Small ISPs welcome rollout of disaggregated wholesale regime

The CRTC kickstarted the industry’s move to a disaggregated wholesale wireline regime Tuesday, setting interim rates and giving wholesale fibre-to-the-home (FTTH) access to smaller providers in Ontario and Quebec, a decision that those companies say will allow them to keep pace with bigger competitors and increasing consumer demands. “It’s that signals an intent to get to multi-party competition and that’s something consumers absolutely need to achieve affordability,” Bram Abramson, chief legal and regulatory officer at TekSavvy Solutions Inc. said in a phone interview. Tuesday’s decision dates back to another in 2015, when the CRTC mandated wholesale access to FTTH networks under a new disaggregated system it proposed to replace the current aggregated system. That decision was followed by another in 2016 to set configurations, such as where competitors would interconnect with incumbents. Tuesday’s announcement only sets interim rates, with final rates yet to be determined. Abramson said the CRTC decision Tuesday effectively allows smaller providers to access customers who are only served by fibre and to follow customers who move into fibre-only premises. “We weren’t there; now we’ll be there, and to be honest, that’s by far the most significant piece of it,” he said. The announcement comes after a Part 1 application that the Canadian Network Operators Consortium (CNOC) brought forward in March, seeking to have wholesale access to FTTH mandated under the current aggregated regime. The incumbents responded by suggesting that cable facilities provided a sufficient alternative to a lack of telcos in “service gap” areas, an argument that was denied by CNOC. Abramson, who said there are still more details to hash out, added that customers are constantly demanding faster speeds and this will not only help small ISPs have direct fibre access to the home — where traditionally it was only to the node — but also “helps us keep pace” with the competition. The decision noted that the CRTC would begin the implementation process in Ontario and Quebec to assess demand and “review and establish proposed configurations” for the disaggregated regime. Judith LaRocque, interim chairwoman of the CRTC, said in a Tuesday press release that the decision fosters a more “dynamic competitive telecommunications market by ensuring competitors have access to the wholesale services they need at reasonable prices.” Matt Stein, spokesman for CNOC and CEO of Distributel Communications Ltd., said in an email that while CNOC is pleased with the decision as a step toward wider access to higher speed facilities, “there are many implementation items and details that we are continuing to review,” including final rates, which will further determine impact on smaller providers and competition. The decision comes as providers accelerate their gigabit offerings, and after the CRTC set a minimum of 50 Mbps download speed as a basic service requirement in December. While demand for over 50 Mbps is relatively small, “the demand for service speeds supported only by FTTP access facilities and other comparable technologies will likely increase as end-users migrate to higher-speed Internet access services to support their growing usage or existing and future applications,” the decision read. CNOC initially argued that a competitor’s ability to compete is correlated to its ability to offer speeds comparable to the incumbents. Without access to FTTH, there would be a lessening of competition in the retail market, it said, adding that duplicating facilities would not be practical or economically efficient. The CRTC agreed in Tuesday’s decision, noting that if such wholesale services were not mandated, then there would likely be a migration to the incumbent carriers, the effect of which would be to squeeze out competition. It also said that it would not be “practical or feasible for competitors to duplicate the access component” of wholesale high-speed access services, including those of fibre-to-the-premises (FTTP) facilities. BCE Inc. spokeswoman Jacqueline Michelis said in an email that the company is still going through the details, but that the CRTC “needs to be mindful of the impacts of the rates it sets on investment in next generation broadband facilities,” though it is “encouraged” that it recognized Bell’s proposed changes. Bell had originally challenged the decision in court in 2015 and was subsequently denied, and argued in front of the CRTC the market is already competitive and that competitors did not give enough evidence that there was demand for disaggregated wholesale service. Rogers Communications Inc., which had argued that introducing disaggregated wholesale services would not provide any material benefits for consumers and should be rejected, declined to comment Tuesday. Spokesman Kevin Spafford said in an email that the company is still reviewing the decision. Quebecor Inc.’s Videotron also declined to comment. Some large companies, including Bell and Cogeco Inc., previously said that mandating wholesale FTTH would reduce their incentive to invest in networks. Stein said that the CRTC approved the disaggregated regime in part because it would encourage investment in middle-mile network facilities, which would then connect with the incumbents and result in greater facilities-based competition. For the last mile, access to the new high-speed broadband facilities “was based on its finding that doing so would not negatively impact investment in these facilities by the large telephone and cable carriers,” Stein said. Abramson added that the smaller providers will be able to “serve end users who are served directly from the place that we happened to connect with the incumbent provider at, and will also enable us to interconnect with the incumbent at more places in order to serve more end users.” In the Tuesday decision, the CRTC approved the interim rates proposed by Bell and cable carriers. In a research note, Desjardins Capital Markets analyst Maher Yaghi said the “new interim rates for the access portion of FTTH services are not low enough to negatively impact the economics for BCE’s FTTH business” and the interim rates overall should not “change the competitive dynamics in the market for low- to mid-speed services.” For example, the monthly access rate for a smaller provider for Bell’s FTTP would run for $121.79 per subscriber, which Yaghi compares to Bell’s retail price of $135 in Quebec and $125 in Ontario for its highest speed, or gigabit service. David Christopher, a spokesman for internet advocacy group OpenMedia, said in an email that while the organization applauds the move to improve competition, it is “very concerned” about the interim rates, “which are simply too high” to “be a game-changer for consumers or independent” providers. Christopher added that the ruling took too long and it “doesn’t open the door far enough for indies to meaningfully compete,” and that because the rates are only temporary, “this prolongs market uncertainty.” Christopher suggested the CRTC move quickly on setting final rates that are viable for independent providers to compete. Abramson said “there’s still lots of details to be worked out, but what it means is that we should be able, very soon, to begin serving at least some customers who are served today by fibre.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Small ISPs welcome rollout of disaggregated wholesale regime

News | August 29, 2017

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Small ISPs welcome rollout of disaggregated wholesale regime

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