This paper is a comment on a recent decision by Canada’s national telecommunications regulator which, in SeaBoard’s view, is a significant step backwards in the evolution of Canada’s communications marketplace. The Canadian Radio-television and Telecommunications Commission (CRTC) decision essentially amounts to a re-monopolization of the most critical sector of communications business and will result in Canadians paying more for poorer service in the future.

The decision, 2008-118, was a denial by the Commission of a request to vary elements of an earlier Commission decision, 2008-17, where Ethernet services were excluded by the CRTC from services that are deemed essential to competition, and that would therefore remain subject to mandatory wholesale rates and availability. That is, the incumbent telephone companies would continue to be required1 to provide both access and a cost-based price to competitors.

The Commission denied the MTS Allstream request because it appears to have believed that Ethernet facilities are replicable by the competitive communications service providers and that there are substitutes for Ethernet services. Unfortunately the Commission’s view is flawed. The reach and breadth of the incumbent (former monopoly) telephone networks cannot be duplicated by competing carriers, and the fact that a competitor might be able to cobble together a roughly equivalent communications pathway from legacy offerings isn’t material to the real advantage that native Ethernet services have over Rube-Goldberg-like ad hoc solutions.

The CRTC decision to exclude Ethernet services from the portfolio of essential services is a significant blow to the competitive communications environment and represents a major victory for the telephone company monopolists. SeaBoard predicts that should this decision be allowed to stand, competition in business services will wither, innovation will dry up, prices will rise, and service levels will decline.

The Commission is wrong. Two decades of progress, two decades of a communications services renaissance, two decades of public benefit from a competitive communications environment are in jeopardy.

We urge Canada’s federal cabinet to overturn the Commission’s decision and to restore Ethernet services classification as ‘essential’ to Canada’s competitive communications environment.