OTTAWA – A Canadian and U.S. lawyer squared off on billing for bandwidth at the International Institute of Communications Canada conference yesterday with the American lawyer arguing that while wholesale access is a good thing, a government mandated regime may not be.
Bryan Tramont, managing partner at Washington D.C.-based Wilkenson Barker Knauer, pointed to a 2010 study of 16 European countries and their efforts with respect to network unbundling and the impact on broadband penetration rates. “[The study] found no correlation between the aggressiveness of unbundling and the broadband penetration rates when you control for other variables…like computer adoption and density,” he said. “I think it’s unproven.”
Tramont, who also used to be a chief of staff for the Federal Communications Commission, added the U.S. experience, particularly in the wireless market, demonstrates that the absence of network sharing can actually lead to new innovations and drive consumer choice. In 2002 after the sunset of wireless network sharing, 7% of subscribers were on resale arrangements and nine years later, that number had jumped to 10% who are subscribers of the mobile virtual network operators (MVNOs).
“So there’s been a fair amount of innovation in the MVNO marketplace and in other parts of the ecosystem that can help drive consumer choice,” he said. “It seems to me that that model is far more persuasive in driving consumer choice than a mandated model. At least in our market that has proven very successful.”
John Lawford, counsel with the Public Interest Advocacy Centre (PIAC), said it’s too early to tell if the wholesale access regime is going to encourage the rollout of network facilities by independent providers and therefore too soon to say such a framework isn’t needed. He suggested that if the small ISPs have certainty in rates, stability to grow, consolidation will take place and create larger, viable competitors to the big players.
“That’s the kind of thing you need to have in this market,” Lawford said, noting the low number of third-party Internet subscribers can be directly related to the fact that there aren’t a couple of larger independent national third-party Internet providers. He added that policy that created new entrants in the wireless market is what’s needed in the wired broadband world.
“You saw how hard it was to get that fourth provider in Canada in wireless. A similar kind of aggressive action has to be taken if we want to do the same thing in the Internet market,” Lawford argued.
The PIAC counsel invoked the functional separation matter, too, noting that unless there is downward pricing pressure and consolidation among the independent ISPs, regulators will have to look into this. “You have certain countries like the UK, like Australia that are doing that now because they have given up on this fiction that there will be facilities-based competition from a third-party, non-duopoly provider. They’ve just said Internet carriage is Internet carriage. Everybody buys from them and we will have a more competitive network environment,” he said.
Tramont was opposed to functional separation, noting the data doesn’t support the notion of giving up on facilities-based competition. The fear in this scenario is that regulators are tempted to support competitors rather than competition. “Those are two very different things and the goal of the policies is to be focused on driving competition not individual competitors or any individual business model. The key I believe at this stage of the Internet marketplace is to continue to present opportunities for other platforms to flourish,” he argued. “As long as you have artificial competition, as long as you have mandated a certain type of model that is preferred, I think it becomes very difficult for other forms of competition to flourish.”
The two lawyers also went head to head over whether the Internet is actually “broken”, as some insist. Lawford seemed to suggest that there is a big problem that still exists for the small independent ISPs as they struggle to survive against the much larger incumbent telco and cable company competitors. He said the uptake of Netflix is the direct result of a consumer backlash against the CRTC’s inability to set just and reasonable retail Internet rates.
Tramont said any consideration of regulating the Internet has to be put into context: the Internet ecosystem has been a success and largely because of its own self regulation. “Whether it is the impact on ecommerce or improved healthcare around the world, there is this virtuous cycle of innovation that has been pervasive in the Internet atmosphere since its founding,” he said. “So let’s not mess it up. It’s been successful. Things are going relatively well and government needs to be exceedingly humble when it attempts to intervene in the marketplace.”
