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  • Ted Woodhead

It's a New Year, and Old Solutions are proposed by TekSavvy

Updated: Feb 7

I happened upon a blog post dated January 23, 2024 from TekSavvy alleging that consumers are being "fleeced during a time of staggering unaffordability and oligopolistic profiteering across multiple industries". The author reserves heaps of scorn for the facilities-based telecom providers, who he implies form an oligopoly that provide services that are unaffordable for consumers. The author asserts this without evidence and then goes on to offer his prescription for fixing the alleged problem which in a word is wholesale i.e., the mandate that requires large facilities service providers to offer for resale their retail networks and network elements at a regulated discount. Conveniently, TekSavvy is a reseller and in this utopia the author envisages all will be right with the world if only TekSavvy gets to ride more cheaply on the networks of others for less.

He asserts that frameworks to encourage investment and increase competition have failed which might come as a big surprise to the Canadian Radio-television and Telecommunications Commission (CRTC). It probably also comes as a big surprise to entrepreneurial providers like RFNow or Beanfield and others too, who invest in building fibre networks and by all accounts are thriving. That aside, no account is given of the increasing CAPEX investment by all facilities-based providers in providing retail broadband services to Canadians as reported by the CRTC's Communications Monitoring Report. Nor is any credit given to the facilities-based providers who are actively investing in their networks to meet the basic service objective of reaching 96% of homes with 50/10 Mbps unlimited service by 2026. As of last September, they had achieved service availability of 50/10 Mbps unlimited to 93.5% of homes. Certainly, a remarkable and world class result for the providers who are actually investing to achieve the objective and who deserve better than the author's derision.

The supposedly desperate state of affairs in Canada peddled by TekSavvy has apparently been noted by none other than the actor/MVNO investor Ryan Reynolds who we are told said that Mint Mobile wouldn't set foot in Canada. Since Mint Mobile was sold in March of 2023, I can't say whether Mr. Reynolds did that because he didn't want to take advantage of the mandated MVNO framework or if rather, he quite liked the $1.35B USD price tag paid by T-Mobile for Mint Mobile more. I can say however, with some certainty, that I believe the latter played more prominently in his decision.

Resale is merely one tool in a regulator's tool kit and a minor one at that. It is eclipsed by a regulator's predominant objective which is or should be to maintain levels of investment in high quality communications networks that provide world class services at affordable prices. Are resellers a part of the overall regulatory scheme? I would say the CRTC believes so, despite the constant cycle of problems resale causes. Resellers are transitory. They come and go in the market because the people who invest in them do so with the short and medium term objective of selling and exiting them at a profit much like Mr. Reynolds did, and as TekSavvy sought to do in June of 2023 as reported by the Globe and Mail.

The TekSavvy blog's author ends with a bold prescription for delivering the utopia he claims we need but don't have. Everything will be better if the CRTC would only move more quickly to reduce wholesale rates regardless of the impact that might have on the facilities-based providers' incentives to invest. He like others seem to believe that facilities-based providers will continue to invest at current levels no matter the circumstance. That would be a very critical error and the regulator should not accept it. After mandating last year that BCE and TELUS open up their new fibre networks in Ontario and Quebec to resellers at discounted rates, BCE, Canada's largest telecommunications company, announced it would chop capital spending by $1B CAD in response. That is not a utopian state, but it is a dystopian one.

Lastly, the TekSavvy blog's author goes further, and suggests structurally separating the large facilities-based network providers such that they are broken up into their constituent parts to be owned and operated separately. From this single act he seems to believe we will all be delivered to an improved state of being. This is perhaps what Judge Greene of the U.S. Federal District Court believed when he concluded the Consent Decree in American Telephone and Telegraph Company v. FTC in 1982. Rather than deliver us all to a state of grace, it set in train decades of upheaval and capital destruction that reverberates today. For anyone to suggest or a regulator endorse that we put our collective fates under that sword of Damocles would be very foolish and most dystopian indeed.


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