The Financial Post
Saturday, May 2, 1998

Service-providers battle Bell over allocation of phone lines

by Paul Lima

John Nemanic is mad and he's not going to take it any more. The president of Internet Direct, a Toronto Internet service provider, claims Bell Canada deliberately delayed installing new Internet Direct phone lines in Hamilton and Oshawa, a tactic, he says, that hurt his business and helped Bell-related ISPs.

A lack of phone lines means subscribers may hear busy signals when they try toget on the Net. They may be prompted to sign up with alternate ISPs, such as Sympatico or Advantage Internet, two ISPs run buy a Bell Canada company, Bell Sygma. (Advantage Internet is a new Internet service offered free for a year by Bell to long-distance customers.)

"I can't believe Bell Canada had (phone line) capacity for Advantage Internet, but could not give me lines. I just don't buy it", says Nemanic, who vented his frustration in an open letter to John Manley asking the minister of industry to call a parliamentary inquiry into alleged predatory trade practices by Bell.

"It's the position of Internet Direct that Bell Canada has been using its monopoly in local phone services to cross-subsidize its Internet business services", he wrote.

"It is also our position that Bell Canada has been using that monopoly to withhold or delay the provision of lines to Bell Canada's Internet competitors."

Bell rejects the charges.

"Bell doesn't treat independent (Internet) service providers any differently (than Sympatico or Advantage Internet), says Irene Shinzoda, a spokeswoman for the company.

She admits Bell was slow to respond to Internet Direct's request for new lines, but says this was due to issues related to a reorganization of Bell's ISP service business. "These have been addressed", she adds.

Lorien Gabel, vice-president of operations for Toronto-based Interlog Internet Services Inc., agrees. Gabel claims Bell is cross-subsidizing its Internet services. Sympatico, he points out, offers Internet users high-speed access to the Internet via ADSL lines that Bell is testing in Ottawa and Hull for less than the cost of the lines. Gabel would to know if Bell charges Sympatico less for ADSL lines than ISPs.

Bell says it charges Sympatico the full tariff rate for ADSL lines. Other costs for ADSL services are discounted based on the number of lines leased, says Shinzoda. Discounts apply across the board to all ISPs. Sympatico has made a business decision to price its ADSL service to compete with Wave, a high-speed Internet service offered by cable companies, she says. The cost of ADSL may come down when Bell Canada completes its tests, upgrades its ADSL technology and rolls it out across Ontario and Quebec.

Gabel is not impressed. He claims Bell is playing a "shell game", because the pricing involves two Bell companies. "Bell likes to pretend there is a Great Wall of China between its subsidiaries, but it is just shuffling money around", he says.

He claims consumers will pay for the losses in increased local phone rates or Bell's shareholders will pay.

Bell's entry into the ISP market has hurt some ISPs, says Nemanic. "Two years ago Bell was calling the Internet a fad", he says. "Now that they've decided it's here to stay, they're giving away service to build market share."

"We want fair play and equality of access", says Nemanic, who says he will compete with Bell by creating a strong customer service culture at Internet Direct. It's the kind of culture Bell could use more of, he says.

Copyright © 1998 by Paul Lima (www.paullima.com), freelance dot-com journalist. First published in The Financial Post. All Rights Reserved. Reprinted with permission.