GATINEAU – Shaw Communications Inc. says that while it prefers a volume-based billing model for wholesale services, it’s prepared to do the work to implement a peak period approach if directed to do so.
The company noted during its appearance on Day 3 of the CRTC’s usage-based billing hearing that if three specific criteria are met either approach could give the independent ISPs the flexibility they need to compete in the market while also appropriately compensating the wholesale network providers.
“We must be able to recover our investments; we must be able to charge more for higher speeds; and there must be an appropriate demarcation between access and usage,” said Peter Bissonnette, president of Shaw Communications. “If these three criteria are met, we believe it is possible that either the aggregated usage or peak period model satisfy the goal of this proceeding.”
Under questioning, Shaw reiterated that both its volume-based approach and the peak model would bring benefits to consumers and to independent ISPs.
“Our volume based [approach] gives the independent ISPs enough flexibility to package their own services to more effectively compete against us in the marketplace and by doing so – giving this flexibility – they’ll be able to provide a different suite of services, different prices, different packaging [and] different bandwidth to consumers,” said Jean Brazeau, senior VP of regulatory affairs.
While the 95th percentile approach will bring benefits to consumers, there will be cost challenges associated with implementation, he added. “On the implementation side…we would incur higher costs in implementing that model given the billing challenges we would have for that. But for the end customer, the advantage would be very similar.”
The tricky part of implementing a peak model will be effectively and accurately measuring peak usage, said Bissonnette. What shouldn’t be done is adopt a requirement to measure peak at 25,000 different points in the network, he added.
“To the extent that we do peak measurements right now on our network, we have some infrastructure that we think by augmenting that infrastructure, we would be able to provide a reasonably close proximity to what is actually happening on the network that with some consideration and compromise that we could make that work,“ he said. “And we think that the difference between the aggregated volume basis and comparing that to peak may not be all that different anyway at the end of the day if in fact we have those facilities in place to do those measurements in a meaningful way.”
While Shaw’s appearance before the commission was largely uneventful, the Public Interest Advocacy Centre (PIAC) did ruffle the feathers of some commissioners. In its opening remarks, the organization suggested that term and volume discounts could help independent ISPs to differentiate their offerings. As well, these measures might encourage smaller ISPs to merge so as to create larger companies better able to compete with the big ISPs.
“We believe that such discounts could potentially provide an additional vehicle for ISPs to distinguish their service offerings from those of other ISPs,” said Jean-François Léger, a lawyer for PIAC.
Commissioner Len Katz didn’t seem too enthused about the idea. Creating an environment that offers volume discounts to larger firms runs counter to market forces “because we are now creating regulatory fiat, a regulatory framework that will in fact penalize certain players in the industry through regulatory oversight. I don’t understand it,” he said to PIAC.
Leger responded by noting that term and volume discounts are common practice in all industries including the telecommunications sector. “Vendors that are motivated by market forces will typically entice customers to purchase larger volumes or to make longer term commitments by offering greater prices,” he said.
A side benefit of volume and term discounts would be the creation of larger players, more capable of competing against the much larger, and well established ISPs, Leger noted.
“We do not expect that effective competition to the incumbents is likely to develop is the independent ISP sector remains fractionalized among hundreds of very small firms. Measures that allow market forces to promote some consolidation may be desirable,” he said during his opening remarks.
Leger acknowledged under questioning from Katz that it isn’t asking the Commission to impose a new framework to encourage mergers and acquisitions in the retail Internet space, but added that consolidation among small independent ISPs, and therefore potentially more robust competition to the incumbent ISPs, could be one of the beneficial outcomes of establishing rules around term and volume discounts.
“We’re saying that a side benefit of that may be that it may help promote some consolidation and help create larger players…who can compete on their own and have the wherewithal to invest more in their facilities,” said Leger.
MTS Allstream is the big name firm that will appear on Thursday. The hearing will break on Friday and return for the rebuttal phase on Monday, July 18.
