MVNO decision arrives at a ‘tipping point’: Bell CEO

GATINEAU, Que. — How threatening the prospect of mandated MVNO access is to BCE Inc. was evident Wednesday as the company brought out its CEO to the CRTC’s ongoing wireless hearing, who told the regulator even the “least aggressive” MVNO proposal would harm investment. Mirko Bibic, who was the company’s head of legal and regulatory before taking the top job in January, was on familiar ground in the CRTC hearing room, and said the hearing was the most important he’s attended during his time in telecom. “The stakes are so high because we’re on a cusp on a new era of communications… and this decision is a potential tipping point,” Bibic told reporters after the hearing. In a four-hour appearance, company representatives repeated the arguments Bell has been making against wholesale regulation -- that any attempt to mandate MVNOs will affect its network investment. In its written opening remarks, Bell said “significant wireless investments will be delayed or abandoned.” Company representatives pointed to the cuts Bell made to rural broadband last year in the wake of the CRTC lowering wireline wholesale fees as an example. In opening statements, Bell representatives said mandating MVNOs would lower industry investment in wireless by close to $500 million dollars a year “in the short run and substantially more in the long run.” Bibic told the panel that even the temporary, limited form of MVNO access proposed by the Competition Bureau would still harm investment. “Even with this model, there is a big risk,” he said. He gave the example of how the introduction of no-data-overage plans in the market last year increased data usage and as a result, wireless providers had to invest in capacity, to the tune of around $700 million. “Even the least aggressive of the highly aggressive forms of intervention we’re talking about here would mean someone else’s subscribers riding on somebody else’s network, creating an increase in capacity which has to be accommodated,” Bibic said. He gave the example of $10 in profit, of which $5 goes to investment and $5 to shareholders. “If as a result of a regulatory outcome, the profit goes to $9…. You can’t even give $5 to shareholders tomorrow, it’s got to be $6 to shareholders tomorrow, because we have to grow free cash flow to support the dividend growth,” he said. “These decisions inevitably affect investment. I know what I have to do,” he said. “I talk about shareholders a lot and I know it comes across as ‘here come the corporate suits talking about shareholders all the time’... But one of the things we have to deliver on is growing that free cash flow to deliver the dividend, and grow the dividend. And we will do it every single time and we are going to have to make some hard decisions at the end of the day to deliver on that.” When asked what it would take for Bell to sign an MVNO agreement and what the starting point would be of such negotiations, Bibic responded that “we would consider whether or not there is a need for us to engage in those discussions from the point of view of, do we have access capacity, is there a portion of the market that we choose not to tackle on our own that the MVNO could.” Bell has been approached by 15 potential MVNOs and hasn’t signed an agreement with any of them, and the company is continuing discussions with some but hasn’t concluded any agreements, senior vice-president of consumer marketing Martin de Gooyer said. “If the request is, I want access to domestic networks in Canada for all customer segments, in all geographies, we’ll offer all the same phones you do, etc -- I’m a no. Because we don’t invest for nothing. We invest to differentiate our services from those of others,” Bibic said. Cogeco Inc. representatives were also asked about negotiations with wireless providers for network access during their appearance in the afternoon. CEO Phillipe Jetté said “I wish we could call them negotiations or even conversations. They’re very polite, they listen to our questions, they take requests, but the answers are not coming back.” He added: “over time we’ve tried on multiple occasions.” Cogeo vice-president of regulatory affairs Nathalie Dorval asked rhetorically why wireless incumbents would move forward with an agreement with a new entrant. “Why would that be since it’s just creating new competition? Why would they move forward with that?” Cogeco has long said it was interested in entering the wireless market if the conditions were right, including the option of MVNOs. It is proposing a hybrid mobile network operator (HMNO) model, under which companies like Cogeco that have broadband facilities would be allowed access to existing wireless networks, as long as the HMNO reinvests in its own infrastructure. “Cogeco and its peers are eager and ready to better serve existing and new customers,” Jetté said. “The right time is now.” CRTC chairman Ian Scott asked why, given the company has been publicly discussing its interest in the wireless market for “quite a number of years,” what was holding them back. Jetté responded that it was the expense of spectrum, as well as spectrum tiers; for the company to serve customers in its operating area of suburban Toronto, it would have to buy spectrum across the whole city. Last year, Innovation Canada introduced smaller licence tiers to address those concerns. During Bell’s appearance earlier in the day, Bibic said in the U.S. that carriers decided to let MVNOs take the lower end of the market, while in Canada, the wireless industry created flanker brands for that purpose. CRTC commissioners asked Bell why it kept its flanker brands so separate, noting customers participating in a CRTC survey appeared to be uncertain who flanker brands belong to. Company representatives said they keep the flanker brands separate because they are targeted towards different segments of the market; for instance, the Bell site doesn’t mention its lower-cost brand Lucky Mobile. “For example, a senior citizen who, their entire life had a Bell landline and now they’re getting into the cellphone market, and they don’t know Bell offers something low-cost and occasional use… shouldn’t you think that would be an important connection to make?” CRTC vice-chair of telecom Christianne Laizner asked. Company representatives responded that the company’s low-cost options are available and marketed in a variety of ways, like budget retailer Dollarama. While most of the focus during Bell’s appearance was on MVNOs, the company was also asked about testimony from Shaw Communications Inc. and Xplornet Communication Inc. a day earlier, who said the lack of mandated seamless roaming is leaving their customers without service when they exit their service area and begin roaming, increasing the number of customers who switch to competitors. Bell representatives said the issue isn’t as simple as it was presented, when Shaw executives said it was a 30-year problem with a $100 fix. Bell’s vice-president of wireless network strategy, Bruce Rodin, said the process would involve mapping the perimeter of the territories and keeping those maps up to date, changing protocols around network switches and changes to billing systems,. Bibic pointed out Bell doesn’t have a seamless roaming agreement with Rogers Communications Inc. either. “You have to ask yourself, do we want to eliminate all the points of differentiation between networks through regulation?” he asked. “We don’t invest just for the sake of investing, we actually invest to differentiate our networks from others.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Adam Langenberg at alangenberg@thewirereport.ca

MVNO decision arrives at a ‘tipping point’: Bell CEO

News | February 19, 2020

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MVNO decision arrives at a ‘tipping point’: Bell CEO

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