Why is the CRTC handing out a “corporate subsidy” to Telus?
Prior to Telus determining that it was in its strategic business interest to take advantage of CRTC rules designed to help small internet service providers, it had this to say about resale being a “corporate subsidy”:
“The proposed aggregated mandate is simply a corporate subsidy for resellers, private entities who do not make any meaningful investments in Canada’s telecommunications system.”
So why is Telus now in favour of a “corporate subsidy,” especially when it comes at the expense of much-needed investment? Telus is obviously not a proponent of resale and never has been. It also has made significant and meaningful investments in the wireline broadband, just not in the areas where it now seeks to resell instead. One must ask the question why?
It also had this to say about the negative impacts of resale:
On Investment and Innovation:
“...decades of practical experience confirms that mandated wholesale access also discourages investment in new technologies and trades innovation and dynamic competition for underinvestment and stasis in innovation. This will leave Canadians behind as technology moves forward, but investment does not. This will not accomplish the objectives in the Telecommunications Act or in the Policy Direction.”
On Network Expansion, Quality and Affordability:
“An expanded wholesale mandate will hinder the expansion of networks, reduce the diversity of facilities and the reliability of Canada’s telecommunications system as a whole, deepen the digital divide, decrease competition, lead to further job reductions by carriers, and ultimately lead to higher prices for consumers for lower quality service. With a wholesale FTTP mandate, consumers will lose, carriers will lose, and the government will be unable to attain its stated objectives.”
On Canadian Jobs:
“Some of these harms are already visible. Given the evolving regulatory, competitive
and macroeconomic environment, including regulatory instability and the likelihood of increased wholesale access, TELUS had no choice but to lay off 6,000 employees. TELUS has also been redirecting its investment capital into other lines of business, including digital healthcare, agriculture and business services. Much of that capital has been invested outside Canada.”
Fast forward to now and incumbent resale of the type Telus is engaged in is the worst of all outcomes. The fact that Telus seems to be the only incumbent carrier so earnestly and vigorously on this path should give the CRTC pause. In allowing Telus to resell high-speed internet on its large competitors’ networks, the CRTC has made an error so fundamental that it should lead observers to question whether the CRTC knows what its role is.
The CRTC most recently had an opportunity to end this “corporate subsidy.” However, the CRTC's inability to right the course with this error has moved from concerning to damaging to the long-term interests of Canadians.
The CRTC seems indifferent to the concerns of the Governor in Council, which were expressed in ordering the review as "maintaining the incentives for the large incumbent ISPs to continue investing in Internet infrastructure, particularly in rural, remote and Indigenous communities and on the viability of small and regional Internet service providers."
I hate to say it but the CRTC's inaction, lack of transparency and seeming indifference to all of it seems to be a most pernicious form of regulatory negligence. The resale of 100-year-old fully amortized copper loops is one thing but allowing competitors to access 5 or 6-year-old unamortized fibre is quite another.
The CRTC and the government should be focused on getting domestic carriers to invest more, especially when Canada faces U.S. tariffs. These officials should be creating conditions and mechanisms to incent carriers to push fibre and next generation wireless networks well beyond their current topologies. Resale, and “corporate subsidies,” achieve none of those outcomes and has been abandoned by most forwarded thinking regulators and authorities globally as Telus itself ironically has documented.
In addition, governments have recently completed their latest round of requests for proposals for expanding broadband networks to previously underserved and unserved areas. Discouraging the willingness or ability of facilities based carriers to undertake those builds expanding fibre networks deeper into rural Canada will also heavily favour Elon Musk's Starlink as the only currently alternative high-speed broadband option available where domestic fibre investment is discouraged. I am not at all sure that Canadian consumers or voters are supportive of that outcome.
Encouraging Telus to add a bundled internet and wireless opportunity in the already hotly competitive markets in Ontario and Quebec will, as I have previously suggested, forestall the spread of competitive alternatives in the West, which is Telus' traditional operating territories for both wireline and wireless services. It will impede the expansion plans of Videotron and nascent wireless providers like Cogeco.
If virtually no one likes what is happening but Telus, the CRTC should think very carefully about the implications. As the CRTC considers the answer to the whole question, which it indicates it will issue this summer sometime, it would be well advised to follow the Hippocratic oath of regulators everywhere, that is, "First do no harm."
Comments