Incumbent reaction to wholesale rates warning shot for fibre, conference hears

TORONTO — The aggressive way incumbent telecom companies reacted to the CRTC’s lowering of wholesale rates in August was a message that they plan to fight any moves to decrease wholesale rates for fibre-to-the-home networks, Laura Tribe, executive director for internet advocacy group OpenMedia told an industry conference Wednesday. “It is not about the aggregated rates. It’s a tantrum that’s a warning shot about fibre,” Tribe said during a panel discussion at the ISP Summit in Toronto. The message the large telecoms are sending is “if you come at us again, we’re going to do something even bigger and worse… it really does feel like they’re flexing their muscle,” Tribe said. She added: “I think it’s actually just setting the stage for all the disaggregated to come.” The CRTC’s final wholesale rates for its newer disaggregated regime — which unlike the older aggregated wholesale regime encompasses FTTH access — are still forthcoming. The regulator lowered the rates ISPs pay for aggregated wholesale access in August. BCE Inc. responded by cutting its rural broadband rollout, and Rogers Communications Inc. and Shaw Communications Inc. also issued critical statements and indicated that the decision could affect future investment. Large telecoms are appealing the decision in Federal Court, which has put in place a temporary freeze on the new rates. A number of the telecoms have also asked the CRTC to leave the option of filing a review-and-vary open, by asking for an extension to the deadline to do so. They have also indicated that an appeal to cabinet is forthcoming. Chris Tacit, a lawyer for the Canadian Network Operators’ Consortium (CNOC), which organized the conference, told the audience that the cable companies said in a footnote to a Federal Court document filing they plan to file an appeal to cabinet. He said the deadline for them to do so is Nov. 13. Moderator and Globe and Mail reporter Christine Dobby noted during the discussion that the way the large players — who, she noted, didn’t accept invitations to participate in the panel — responded to the new rates was unusual. “I hadn’t really seen that kind of reaction before,” in terms of issuing public statements, “making quite a big deal about the cost” and in the case of Bell, cutting rural investment. Tacit pointed out that the particular type of reaction does have a precedent, going back to 1992, when long-distance competition was opened up. “They felt the sting of the loss of that monopoly,” he said. Michael Geist, a panelist and professor at the University of Ottawa, said that the anger on the part of the telecoms about the retroactive portion of the decision — which would see them owe about $350 million — was overplayed. “This idea that somehow this was completely uncertain, thus leading to the kind of reaction that you highlighted, strikes me as a bit theatrical, to be honest,” he said. “You come into this knowing full well that this is a process that will take time, and if you’re not accounting for it, why are you not accounting for it?” Indeed, the CRTC made the rates interim in 2016 — meaning that it stated three years ago that the new rates could be made retroactive back to the March 2016 date of that decision. In a question and answer session earlier in the day, former CRTC chairman Konrad von Finckenstein said the retroactive portion of the decision was problematic because of how long it took to reach a decision. “If we had done the decision quickly, no problem with retroactivity,” he said. “It took them three years to do that. You are now rolling things back three years. People have built a business case on this.” Both conference sessions also discussed what kind of an effect the federal election campaign promises about lowering wireless and internet prices will have on the industry. Geist said he doesn’t expect the Liberal minority government to do anything on telecom, but that he does expect them to move quickly on their promise to implement new rules for streaming services, and potentially to take action on new privacy rules. He said his understanding of the Liberals’ plans for wireless is that the government will let the CRTC mobile wireless network operator (MVNO) review “play itself out,” and only act if the government is not satisfied with changes in the market after a couple of years. OpenMedia’s Tribe noted that the Liberals, the NDP and the Greens all talked about wireless affordability. “I think you’re right, the Liberals don’t want to move on cellphone quickly, but I think the NDP does, and so there could be some conciliatory middle ground on that one,” she said. NDP leader Jagmeet Singh said in late October that telecom affordability would be on, if not at the top of, his list of priorities. Tribe noted that in a minority government, the parties will be keeping a keen eye on what issues the public cares about and any how any action or inaction might be viewed by voters should an election be called. When it comes to cellphone bills, “if in two years there’s another election call, and nothing’s happened, will get slammed for it, because it was so talked about, and something that people remember. It’s about your pocketbook,” she said. “I think there’s some appetite to have something to demonstrate.” Von Finckenstein said that he was surprised that telecom became so “front and centre” in the election, including the Liberal promise to cut prices by 25 per cent. “I think what we will see now is presumably some of them walking back. I mean, nobody wants to get into price controls and price caps, etc. We know they don’t work,” he said. During the campaign, one of the NDP’s promises was to implement price caps for wireless service. “But on the other hand, you have this promise, it’s out there, so you have got to do something,” he said, adding he expects that the government will lean on the large telecoms to get them to lower prices, as the Liberals have said they will do. He said we are more likely to see “gestures than effective policies.” “These promises will come to haunt them,” Von Finkenstein said. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Incumbent reaction to wholesale rates warning shot for fibre, conference hears

News | November 6, 2019

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Incumbent reaction to wholesale rates warning shot for fibre, conference hears

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