Quebecor Media expects CRTC to ‘throw out’ Bell’s deferral account proposal

Quebecor Media Inc. expects the CRTC to “throw out” Bell Canada’s submission to use its deferral account funds to expand its HSPA+ broadband Internet service in rural parts of Ontario and Quebec, says Dennis Béland, Quebecor’s director of regulatory affairs for communications. “We expect the commission to simply throw it out,” Béland told The Wire Report. “We don’t think a hearing is required. The evidence is quite strong that it’s an outrage and it should be immediately discarded.” On May 21, Robert Dépatie, president and CEO of Videotron Ltd., a subsidiary of Quebecor Media, submitted a letter to the CRTC, strongly objecting to Bell’s plan to spend $463 million in deferral account funds on the rollout of an HSPA+ network. Deferral accounts consist of funds collected from urban phone customers during the last price cap period, 2002 to 2006. Bell initially planned to use the money to fund wireline DSL broadband to 112 communities in Ontario and Quebec, but decided in late February 2010 to use its HSPA+ wireless technology to serve those areas. In a May 21 comment to the CRTC, Videotron called Bell’s February application a “bait and switch” and a move to a radically different plan under conditions put in place for an expansion of DSL service. “The cynicism of Bell’s financial manipulation has been compounded by an equally cynical attempt to use deferral account funds to distort Canada’s vital and increasingly competitive wireless marketplace,” Dépatie wrote in the letter to the CRTC. Bell did not provide comments on the matter by deadline Thursday, but Jacqueline Michelis, a spokeswoman with Bell, told The Wire Report in an email last March that Bell had originally planned to use a combination of DSL and fixed wireless technology, consistent with its commercial broadband program at the time. “However, Bell has recently launched our new state-of-the-art HSPA wireless network, which will provide better service and coverage as well as the added benefits of mobile voice services to customers in the 112 approved areas,” Michelis said. Béland told The Wire Report that the switch from DSL to HSPA+ changes the nature of Bell’s proposal. “You go through this exhaustive process looking at a particular proposal and at the very end, after it’s gone through every imaginable step Bell comes in says, ‘We’ve changed our minds and we’re going to spend the money on mobile wireless technology,’” he said. Béland said the communities approved for DSL Internet were found to have no competition for wired Internet, but that the switch to wireless means Bell can use “public funds” to compete with other companies in the same regions. “To think that this massive subsidy could just be picked up and transferred into this other highly competitive market is seen by Videotron to be an outrage,” Béland said. Videotron says Bell’s plan represents an inefficient use deferral account money. For $463 million, Bell will extend its coverage to a potential 61,000 households. According to Videotron, that amounts to a $7,590 per household. Dépatie noted in the letter that Industry Canada’s Broadband Canada program, to connect rural Canadians to broadband Internet, will cost $76.7 million and extend broadband Internet access to 160,000 households in remote areas across the country. That amounts to a cost of $454 per household. Mark Goldberg, a telecommunications analyst with Mark H. Goldberg and Associates, told The Wire Report that it is unfair to directly compare the Bell’s initiative with that of the government, but said some serious questions need to be asked about the deferral accounts program. “While what we want to do is create incentive for private sector investment, we’ve got to look at whether these programs are actually having the reverse effect of delaying investment,” Goldberg said. He noted that the first CRTC decision on the deferral accounts was made in 2006, and that, four years later, no final decision has been made on how the money should be spent. “At what point do we say that the government has got to get out of the broadband business and create the right environment for the private sector to do it on its own?” Goldberg said. “Let market forces drive it.” Goldberg added that the focus on subsidizing regions instead of attending to end-user needs has been wrong-headed. “Typically, high-cost serving areas, from a telecommunications perspective, are low cost real estate areas,” Goldberg said. “Why is there this presumption that just because you live in a rural area you can’t afford to pay $60 a month for the kind of broadband service that I pay $40 a month for? I would happily trade mortgage payments with those people.” He said that subsidies should instead focus on low-income Canadians in both rural and urban areas. Videotron has said Bell should return to its original plan to use DSL-based technology in the 112 communities or return the $463 million to its subscribers by way of a one-time rebate in the form of a cheque. jmigneault@thewirereport.ca

Quebecor Media expects CRTC to ‘throw out’ Bell’s deferral account proposal

News | May 27, 2010

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