Speedy temporary relief

Yesterday’s decision from the CRTC provides fast temporary relief for the smaller ISPs; it may still leave the bigger telcos with indigestion.

Telecom Regulatory Policy CRTC 2010-632: Wholesale high-speed access services proceeding, is designed to preserve a delicate balance that ensures “that the retail Internet service market is sufficiently competitive to protect the interests of users.”

In effect, the CRTC has found that the current retail marketplace is enhanced by the presence of the smaller players, providing price competition and service innovation beyond that of the major telephone companies and cable companies. That has been the situation to date that has allowed retail internet services to avoid price regulation. The decision was predicated on the view that two facilities-based service providers, the phone company and cable company, are not sufficient; the CRTC was not persuaded that mobile wireless companies and satellite services are yet able to serve to discipline the marketplace.

The Commission notes, for example, that current prices for wireless- and satellite-based retail Internet services generally significantly exceed wireline retail Internet service prices for comparable service and that speed issues can occur as those systems’ capacities are approached.

But make no mistake, this is not going to be the long term situation. The CRTC is not setting the mandated wholesale regime in place for all time:

The Commission notes, however, that it expects that as technologies and retail Internet service markets evolve, retail Internet services provisioned using wireless and satellite facilities are likely to become substitutes for those provisioned using wireline facilities.

This is likely a 5-year lifeline to the smaller ISPs, because the alternative technologies will need to establish a measurable share of the market (say, 5-10%), followed by a proceeding that provides a CRTC endorsement of the proposition that these facilities-based competitors are able to provide sufficient discipline to ensure consumer benefits.

In the meantime, competitors will be compensating the phone companies with an additional 10% margin, an amount found by the CRTC to be sufficient to satisfy the increased shareholder risks associated with deploying fibre infrastructure.

The dissenting view of Commissioner Denton says that the CRTC should have gone further, a sentiment captured in the official reaction from Teksavvy. However, aspects of the Policy Direction, specifically the requirement to rely on market forces to the maximum extent feasible, would likely not have survived a challenge on this point – appeals mean delays.

For smaller ISPs, that would prevent the fast, temporary relief associated with this decision. The heartburn medication for smaller ISPs may be giving stomach upset to others. Ask your doctor.