Good afternoon.
My name is Monica Song. I am counsel to the Canadian Association of Internet Providers, or CAIP.
CAIP thanks the committee for this opportunity to appear before you today.
The chairman of CAIP, Mr. Tom Copeland, has been called away on a personal matter and asked me to express his sincere regrets for not being able to appear before you personally today.
The Canadian Association of Internet Providers was formed in 1996 to provide effective advocacy and leadership respecting public policy and regulatory and judicial proceedings affecting the ISP industry. Subject to any questions you may have, CAIP would like to focus on three specific points, with a view to re-establishing the trust of Canadians in the industry and the regulatory process.
First, the true measure of telecommunications services is the network's peak-period bandwidth requirement, expressed in kilobits per second, megabits per second, or gigabits per second. Competitors already pay their proportionate share of the costs of provisioning to the network's peak-period bandwidth requirement.
Second, given that all costs associated with the provision of wholesale gateway access services access costs are already fully recovered, along with very healthy markups, there is no principled basis to authorize wholesale UBB. We want a rational tariff based on wholesale pricing principles that the CRTC has always followed, until now.
Third, we hope that the commission has resolved to go back to the drawing board and rethink the appropriateness of wholesale UBB charges. The commission's so-called “retail equivalence principle” is anti-competitive and arbitrary, and must be shelved in favour of established wholesale costing principles.
Bandwidth constraints are the true measure of network value. It's important to understand what usage means and how it relates, if at all, to the true costs of designing and building a telecommunications network, and therefore whether anyone is heavy or light or getting a free ride.
All IP-based services are defined in terms of bandwidth, or the rate of data transfer, measured in kilobits per second, megabits per second, or gigabits per second. When a retail customer orders an Internet access service or a private network service, or any number of other IP-based services, the customer will be asked to select from the available speed restriction of the service. In the case of Internet services, for example, the retail customer will be asked to select a speed of between say 500 kilobits per second or 25 megabits per second.
Thus, a person who has already migrated to the Internet as his or her preferred video content delivery mechanism, a scientist who wants to exchange huge scientific data sets with a graduate student or fellow scientist across the country or on the other side of the world, or a grandparent in a far-flung area of Canada who wants to video-Skype his or her grandchild in Ottawa will definitely find a 500 kilobit per second connection painfully slow and will order higher-speed services. However, no matter how hard the customer tries, he or she will never be able to exceed the preordained bandwidth of the service ordered. The service is therefore constrained or capped at its preordained speed. And the price of the service increases in proportion to the speed ordered. The higher the speed; the higher the price. In this sense, every IP-based service is already priced to reflect bandwidth intensity.
Carriers and network operators the world over design and invest in their networks based on projected total bandwidth requirement at peak periods—the peak-period bandwidth requirement. This is the true measure of telecommunications services and of the way in which telecommunications networks are planned and built. In contrast, and not to be confused, is usage in association with usage-based billing. Usage in this context refers to the number of bits of data that are transferred over a given end-user connection, usually over the course of a month. Usage is expressed in bytes, as opposed to bits.
As concerns wholesale access services, such as Bell's GAS, in addition to the foregoing bandwidth cap, competitive ISPs are doubly constrained by a further aggregated bandwidth restriction, which is also preordained and paid for in bits per second. Bell’s own responses to commission interrogatories make it abundantly clear that the only way that costs associated with the wholesale GAS access service may be derived is on the basis of peak-period bandwidth, expressed in this case in kilobits per second.
The commission found that Bell already recovers all costs, plus prescribed markups, that are associated with the provision of GAS from the pre-existing rates for the wholesale GAS access service. Wholesale UBB charges are therefore pure gravy.
In the interests of time, I will summarize my second point, which is that we want a rational tariff based on wholesale pricing principles that the CRTC has always followed, until now. They've abandoned that in the case of wholesale UBB. And we’d like a return to established wholesale pricing principles.
CAIP's third point: the commission's equivalence of treatment principle must be shelved. The commission abandoned wholesale pricing principles and instead based its approval of wholesale UBB charges on its so-called “equivalence of treatment" principle for wholesale services and retail services.
The problems with this approach are manifold. They have all been touched on by previous witnesses but were not necessarily related back to this misplaced equivalence principle.
I have five points, which I will quickly summarize.