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The CRTC plays Taps for facilities-based competition

Ted Woodhead

Yesterday afternoon, at about 4:15 p.m., my notifications for this blog began pinging and they kept pinging for most of the evening and again this morning. I can only assume that people were checking to see if I had written a post about yesterday's CRTC decision disposing of the Governor in Council's Order of November 5th, 2024 referring back for reconsideration a decision the CRTC had previously made in November 2023 that took effect in May 2024 (the Temporary Decision). That decision allowed the three largest incumbents to resell each others' fibre to the premise (FTTP) services. The CRTC was given 90 days to reconsider and yesterday would have been the 90th day.


As followers of this blog will know, I have been an outspoken critic of the implications of permitting incumbent resale of FTTP service. My view is largely informed by market facts, the history of resale in the Canadian context and a steadfast belief that using the regulatory framework to encourage investment is the far superior choice for ensuring Canadian consumers receive high quality and affordable services. In a nutshell, I believe that facilities-based investment encourages network expansion to underserved and unserved areas, improves services in areas already served, increases network resilience and diversity and promotes greater innovation.


In a number of different venues, I have argued that the CRTC should definitively clarify that incumbents should not be permitted to resell each others' FTTP services for those and other reasons. So when the reconsideration Decision was issued yesterday, I was disappointed to read that the CRTC had doubled down on its decidedly counter productive prior Decision by essentially deferring the ultimate issue to a later date when it will decide whether it will review and vary its Final Decision allowing incumbent resale.


I don't want to be overly critical of the CRTC here because the Governor in Council had not given it much to work with in arriving at a different and in my view correct decision. The reason for that is because the Governor in Council had cast the reconsideration narrowly to consider only the Temporary Decision. The Temporary Decision was operative for 3 months and was supplanted by the Final Decision with some relatively minor alterations in August 2024. In other words, the Decision the Governor in Council asked the CRTC to reconsider was moot. The Temporary Decision was no longer technically in force or effect.


In yesterday's Decision, if the CRTC had simply said that, there would be little to debate. Instead, the CRTC attempted to justify the impact or lack thereof, of the resale it permitted in the Temporary Decision by 1) not finding any negative impact on investment of the decision and 2) by giving significant weight to some promotions by the one incumbent who has actively resold its incumbent competitors' FTTH service. With respect, apparently the CRTC looked for proof of a negative and found none in the first arm of its enquiry and accepted and gave weight to some promotions proffered by one incumbent party - Telus - to create the lustre of a consumer benefit in the second.


If the CRTC had cast its gaze at the market facts, it would more credibly have been able to discern the reason for Telus' surprising volte face on the issue of the benefits of resale after at least a quarter of a century of opposing it. For example, Telus' traditional operating territories are in the West although it operates a national wireless company. Western Canada is its base and as recent CRTC data shows, it enjoys comparatively higher retail revenues for its wireline broadband service than its competitors do in other regions of Canada. Specifically, in BC where Telus is headquartered the average monthly subscription price for a 1 Gbps broadband service according to the the CRTC is $113 whereas in Quebec it is $82. Paradoxically, it enjoys a lower amount of resale activity by wholesale competitors than for example it does in Eastern Canada where resale is long established. Keeping it in Eastern Canada works to Telus' advantage.


Telus' newfound interest in resale is no coincidence if one considers that the Rogers/Shaw transaction not only injected a much better capitalized broadband competitor to western Canada but also a revitalized Freedom Mobile, with its acquisition by Videotron, and its increased ability to offer expanded bundled offerings in Telus' traditional incumbent territory. Telus' move to resell its competitors' landline broadband services in Eastern Canada can be entirely explained as a defensive move to protect its incumbent base in Western Canada. Using the CRTC's resale construct strategically, it is quite plausible that Telus is targeting its potential competitors in the West by engaging them in the East in a temporary and transitory fashion to dissuade them from aggressively contesting Telus' dominance in the West.


While the CRTC accepted Telus' promotions as compelling evidence of consumer benefit, it obviously dismissed Telus' own warnings in 2020 that permitting resale of its network would cost 5,000 jobs and $1B in investment. The CRTC's view is unlikely to be challenged by the incumbent Minister who is engaged on other current trade issues and there is a distinct likelihood that a new Government won't be in place until after the CRTC disposes of the review and vary of the Final Decision. All of this calls into question whether the CRTC has already predetermined the result of its review of the Final Decision and has closed its mind to the entire issue. We shall see.


At the end of the day I cannot see anything other than that the CRTC has played taps on facilities-based competition as the preferred form of competition and ultimately, in my view, consumers will be the poorer for it.

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