Disaggregated regime to spark new wholesale models, agreements: CNOC

TORONTO — The CRTC’s new disaggregated wholesale regime will bring with it enormous costs to connect customers to fibre and will give birth to new wholesale models, agreements and strategies to make it affordable for independent internet service providers (ISPs) to compete, the president of the Canadian Network Operators Consortium (CNOC) told a conference crowd on the second day of the ISP Summit Tuesday. The new wireline regime will “spawn new wholesale models that will come from alternative carriers, that will come from alternative coopetition — people are going to work together,” CNOC president Michael Garbe said, adding providers will need to move fast to establish themselves to avoid falling behind and losing revenues. The comments followed a presentation by Garbe, which broke down the costs of delivering fibre to the home (FTTH) for players who aren't already established in areas. He concluded that at current interim rates, the costs are still exorbitantly and prohibitively high to establish a presence for smaller providers, and a lot of work will need to be done to make it financially viable. In an interview following the presentation, Garbe added that providers will have options including going to regional players like Zayo Group Holdings Inc. and Birch Communications Inc.'s Primus that have a “ton of connections into” central offices. “So you're going to end up with a whole bunch of new wholesale agreements that ultimately give you the coverage you're looking for,” Garbe said, adding the advantage of being first to connect in an area lies in that you force everybody else's hand to follow suit to capture market share or force them to buy access from that first provider. In August the CRTC set interim rates to get providers to begin roll-out of the disaggregated regime, which effectively allows those smaller players to lease fibre. The prior aggregated regime did not require bigger players to lease FTTH to the smaller ones. But in the aftermath of the decision, representatives of small providers — despite admitting the importance of the decision to allow providers to begin offering FTTH to their customers — said that the interim rates are still too high. For example, Bell's rates were set at $121.79 per subscriber. Matt Stein, spokesman for the Canadian Network Operators Consortium (CNOC) and CEO of Distributel Communications Ltd., previously told The Wire Report that the biggest issue is the cost of connection. “In order to connect the first customer in a single central office, first you have to spend close to $20,000 just in fees to set it up, just to turn it on in a single central office — and there’s over 800 of them — so you’re spending enormous dollars just to be able to start in a single neighbourhood then to hopefully make that back on the circuit,” Stein said. Garbe said he expects that “maybe not right away, but shortly after we get started that are going to come around and start offering some solution on their own so that they can grab all the revenue that they can.” On the first day of the summit, representatives of some facilities-based providers cautioned that just leasing fibre, instead of owning the facilities, would not be sufficient for competition. Garbe, who is also president of business-oriented ISP Accelerated Connections Inc., said ISPs will have to decide which path they want to take — building their own network or leasing. But either way, they can’t ignore the reality that they will eventually have to switch to the disaggregated regime. “So don't put your head under a rock or in the sand and hope that this isn't going to happen; it's happening and now we just have to make it something that is affordable,” Garbe said. But Garbe noted in the presentation that CNOC still “has a lot of work to do.” "We're going to be doing all the things that we do on a , talking to the CRTC, doing what we have to do with regulatory files, etc,” he said. The disaggregated regime is also intended to encourage transport, or middle-mile, investment. When asked about whether there will be any economic incentive to build those facilities as opposed to leasing them, considering the already high cost of investing in the last mile, Garbe was clear about the problem. “Let's say that I had the money or the financial wherewithal to become that middle-mile provider — am I going to take the risk that the technology is going to be around long enough for me to get my return on investment, number one? Number two, as soon as I do it, I run the risk that will say, 'okay, we'll just give it to you for this set price and undercut .” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Disaggregated regime to spark new wholesale models, agreements: CNOC

News | November 7, 2017

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Disaggregated regime to spark new wholesale models, agreements: CNOC

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