GATINEAU – Shaw Communications filed an appeal to the CRTC on Friday regarding last October’s policy decision to quash usage-based billing in favour of incumbents charging independent internet service providers either a flat rate, or a rate based on capacity and the number of users.
Under the new regulatory regime, ISPs can now sell smaller providers a set capacity per month, or a simple flat fee for a set level of speed – and was officially instituted February 1st. The new policy also means smaller ISPs will have to pay more to provide faster Internet service to their customers and the decision has been lauded as a fairer way to charge for usage, and critcized too that the rates set by the Commission were too high.
However, Shaw maintains that the CRTC’s decision contains a “number of errors of fact and law” and unfairly favours independent ISPs “who do not risk their own capital” compared to Shaw which “invests billions of dollars” to maintain and enhance its networks. Shaw’s appeal calls the CRTC decision an “excessive intervention in the broadband market” and argues that because “intense competition” already exists (for instance, Shaw and Telus are going at it tooth and nail out west), that there was “no reason to give independent ISPs an artificial competitive advantage by providing them with [Third Party Internet Access] (TPIA) services at artificially low rates.”
The company maintains that these errors have been “amplified” since the decision, in part because competitive forces have forced Shaw to “significantly enhance the speeds and value of its Internet offerings” and by the Commission’s new approach to TPIA billing, which “erroneously characterized Shaw’s billing model as including unlimited usage.”
It argues the CRTC justified the lower rates by making a number of “unsubstantiated, arbitrary and internally inconsistent adjustments” to Shaw’s TPIA Cost Study that was submitted to the regulator in December of 2010. It adds the CRTC replaced Shaw’s actual and forecasted costs with its “own views of what Shaw’s costs ought to be, with a view to micro-managing a competitive environment in which incentives for innovation and investment are dulled, rather than enhanced.”
“While it is true that it is very difficult to accurately project Internet traffic more than a couple of years out, and it is extremely difficult to do in years five to ten, it would be reckless for any carrier to low-ball Internet growth in the manner the commission has done,” states Shaw in its appeal. “Five years is a long time in the Internet world and ten years is an eternity – yet the Commission has locked Shaw into its estimate, substituting the Commission's own judgment for the judgment of traffic engineers, independent monitors of Internet traffic growth and industry members like Cisco.”
The cost impact of the CRTC’s adjustments to Internet traffic growth estimates is significant claims Shaw. “Over the ten year life of the study, the Commission’s traffic growth assumptions result in approximately 40% less peak traffic per end-user by year 10 than what Shaw has projected.”(see chart)
Shaw argues that the TPIA service rates the CRTC has finalized for the company are at levels “much lower” than they proposed. It maintains that the new rates are also much lower than the pre-existing approved rates and the rates approved in the decision for similar services offered by most other carriers. It is now calling on the CRTC to review again its Cost Study and reassess its pricing based on its projections for its traffic and subscriber growth, compared to TPIA growth over the next 10 years.
In addition to these adjustments, Shaw has requested that the commission also apply the same 10% mark up it provided Incumbent Local Exchange Carriers (ILECs) for their Fibre-to-the-Node (FTTN) services, to other cable carriers like Shaw.
The company contends that the CRTC’s “arbitrary adjustments rates” do not permit it to make a “reasonable return on its TPIA Services” and is urging the Commission to immediately make those rates interim, along with the rates under Shaw’s recent tariff notice that provides for three new Internet services, pending the CRTC’s final determination of their application. “Shaw also requests that new rates approved as a result of this application be made effective as of the date that the rates are made interim and be applied retrospectively to that date,” it urges in its appeal.
– John Bugailiskis
