No wholesale obligations for new broadband fund projects: telcos

Mandating wholesale access as a condition of funding for projects under the CRTC’s new broadband funding regime will increase costs while effectively discouraging investment, two of the country’s largest telcos said. “While we recognize that the Commission has historically required wholesale access as a condition of receiving subsidies, there should be no obligation to provide wholesale access services under this program,” BCE Inc. said in an intervention in a consultation on the new regime. The CRTC issued a call in April for input on the $750-million fund for improving broadband service in underserved areas across the country. The fund is part of the regulator’s basic service decision that set new basic service requirements, including minimum internet speeds of 50 Mbps download and 10 Mbps upload. The regulator will repurpose the existing local service subsidy and implement new contributions from telecoms based on broadband revenues. The consultation included a suggestion that “applications will be given more weight if wholesale access to elements of the network is proposed.” Bell noted that mandating wholesale access — in which the carrier is required to lease their networks to smaller providers — would create a disincentive for potential bidders and drive up the costs of the subsidy. “Where there is a wholesale obligation, an applicant will have to assume that it will lose retail market share — and thereby retail market revenues to a wholesale competitor,” Bell said. “Unless one believes that the wholesale competitor will actually grow the market (a dubious proposition), then the impact of mandating wholesale can only be to reduce the profitability (and therefore increase the required subsidy) for the bidder.” It added that the CRTC would thereby be “requiring the industry to pay a higher contribution — and by extension— subsidize competition.” Bell did, however, suggest that if the CRTC is to require access, it should be a “universal parameter required of all bidders rather than an evaluation criterion.” Agreeing with the idea that the CRTC should remove wholesale access from the assessment criteria, Telus Corp. said a wholesale access requirement will increase costs to provide service. “The goal of this fund should be to ensure that there is at least one retail broadband internet option for customers in recipient communities,” the company said in its submission, adding such a regime would “make it costlier to provide retail service in these areas, and thus further disincentivize service.” “There is also no evidence that any demand for wholesale access exists in unserved or underserved communities to date or that there will be in the foreseeable future,” Telus added. But smaller providers and public interest groups disagreed with the elimination of wholesale access as a criterion for project funding. “To decline to require wholesale supply outright, as a condition of funding, is out of step with modern broadband funding programs,” such as Connecting Canadians and Connect to Innovate, TekSavvy Solutions Inc. said in its submission, adding not requiring such projects to include wholesale supply may be offside the Telecommunications Act. TekSavvy reasoned that pricing would not be “disciplined” in markets with no wholesale supply or direct regulation of rates, running counter to the sufficient competition provisions in the Act. It recommended that the CRTC follow the lead of Innovation Canada, which has required funded projects to provide wholesale access. However, the company also asked for an exception to the wholesale rule for service providers serving less than 20,000 “endpoints,” suggesting they should be able to deploy funded projects without providing wholesale access, while retail rates in those cases would be regulated by the CRTC. Smaller providers that prefer to avoid retail regulation would need to implement wholesale access, it said. Suggesting that wholesale access promotes greater competition in retail services, the Canadian Network Operators Consortium (CNOC), which represents smaller ISPs, said in its own submission that the CRTC should give greater weight to applications that propose wholesale access. “Any project for which propose no wholesale access or delayed wholesale access should be disqualified for funding as being non-compliant with their wholesale access obligation,” CNOC said, adding those companies already have wholesale obligations in their operating territories. Saskatchewan Telecommunications Holding Corp. said in its submission that wholesale access should hold five per cent weight in the assessment, compared to its top concerns of sustainability (13 per cent), scalability (12 per cent), and quality of service, capacity and speeds (10 per cent each). Consumer groups OpenMedia and the Public Interest Advocacy Centre (PIAC) agreed that open access should be mandated and would enable retail competition. PIAC said wholesale access should be a standardized eligibility requirement, without which it would be “difficult to weigh the relative merits of wholesale offerings and assess whether any resellers are likely to take them up.” Rogers Communications Inc., for its part, said projects including fibre backbone facilities may demand more public funding, more so when tied to making the facilities available for wholesale access. It also said there will be a need for last mile providers to financially justify extending their networks. However, it said that it would support a wholesale access obligation for projects that include a transport element, which includes off-ramps at multiple points along the fibre transport route. On that, Shaw Communications Inc. said wholesale access to subsidized transport facilities is an “important consideration.” It said in its submission that access “will enhance competition, ensure reasonable rates for local access network providers and bring the benefits of facilities-based competition to remote and underserved communities.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

No wholesale obligations for new broadband fund projects: telcos

News | July 4, 2017

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No wholesale obligations for new broadband fund projects: telcos

News | July 4, 2017

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