Monopoly.com

>> Independent ISPs feel the digital subscriber squeeze

by PATRICK LEJTENYI

Rudy Komsic founded his Internet Service Provider (ISP) company Cyberglobe Communications seven years ago because he was sick of the slow, clunky and unreliable service he was getting from other companies. From his Place de la Savane office, where the 28-year-old president says he spends about 12 hours a day, he manoeuvred his startup into a successful local company with a handful of employees and 1,500 customers. So when Bell--through its subsidiary ActiMedia, aka Sympatico--began offering its high-speed digital subscriber line (DSL) service four years ago, Komsic knew he was in for a rough ride.

The ride brought him, Bell and the Canadian Association of Internet Providers (CAIP) to the door of the federal regulatory body of all things broadcast, the CRTC. Cyberglobe and its fellow CAIP members--about 100 in all--filed a grievance with the CRTC on Aug. 15 over what they claim are Bell's unfair and anti-competitive practices. By offering DSL services for under $30 a month, the grievance says, Bell is undercutting the competition and squeezing independent operators like Komsic out of business. Bell has 30 days to respond.

"Due to our higher-priced DSL services," Komsic says, "customers asking us about it say 'Okay, thank you, bye.' They don't even want to try it." Komsic says he has "a handful" of DSL clients.

It's simple economics: Cyberglobe charges $49.95 a month for DSL service and $10 for every gigabit of Internet traffic (that's about 350 songs, 15,000 web pages or eight hours of high-quality video). Sympatico, on the other hand, charges $29.95 plus incidentals per month and hands out free modems and free installation.

"I can't offer those perks," Komsic says. "What you're seeing here is unfair competition subsidized by Bell Canada."

CAIP is claiming that Bell offers these low prices because it can. It controls the copper wires, phone lines and switches DSL is attached to and sells the service wholesale at the regulated rate of just under $300 per residential line per month. Independents can buy DSL services either directly from Bell or through another subsidiary, Bell Nexxia, but at a higher rate than that offered to yet another Bell offspring, ActiMedia (branded as Sympatico). Bell Canada, it is widely assumed, can take the loss for as long as it takes for the independents to get squeezed out. Then it, with the Big Three cable companies--Rogers, Videotron and Cogeco--will be the last players standing on the retail DSL field.

The advantages of monopoly

Jay Thomas, president the Ottawa-based CAIP, whose members, including Bell Canada, provide 80 per cent of Canada's Internet connections, says all the independents want is a fighting chance at competing. The current price structure and practice, he says, "make it impossible to create competition in the marketplace. We want the CRTC to take a look and help find a way that would allow the smaller ISPs to compete."

The regulatory body fixed the tariff--the agreed-upon price for a set of services--for wholesale DSL at $288.88 per line per month, but because both Nexxia and Sympatico are unregulated, they can get away with charging less.

Furthermore, because Bell and its parent, BCE, are so gargantuan and interlinked, CAIP claims, they enjoy other advantages its tiny competitors don't, including non-tariffed billing practices (included with your monthly phone bill) and "leakage" of customer information between Bell Canada, Nexxia and Sympatico. The claim states the independents know of "several instances where certain of their members have placed orders for DSL services with Nexxia on behalf of specific end-user customers, both business and residential, only to find out that these very same customers were then approached by Sympatico or Bell Canada employees and offered high-speed Sympatico services at greatly reduced rates and/or with other added discounts or signing 'incentives.'"

A CAIP victory, however, could end up costing consumers more than they pay now. Ideally, Thomas says, Nexxia would charge the independents the same price it charges Sympatico. Realistically, however, it would mean bumping prices up to more competitive levels. But for Thomas, this means the consumer will ultimately benefit.

"There will be more innovation and better customer service," he says. Equity would "bring with it all the benefits of competition, which is what we are trying to get Canadians access to."

Lis Angus, executive vice-president of Angus Telemanagement Group, a telecommunications consulting and research company in Pickering, Ontario, says that whatever the outcome, it won't be decided for a long time.

"There's no question, Bell has some pretty skilled lawyers," she says. "It's going to be a long, dragged-out fight no matter what, and Bell won't give up easily. It will be months before it's decided and a lot of the independents won't be around to see it. Meanwhile, consumers are getting great rates [for DSL services] because it's being supplied at less than cost."