The CRTC and its singular affection for the sharing economy and ambivalence for investment

As many who follow this blog know I have been critical in the past about the Canadian Radio-television and Telecommunications Commission's (CRTC) approach to resale generally and, in particular, with respect to the established carriers reselling the networks of their competitors.

As I noted in my last piece, with its then upcoming review of its August 2024 decision permitting established carrier resale imminent, the CRTC had an opportunity to rationally address its policy volte face from the traditionally balanced approach to wholesale it has taken and provide reasons as to why it radically altered its decades long strategy in balancing resale with offsetting incentives for network building carriers to continue to invest.

Rather than doing so, the CRTC doubled down on its previous palpable errors and gave its regulatory blessing to the one carrier, at last count Telus, using the facilities of other established carriers to provide retail internet services to consumers despite its historical demonstrated ability to provide those services over its own facilities or negotiate access on its own terms. Carriers who own and operate networks have all long opposed the mandated resale of their networks at discounted rates by competitors and notably Telus, which traditionally has very vociferously opposed mandated resale of its networks on any basis other than commercially negotiated terms and conditions. Curiously, the CRTC dismissed the positions of virtually every party to the review and vary other than Telus.

This issue therefore has become one that must be resolved elsewhere, preferably by the Governor in Council which has an outstanding Petition before it, or otherwise by the Federal Court of Appeal where last Friday Cogeco Communications Inc. (Cogeco) and Bragg Communications Inc. (c.o.b. as Eastlink) filed an appeal of the June 20, 2025 decision. More on that in a coming post.

There were a number of things that struck me as curious in this most recent decision. For example, the CRTC had said as recently as two years ago that national collective market share was an important, if not the most important, aspect of its initial review of its wholesale high-speed access framework. It was the lynchpin for justifying the resale remedy to allow "small", "new" and "regional" competitors to emerge and effectively compete. The Commission said that, "large incumbent carriers collectively hold an 84% national market share. This situation had raised concerns with respect to the potential for these dominant firms to exercise market power in a manner that is detrimental to the realization of the Canadian telecommunications policy objectives (the policy objectives) set out in section 7 of the Telecommunications Act (the Act)".

How can a large incumbent carrier (in this case Telus) which the CRTC has found to be exercising collective market share in a national geographic market be considered simultaneously to be a beneficiary of the resale mechanism put in place to mitigate that very market share and dominance? That alone is inherently incoherent and untenable in light of the lack of a specific forbearance order sheltering Telus from the CRTC's dominance determination, or a finding that would explain this radical and unexplained deviation from past practices and decisions.

The CRTC also pointed to the fact that, "(i)n recent years, Canadians have had fewer options when choosing an Internet service provider (ISP)". This of course has largely been because incumbent carriers have been permitted to acquire their smaller rivals, including Telus which acquired so the CRTC tells us Altima Telecom and Start.ca. The CRTC concluded in its Regulatory Policy issued last August that competitors have been unsuccessful in making use of the available access frameworks and many have struggled to compete for customers at higher speeds. The CRTC noted that, "(t)his has contributed to market instability, and independent ISPs have found it increasingly challenging to bring attractive services to market".

Rather than addressing what, on its face, are issues with the CRTC's own mandated terms and conditions, costing regime and relative rates as between the wholesale fibre to the home service of the telephone companies and the third party internet access service of the cable companies, the CRTC has simply thrown up its hands and decided to permit everyone to resell virtually everyone else, leading to "no" reduction in barriers to entry or improvement in the operating terms and conditions for "new", "smaller" or "regional" competitors. In essence, the CRTC has declared that regulating competition is too hard and has given up even attempting to establish the terms and conditions that would serve to facilitate such competition. In so doing, the CRTC has decided to settle on the worst of all alternatives - resale by everyone incumbent carriers included - and abandon its strategic objective of promoting investment in high-quality networks, particularly in underserved areas. Resale is antithetical to investment without positive investment requirements attached.

To do this, it has declared that now, for the first time, large incumbent carriers like Telus which can trace its existence in various parts of the country back more than 100 years is a "new entrant". To conclude this, the CRTC has found that the large incumbents do not own or operate networks to provide retail wireline services outside of their traditional wireline serving territories. Putting aside for the moment that the CRTC is employing the wrong test under its own framework, in the case of Telus it does or did in fact own and/or operate networks to provide retail wireline services outside its traditional wireline serving territories for example, in downtown Toronto where it now also competes alongside itself as a reseller, as well as owning and operating robust transport networks nationally and access networks serving enterprise customers from which it could economically expand. In addition, Telus has recently begun to reach commercial agreements with third party network builders to expand its fibre broadband services pursuant to an IRU-like arrangement without expending its own capital in agreements with companies like F3 Networks and these are in areas within its traditional serving area. Clearly, it is not economically unable to duplicate the infrastructure necessary to compete rather, it is choosing not to do so further given the opportunity to arbitrage offered by the CRTC and simultaneously assuage financial analysts with a message that it is expanding without investing capital.

In reading the Decision the CRTC contends that it is fully compliant with the Policy Direction and points us to four paragraphs of the CRTC's Final Decision where it contends it is encouraging all forms of competition and reducing barriers to entry for smaller ISPs despite uncontroverted evidence otherwise as justification for sacrificing investment and the very existence of existing and new facilities-based competitors. The CRTC suggests that incumbents continue to invest despite evidence that they are, in fact, investing less and have no intention of investing more given the CRTC's decision. The Memorandum of Fact of Law of Cogeco and Eastlink points to the short shrift given to the Policy Direction charitably referring to the CRTC's treatment of the Policy Direction "laconically" without addressing the Direction's objectives in any degree of detail. I would suggest the Commission didn't meaningfully address the objectives at all. Despite that evidence, and despite the fact that more evidence testing the credibility of the claims made emerge daily in the public domain, the CRTC seems unconcerned.

For example, on July 21st Telus loudly announced what it claims is a $2B investment commitment in Ontario and Quebec over the next 5 years in what it claims is a direct response to the CRTC's wholesale fibre-to-the-premise framework. The CRTC will breathe a sigh of relief no doubt as Telus would appear to be one of a very few of the industry stakeholders supporting the review and vary Decision. Telus' seeming commitment to investment drew a quick response from investment analysts who are understably jittery because all carriers have been publicly signalling reduced capital investments and lower capital intensity targets, in Telus' case lowering its target to 10%. One analyst summed up his view of Telus' media release as, "We doubt that Telus will end up investing much incremental capital, but we are impressed with the opportunistic PR strategy".

At the end of the day there is no credible evidence about investment incentives or indeed investment activity at all that supports the CRTC's finding and the Commission steadfastly refuses to admit that there is a profound and substantial doubt as to the correctness of its decision. It's facile suggestions that establishing final rates, which it has as much as signalled will be adjacent to the current rates, will settle any uncertainty about real investments are utterly unconvincing to any educated observer.

If ever there was a circumstance for the Governor in Council to act urgently to correct the ongoing harm of an incorrect decision this is it. To do otherwise puts at jeopardy the possibility of any CRTC regulatory framework making possible ongoing investments in expanding affordable access to broadband beyond the existing footprints of the facilities-based providers. This would be a result that is directly at odds with Government policy as communicated by the new Prime Minister that favours targeted infrastructure investments and particularly investments that contribute to the nation's lagging productivity. The CRTC's apparent strategy of simply giving up is not aligned with the Government's push for smart and targeted investment that gives Canada a productivity dividend and a comparative competitive advantage.

The CRTC's new found penchant for expanding the sharing economy to digital infrastructure puts at risk the demonstrated benefits of investing in that infrastructure beyond current network footprints that the Government itself is subsidizing through programs like the Universal Broadband Fund and the CRTC itself is subsidizing through the CRTC Broadband Fund. The CRTC's errors in these decisions has created a dissonance that cannot be reconciled and it requires urgent intervention from either the Governor in Council or the Courts.