Telus, Eastlink provide opposing perspectives on wholesale regulation

GATINEAU, Que. — The CRTC on Tuesday got opposing opinions on the need for wholesale wireless market regulation from two wireless carriers with very different perspectives. Incumbent carrier Telus Corp. argued that too much regulation will deter a healthy climate for investment in Canada's wireless market, while regional carrier Eastlink said the current lack of regulation is stifling competition. At the second day of a weeklong hearing on the wholesale wireless market, Ted Woodhead, Telus' senior vice-president of regulatory affairs, told the CRTC there is no basis for further regulation of the wholesale market, and that regulators risk stifling innovation and deterring infrastructure investment if they allow for cheaper and easier wholesale access to their network. “The superior performance of the Canadian wireless marketplace makes further wholesale regulation of wireless services unnecessary,” he said. “Indefinite access to roaming plus regulated roaming rates based on an arbitrary formula will predictably depress investment and negatively affect the quality of Canadian wireless networks.” In its filing to the commission, Telus included a report from NERA Consulting that claimed wholesale wireless access regulation in the European Union has led to a lack of investment in network infrastructure and new technologies. “All of Europe is paying the price for missteps in communications policies,” Woodhead told the hearing. Smaller carriers Wind Mobile and Mobilicity told the CRTC Monday that further wholesale regulation was needed in order for them to build out their networks. In June, the government passed legislation that capped wholesale roaming rates at what a host carriers charges for retail access. On Tuesday, Woodhead said the experience of carriers entering the market over the last half decade is “an artifact of history” because, at the time carriers were set up, there was only one incumbent, Rogers Communications Inc., with a network compatible with their technology. “The problem, to the extant that there was one, was because they had one supplier,” he said. In July, the regulator found Rogers had committed “unjust discrimination” by including exclusivity clauses in its domestic roaming agreements, but Woodhead said that decision does not mean further regulation is required. Woodhead said wholesale roaming rules are not necessary if companies have other options to pursue in the marketplace. “The existing commercially negotiated method has worked fine,” he said. The new entrants, he said, dislike their roaming agreements, but that’s no reason to change policy. “I’ve heard them say they didn’t like it because they want lower costs,” he said. “That’s not a conclusion that the policy is unsuccessful.” On Monday, the Competition Bureau told the hearing that the CRTC should pursue regulation to promote the development of a fourth national facilities-based competitor. Woodhead said Canada’s mandatory roaming policies are “already more interventionist” than those of other companies, and that the Competition Bureau’s suggestion would lead to European-style regulation that would be “disastrous” for the industry. When pressed by CRTC vice-chairman Peter Menzies, Woodhead said his company does not believe the wholesale rate should be regulated, but that wholesale prices should be set “properly,” perhaps with a structure for arbitration as a last resort. If the CRTC institutes “arbitrarily low” wholesale price caps, Woodhead said it will deter the company from investing in its network. Eros Spadatto, executive vice-president of technology strategy at Telus, said the company already makes difficult decisions about where and how to invest its infrastructure money. New networks, he said, cost “hundreds of millions of dollars,” and any change to the economic rationale will have an enormous effect on where and how they are built, particularly with rural customers. “If you start to not be able to substantiate your capital programs, the first thing that goes is rural coverage,” he said. “And, frankly, that’s happening today with some of our rural customers.” Natalie MacDonald, Eastlink's vice-president of regulatory affairs, told the commission: “Wholesale roaming services play a key sole in enabling Eastlink to bring competition to more Canadians more quickly." However, she added: “The incumbents' wholesale roaming rates are so high that it is cost-prohibitive to rely on roaming services, even temporarily.” MacDonald said her company sees “an ongoing need to regulate wholesale access” as it expands its LTE network in the Maritimes. Menzies asked Eastlink officials why they and the other small carriers failed to anticipate the high cost of roaming before launching wireless services. Matthew MacLellan, president of wireless at Eastlink, said the company believed it could pass on those costs to customers in a transparent way. “We underestimated consumer’s general willingness to have an unknown — that roaming cost each month,” he said. In negotiations with incumbents, MacDonald said the company suffered from a lack of information and an accompanying lack of power that can only be balanced by regulatory intervention. “It was a real challenge for us as a new entrant in the startup phase,” she said. Later in the day, Canadian Network Operators Consortium (CNOC) president William Sandiford said there are significant barriers to competition in the wireless sector and that the regulator must mandate reasonable roaming rates and regulated wholesale access. “In order for consumers to take full advantage of the choice, low prices and other benefits that only competition can bring, the situation needs to change,” Sandiford, who represents small Internet service providers, told the commission. — With reporting by Peter Henderson phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Telus, Eastlink provide opposing perspectives on wholesale regulation

News | September 30, 2014

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Telus, Eastlink provide opposing perspectives on wholesale regulation

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