Rogers takes aim at Telus, Bell network sharing

GATINEAU, Que. — It's not always a case of the wireless incumbents battling newer entrants; Wednesday's session of the CRTC hearing into the wholesale wireless market featured one of the big three throwing its two closest competitors under the bus. Representatives from Rogers Communications Inc. made the case on the third day of the week-long hearing that rivals Telus Corp. and BCE Inc., which have a comprehensive network-sharing agreement, should be forced to negotiate with smaller carriers as two separate companies. Rogers vice-president of regulatory affairs Ken Engelhart agreed with the suggestion that the close relationship between Telus and Bell has reduced the wholesale market to two players in some areas. "They share the radio access network," he said. "The two are as one." Rogers has its own domestic roaming agreement with Quebecor Inc.-owned Videotron, yet Engelhart emphasized that his company negotiates wholesale agreements completely separate from its roaming partner. In its Tuesday appearance, Telus said it never had roaming agreements with smaller carriers, except Public Mobile, which it eventually purchased, until just a few months ago. Telus said it would be hard for it to support more wholesale access because it already runs its network near capacity. "It was good to hear that Telus don't know how to run a network," Rogers CEO Guy Laurence said Wednesday. "I don't believe it." The close cooperation between Bell and Telus has long been a sore point for Rogers. The company complained recently that its rivals split up Canada by region in the 700 MHz spectrum auction in order to keep costs down, and it is asking Industry Canada to prevent such behaviour in the upcoming AWS-3 auction. "They have one network, and they're pretending they don’t,” Engelhart told the commission. “It's a shared network. We're just saying you should recognize that and that will be a very valuable thing for this wholesale market.” Bell will testify before the hearing on Thursday. Engelhart also addressed concerns raised by Wind Mobile and Eastlink during their appearances before the hearing earlier this week. He said Eastlink’s complaint about "asymmetric information" in the initial negotiations on roaming rates in 2008 and 2009 was a problem his company shared. "No one has good information about domestic roaming," he said. "Roaming is one of the deepest secrets you could ever find. Roaming rates, people jealously guard them and won't disclose them." Because the terms of Telus' and Bell's domestic roaming agreement are secret, he said Rogers looked to carriers in the United States to determine the rates for their negotiating position. "We had a vigorous negotiation," he said. "I think ended up getting rates that were quite comparable if not better than what Americans were paying." In July the CRTC found that exclusivity clauses included in Rogers' domestic roaming contracts amounted to "unjust discrimination.” In June, the government passed legislation that capped wholesale roaming rates using a formula based on the host carrier’s cost and usage.Because data use is growing at an extraordinary rate, Engelhart said, wholesale prices will inevitably get cheaper. “People are buying more packages and using more data, but the rates we charge aren’t going up commensurately,” he said. “That roaming price will drop every year for data even if you don’t do anything.” The current cap set by the legislation is too low, Engelhart said in an interview after his appearance, meaning the incumbent carriers will set their rates at the cap and won’t compete for wholesale business. “That’s why we’ve suggested raising the rate a bit and letting market forces operate underneath it,” he said. The smaller carriers have asked the CRTC to lower the rates they pay for wholesale access to the incumbents’ networks, as well as introduce a tariff for tower sharing. This mandated price would replace the current rates for tower sharing, which are negotiated between the individual carriers. Engelhart dismissed their request for a tariff as “rent-seeking,” an economic term for those who use government action to enrich themselves without investment. “We have no tower problem in Canada,” Engelhart told the hearing. “The rates are competitive, they're market rates. People can get access.” The negotiations, he admitted, can be “annoying,” but so can the construction of cellphone towers. “You don’t have to go to meetings where local residents are throwing things at you,” he said. Under the current process, Industry Canada oversees any disputes about tower access and pricing, and Engelhart said that mechanism was the only flaw in the system. “You end up hiring expensive lawyers. You go to one of these expensive tribunals. It's sort of killing a fly with a sledgehammer," he said. Engelhart said the CRTC could take positive action by taking power over tower sharing but should stay with the commercially negotiated rates. "I would be perfectly fine with the commission being the arbitrator, because you're a less expensive, kinder, gentler arbitrator than what's out there,” he said. Despite the perception of Rogers as a wealthy company, Engelhart said its wireless business is a risky investment with high fixed costs that wholesale regulation could destabilize. “You make these massive bets and either it works or it doesn’t,” he said, adding that the commission has no responsibility to keep his company profitable. “But you can't give wholesale carriers access at rates that make it hard for those bets to pay off.” From the government’s stated aim of facilities-based competition, Engelhart said, it does not follow that carriers should be forced to provide wholesale access at retail rates. “The whole nature of facilities-based competition is, 'We'll let people make those gambles and it's up to them whether it works out or not,' ” he said. “But it sure doesn't work out if your competitors are using it at marginal cost.” — With reporting by Peter Henderson at peter@peterhenderson.ca and editing by Derek Abma at dabma@thewirereport.ca

Rogers takes aim at Telus, Bell network sharing

News | October 1, 2014

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Rogers takes aim at Telus, Bell network sharing

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