Ethernet facilities and services. Without

access to last and middle mile infrastructure many investments already made by

competitors in colocation and backhaul network capacity will be stranded.

Moreover, without last mile access to end customers, competitors such as

MTS Allstream will have little incentive to continue to invest. A withdrawal of

wholesale EAS will undoubtedly reduce competition in the multi-billion dollar

market for business data services.

MTS Allstream submits that Ethernet access, the last mile access to customer

locations, meets the test for “conditional essential” as defined in the Essential

Services Decision: services that conditionally meet the essential services criteria,

but where the Commission considers that changes in market conditions at a point

in the future could result in them no longer being considered essential.

Taking all three components of the essential services test together, the above

demonstrates that Ethernet access service meets the three criteria of the



essential services test: 1) Ethernet access as the unbundled local loop of IP

based services is an essential input required by competitors to offer competing

voice and data services in today’s market; 2) like all last mile access facilities

Ethernet access is not duplicable; and 3) the evidence already shows that the

absence of a conditional essential Ethernet access service has already lead to

and will continue to result in a substantial lessening of competition. MTS

Allstream further submits that Ethernet transport is a required input that should

be reclassified as “conditional mandated non-essential.” In the Essential

Services Decision the Commission determined that mandated non-essential

services are those the Commission has determined do not meet the criteria for

essential services but must be mandated nonetheless.

The principles that the Commission has established to ensure that competitors

are able to use their own network in conjunction with inputs from the ILECs

necessitates unbundling of facilities and service components that when taken

together with co-location, will increase competition, choice and efficient supply,

and stimulate the development of competition. This was deemed by the

Commission to be particularly the case when applied to provision of other network services.21

With Ethernet transport, IP data traffic can be efficiently transported throughout

the network using the most efficient path, sharing the network capacity. Without

mandated competitor access to Ethernet transport, as demonstrated in

Appendix A, competitors will be limited to within the footprint where they are co-

located, be forced to buy bundled, end-to-end Ethernet services or use inefficient

and prohibitively expensive private line services. This will lead to a substantial

lessening of competition in many communities leaving customers wholly

unprotected.

21 Decision 94-19, pages 42 and 43.


II. NEGOTIATION WILL NOT WORK

The Commission's rationale in the Essential Services Decision for establishing a

phaseout period for services, including Ethernet, was to provide competitors with

an opportunity to restructure their provisioning arrangements:

…a phase-out period will provide competitors with a reasonable period and incentives to review their provisioning arrangements and to restructure them as required, taking into account the significant changes made in this Decision to the regulatory framework for wholesale services.22

. . .

In reaching its determinations on the length and structure of the phase-out period for each non-essential service subject to phase-out, the Commission has taken into account the nature of the service, the time required to negotiate alternative arrangements for the service, impediments to its replacement through self-provisioning, and the relatively large number of services that are subject to phase-out.23

While it may sound reasonable and is appealing to be able to rely on negotiated,

rather than mandated, access, the sad reality is that such negotiations have not

and will not work. The natural economic interest of any service provider (and its

shareholders) is to hold onto the maximum amount of revenues and earnings

possible and give as little share of these to their competitors. This is rational

behaviour. This is why all ILECs resist competition and, consequently, mandated

access to any of the underlying facilities and services they currently use to

provide services. The greater the market power of the incumbent the more easily

it can thwart competition.




Ironically vibrant retail and wholesale competition create the incentives for

incumbents to negotiate the delivery of wholesale services on reasonable terms

to competitors. Or, at a minimum, these incentives are mimicked when control of

the inputs required by the industry (i.e., all market participants including the

ILECs) to offer competing services is outside of the control of the incumbent24.

The business telecom market in Canada is not characterized by either of these

situations. The ubiquitous network infrastructure is controlled by the ILEC within

each operating territory and the majority of the market share is held by that same

incumbents. Naturally since the market circumstances for a robust wholesale

market are not present the ability for competitors to reasonably negotiate with

ILECs is also not present.

The following Bell behaviour, accentuated by Essential Facilities decision and

Essential phase out beginning in March 2011, reflects the rational behaviour of

an ILEC with market power and illustrates that the circumstances for a

reasonable negotiated wholesale arrangement are not present in the Canadian

market place for a competitor:

1. Bell made it clear that it views wholesale as simply another

distribution channel and wants to reserve the right to determine who can

access its facilities and services on a wholesale basis.25

2. The price increases Bell tried to impose on MTS Allstream for DS3

intra exchange transport channels post phase-out in March 2011

exceeded Bell's retail rates for that same service;

24 This is the case in the UK, for example, where Open Reach provides the underlying facilities and services to all industry players including BT.

25 See, for example, the discussion between Mr. Cope, CEO and President of BCE Inc. and Bell Canada, and Commissioner Molnar at paragraphs 594 to 614, TNC 2009-261 Transcript, Vol. 1, 31 May 2010.


3. Bell has filed for approval to increase the rates for ULLs and

colocation power rates;

4. Bell has abused the regulatory process on numerous occasions;

1. in the ULL proceedings to prevent, or delay, corrections to

errors in Decision 2011-24;26

2. in the IC to IC link proceeding to pre-empt co-located

carriers from offering transport services from colos; and

3. by unilaterally refusing to continue providing approved

tariffed rates for two DS3 circuits which have been in service for ten

years, and on 6 October 2011 filed a “special assembly” tariff to

increase rates for the exact same circuits by about 800%. Further,

Bell advised MTS Allstream in a letter dated 11 October 2011 that

once the new SFT application was approved, the rates would apply

retroactively to 1 June 2011, clearly several months prior to the SFT

tariff application to say nothing of the effective date.

5. Bell has refused to negotiate the provision of retail IPVPN service

to MTS Allstream for more than a one-year commitment. And even under

the one year contract only provides this service on a customer by

customer basis, demanding detailed information about the end-customers

that MTS Allstream is proposing to serve.27

26 Telecom Decision CRTC 201124, Bell Aliant Regional Communications, Limited Partnership and Bell Canada – Monthly recurring rates and service charge rates for unbundled loops in Ontario and Quebec, 12 January 2011 (Decision 201124).

27 This puts MTS Allstream at a considerable competitive disadvantage in situations where it requires access to this service to extend the reach of its own network facilities when bidding in response to a request for proposal (RFP) from a potential business customer. Given the uncertainty and lack of predictability, MTS Allstream is also disadvantaged in providing service to its existing customers.


6. Bell attempted to preclude competitors from using DNA transport

components in conjunction with CDN service, even though the

Commission has clearly stated that competitors are permitted to use any

service provided as part of CDN services in conjunction with any other

ILEC or non-ILEC services or facilities.28

7. Bell filed an application requesting that the Commission change the

classification of its retail Ethernet Access Services29, the only one in which

Bell provides Ethernet access at speeds above T1 (and which is

purportedly used as the underlying access facility for Bell’s retail IP

Centrex service), offered in Ontario and Québec from an uncapped retail

service to a wholesale so that it would be able to completely withdraw this

service as of 3 March 2013.

8. Bell offers inferior quality of service sometimes taking up to 35 days

to merely respond to an order, often informing MTS Allstream that

construction is required before the requested facility can be installed.

This list, while not exhaustive, demonstrates that the circumstances needed to

encourage negotiation of reasonable wholesale Ethernet access and transport

services does not exist in the Canadian market at this time. Absent a mandate

from the Commission for ILECs to provide Ethernet access as a conditional

essential service and Ethernet transport as a mandated non-essential service,

competitors will be unable to offer robust competition in the business market over

time.

28 CDN Decision, paragraph 240.

29 Bell General Tariff, Item 5020.


III. CONCLUSION

With the significant shift in the demand for Ethernet speeds and capabilities in

the retail business market there has been a corresponding inability for

competitors to the incumbents to meet this demand through negotiation, self-

supply, or through the provisioning of alternative technologies.

The practice of cobbling together legacy facilities in an attempt to replicate the

speed and capacity of Ethernet networks – assuming it was ever viable – is no

longer sustainable for three simple reasons: (i) this was never an efficient or

economic solution; (ii) as the largest ILECs upgrade their networks, those legacy

facilities are less available; and (iii) even where legacy facilities continue to be

available, the higher Ethernet speeds that are increasingly becoming the norm

cannot be replicated using those facilities.

Ethernet is replacing both ULL and CDN as the essential underlying access

technology for IP-based solutions. In the Broadband Access Policy, the

Commission stated:

The Commission considers that as new technologies are deployed to deliver even higher speed broadband services to retail customers, there will likely be a demand for wholesale access to these services. The Commission notes that its existing essential services framework will allow it to assess any future services on a case-by-case basis, consistent with the requirements of the Act, the Policy Direction, and the principles set out in the Order in Council.30

. . .

In the essential services decision, the Commission assigned both aggregated ADSL access and TPIA services to the conditional mandated non-essential wholesale service category to ensure continued competition in retail Internet service markets. In that decision, the Commission found that this classification would continue until it is demonstrated that a functionally equivalent,



practical, and feasible wholesale alternative exists for these services.31

Consistency with these findings dictates that the ILECs' wholesale EAS and ETS,

be reclassified as conditional essential and mandated nonessential, respectively.

The purpose of the Commission's wholesale framework is to provide appropriate

incentives for continued investment, to encourage innovation and choice.

Competition is the driver of that innovation. Competitors must invest and

innovate to serve customers' demands if they are to win business from

incumbents. It is equally true, however, that an incumbent has no incentive to

innovate in the absence of competition.

As a competitor, MTS Allstream has invested significantly in innovation and

network capacity but this investment has been predicated on the ability to access

final customers. Without doubt, withdrawal of access to Ethernet services will

reduce competition and reduce the incentives to invest in new network

infrastructure as competitors will no longer be able to access their customers and

incumbents will be relieved of competition. The final result is lower investment,

fewer choices and higher prices for Canadian business, slowing the already slow

pace of ICT adoption and productivity in Canada.

The Commission has an opportunity to fashion a competitive and technologically-

neutral regulatory environment for business telecommunications services. The

Essential Services framework outlined by the Commission provides the

foundational principles of defining this environment, ensuring that competition

and market forces can flourish. MTS Allstream is confident that this application

will confirm that enabling Ethernet access is consistent with these goals and

consistent with the 2006 Policy Directive. Competitor access is the key to greater



investment and innovation in Canada's ICT sector and improving Canada's

productivity.

All of which is respectfully submitted by MTS Allstream this 25th day of

November 2011.


NOTICE

This Application is made by MTS Allstream Inc., c/o Teresa Griffin-Muir, Vice President,

Regulatory Affairs, Suite 1400, 45 O'Connor Street, Ottawa, Ontario, K1P 1A4.

TAKE NOTICE that pursuant to section 59 and subsection 57(2)(c) of the CRTC

Telecommunications Rules of Procedure, the Respondents are required to mail or

deliver or transmit by electronic mail their Answers to this Application to the Secretary

General of the Canadian Radiotelevision and Telecommunications Commission, Central

Building, 1 Promenade du Portage, Gatineau (Québec) J8X 4B1, and to serve a copy of

their Answer on the Applicant by 16 January 2012.

Service of a copy of the Answers on the Applicant may be effected by personal delivery,

by electronic mail, or by ordinary mail. In the case of service by personal delivery, it

may be effected at the address set out above.

If the Respondents do not file or serve their Answers within the time limit prescribed, the

Application may be disposed of without further notice to them.

* * * End of Document * * *

25 November 2011 - dslreports.com66527180c72473454e3… · Part I Application for reclassification...

Documents

Transcript of 25 November 2011 - dslreports.com66527180c72473454e3… · Part I Application for reclassification...