TORONTO -- BCE Inc.’s Bell Canada is vehemently opposing a regulatory decision this week to allow smaller Internet providers more room on its network but not because of the immediate competitive threat they pose. Instead, it is the online TV giants standing behind them Bell is likely more concerned about.

Forced by regulators on Monday to provide matching download speeds to firms such as TekSavvy Solutions Inc., which provides unlimited downloading, Bell risks losing out on coveted TV customers to Internet content-streaming behemoths such as Netflix Inc., which is bringing services to Canada this fall.

Unlike Bell and other incumbents, there are no download caps at wholesale resellers like TekSavvy and Primus Telecommunications Canada Inc.

Combined with Monday’s decision from the CRTC ordering Bell, Telus Corp. and other major providers to give TekSavvy customers equal speeds to their own, it means smaller ISPs can stream high-quality video in huge volumes, creating an attractive alternative for TV products from Bell, Telus and even Rogers Communications Inc.

“[The incumbents are] concerned,” said Brahm Eiley, principal at Toronto-based Convergence Consulting Ltd. “Netflix, Apple, even Microsoft with the Xbox — anybody with a content platform can benefit from unlimited data usage.”

So-called “data hogs” or users that account for the vast majority of online downloading have migrated to TekSavvy and the like, but until this week’s decision, have had to live with sluggish speeds, confining activity to mostly peer-to-peer torrent trading.

The CRTC, in its impulse to spur competitive pressure, changed that.

“Now they impose speed-matching, a wholesale competitor comes in here, gets access to our network without putting any risk capital in the ground, and can take away our Internet service from that home,” Mirko Bibic, chief of regulatory affairs at Bell said.

More than that though, the current framework threatens to undermine Bell’s — and indeed Telus’s too — strategic push to win greater share among television subscribers.

With a viable alternative entering market in Netflix (and likely others) the high-speed, unlimited model wholesalers can provide is an uncomfortable scenario for incumbents, even cablecos, all of which have imposed usage-based billing on their own customers to help manage network strain (in part from P2P file sharing).

Rogers lowered its download caps this summer — the same day Netflix announced it was headed to Canada — perhaps to send a message that online streaming won’t be tolerated as an alternative source of TV content. So far, incumbents are prohibited from imposing usage based billing on wholesalers, a related issue regulators must make a separate ruling on this fall.

But to head off the current threat, Bell wants Cabinet to once and for all overrule the speed-matching decision, and has threatened to scale back investment in next-generation technology failing that.

“We will be making our views known to Industry Canada and Minister Clement that this is the wrong decision for broadband deploymt in Canada,” Mr. Bibic said.

Cabinet has 90 days to make a final determination on Monday’s decision by the CRTC.

In the United States, “cord cutting” or nixing traditional TV for Internet alternatives remains a nascent phenomenon. To date, a mere 1% of households, or about one million, have dropped cable or satellite, according to Convergence.

“But we’re at the beginning of new era,” Mr. Eiley says.

The major beneficiary of cord cutting in the United States would be Netflix, which is pushing its online streaming platform over its older DVD mail-delivery service of popular television shows and movies.

The California company grew by three million subscribers in 2009 — a 50% rise over the year earlier. Another three million Americans have joined since the beginning of the year to bring the total to 15 million.

“You see the pattern,” Mr. Eiley said.

Financial Post

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