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  • Ted Woodhead

Throwing the baby out with the bath water

In my February 28th blog post, "Sometimes, the right answer is simply NO!", I explained why I believe that permitting incumbents to resell competitor networks is bad public and regulatory policy. Therefore, it was with interest that I read the CRTC's response on March 5, 2024 to a request for clarification of the interim wholesale decision filed by Mr. Jordan Deng the CEO of CIKTelecom on February 1, 2024.


In its February 1st request for clarification, CIK Telecom highlighted some of the concerns I expressed in my February 28th post with respect to grave harm that would be done if the incumbents were permitted, even encouraged to resell competitor networks. Cik Telecom states,


We submit that now is the time for the Commission to clarify that incumbents, especially Bell, Rogers and TELUS, were not meant to be eligible for FTTP-HSA under tariffs...


...the Commission notes the "declining competitive intensity in this industry", evidenced by the fact that "[t]he number of Canadians who buy Internet services from independent wholesale-based competitors has fallen by 40%, even as the overall number of Internet subscribers in Canada has increased". The Commission also notes that when wholesale- based competitors are bought by incumbent companies, "competitors exit the market, Canadian consumers are left with fewer options." It also found that "[a]t the end of 2022, independent wholesale-based competitors served 47% fewer subscribers in Ontario and Quebec than they did two years prior...and


In light of this dire state of affairs, the Commission saw the importance of revising "its approach to promote competition and protect the interests of Canadians concluding that the Decision "provides a temporary and expedited solution to those problems".


As CIK Telecom points out, "If the largest dominant carriers are allowed to take advantage of the interim FTTP-HSA, the survival of the independent ISP constituency, which we understand was a key concern in the Decision, may well be irremediably compromised. The Decision's objective would perversely be completely undermined by the recourse by incumbents to interim FFTP-HSA services, all to the ultimate detriment of Canadian consumers.


CIK Telecom continues by referring to submissions by the Competition Bureau in the proceeding in support of CIK's analysis.


Increased bundling by incumbent providers, especially through their flanker brands targeting similar speed bands as Wholesale-based Competitors, may act as a barrier to entry and expansion by independent Wholesale-based Competitors who do not have the same range of services (such as a wireless offering).


CIK points as well to the Canadian Network Operators Consortium (CNOC) who submitted,


If independent service-based competitors are compelled to compete against flanker brands operated by Bell Canada, Rogers, and TELUS that leverage wholesale HSA services and their nationwide mobile wireless offerings, it will be extremely difficult for independent service-based competition to recover.


I agree with all of these concerns expressed by CIK Telecom. I would add another that I would encourage the Commission to consider. Government, and by extension the CRTC, has for decades had a preference for facilities-based competition. It has been a natural experiment of sorts and the results of this policy preference have been observable and impressive. The incumbents have built out competing networks that have been in an intermodal battle royale that has provided considerable benefits to Canadians. The fierce competition between them, along with the new competing technologies that emerged over time, have provided Canadians with near ubiquitous geographic coverage and carrier choice. In almost all instances with at least 2 competing choices but in most cases 3 or 4 or more. Allowing the incumbents to resell network access under a mandated access regime would squander that success. It could well be the end of further network investment and the host of benefits that policy and the consequent investment has delivered. This would be a legacy too valuable to lose.


The CRTC issued its answer to CIK Telecom on March 5, 2024. The CRTC responded,


You have asked the Commission to clarify whether the temporary aggregated FTTP access service mandated in the decision is available for use by Bell Canada, Rogers Communications Inc., Québecor Média Inc., and TELUS Communications Inc., or their affiliates.


The Commission in its own inimitable way concluded,


With respect to the availability of the mandated temporary aggregated FTTP access, the decision did not contain any condition that limits eligibility for use of the service. As part of the Commission’s ongoing review, initiated by Telecom Notice of Consultation 2023-56, the issues of who should be eligible to use wholesale high-speed access services, and what the associated final rates should be, are being considered.


So the question remains open for the time being awaiting the Commission's final decision in the wholesale access proceeding. It's apparent that eligibility was an an important issue in the 2023-56 proceeding and the CRTC is aware of it. Getting the decision on this issue wrong would be a grave error and own goal for the Commission. Since the interim rates decision is to come into effect on May 7, 2024 the Commission has lost the ability to take this issue off the table with its answer to CIK Telecom's request for clarification. That is a shame because it is unlikely that the final decision will be issued before May 7th. By its inaction the Commission may well do great harm to one of the most successful policy underpinnings of the Canadian telecom industry as well as Canadian consumers. At a time when businesses seek certainty, the economy, investment and Canadian productivity lag. The CRTC has some responsibility for contributing to that.


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