Tuesday, August 31, 2010

Speed Matching

Yesterday the CRTC issued a ruling that requires Bell and other ILECs to offer wholesale ADSL speed matching to the independent ISPs. On the face of it, it looks like a big win for consumers, but I not convinced.

Although the higher speeds are great, the main problem is the independent ISPs would still be using the ILEC's Gateway Access Service (GAS), the aggregation infrastructure that connects wholesale ISPs to their customers. That means the connections are subject to throttling, deep pack inspection, usage based billing, and anything else that the ILEC can dream up. That actually makes it harder for the independent ISPs to differentiate themselves from the ILEC's Internet services. That's not good for consumers.

Some ISPs were asking for a new service (dubbed ADSL-CO) that would allow them to install their own DSLAMs into Central Offices, but the CRTC has ruled against this option, at least for now. This service couldn't offer the full range of speeds which would be limited by the customer's distance to the CO. There's no doubt that there are significant technical challenges for installing ISP equipment in COs. In addition, each CO needs a non-ILEC network back haul, which would have delayed wide spread deployment. The CRTC likely took these factors into consideration in its decision. But in the long term, it would have been good for consumers.

The ILECs would definitely have lost revenue with ADSL-CO since GAS would no longer be required. The CRTC has mandated that wholesale ISPs will pay a 10% surcharge on the tariffs for the higher speed to compensate the ILECs for the investments that they've made. So the ILECs are actually making more money with this decision! What a sweet deal! Not only that, the ILECs remain firmly in control of the ADSL market.

To me, it looks like the real winners are the ILECs, not the consumers.

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