CNOC takes issue with Shaw’s proposed costs for new 1.5 gigabit service

The Competitive Network Operators of Canada is taking issue with a costing study Shaw Communications Inc. presented to the CRTC to justify the prices it wants to charge its wholesale customers for two newly offered gigabit speeds. In a Tuesday filing with the regulator, CNOC wrote that Shaw's cost study "proposes several significant departures from established Phase II Costing principles and methodology," and calls on the CRTC to "deny such deviations for lack of adequate supporting rationale." Across a number of factors – including how Shaw calculates the costs of node segmentation, how Shaw estimates demand quantities, the lifespan of certain equipment, and the cable company's proposed debt ratio – CNOC argued that Shaw is inflating the cost of launching its new speed services, and thus inflating the cost it seeks to charge wholesale-based ISPs for access to the speed tier. Node segmentation refers to the process by which infrastructure is added to increase the bandwidth of a given fibre feed. The attribution factor refers to the level to which a given telecom attributes required node segmentation capital costs to wholesale customers. In its Tuesday letter, CNOC requested that the CRTC adjust Shaw's node segmentation attribution factor from its proposed 97.2 per cent to what CNOC argued is a "longstanding approved" attribution factor of 75 per cent, which the group said reflects determinations first made in 2006 and upheld in the 2019 wholesale rates decision (which the commission subsequently overturned). Specifically, CNOC points to language in Shaw's cost study in which the cable company wrote that "'there is a specialized service, internal to Shaw, which nodes do not produce nor carry, but with which the number of node segments is indirectly linked', more specifically, dark fibre strands 'within the fibre cables which connect nodes to Shaw’s core network are occasionally leased to another division of Shaw, Shaw Business.'” If Shaw's node segmentation investment is, at least in part, used to provide services that are "internal to Shaw" or leased to another part of Shaw's business, the 97.2 per cent attribution factor is too high, CNOC argued. "Shaw’s arguments consist of essentially the same claims that the Commission explicitly rejected in recent years: that node segmentation is exclusively driven by Internet services," CNOC concluded about node segmentation, arguing that it is also driven by voice and cable television. CNOC also told the commission that Shaw's estimate for the lifespan of certain equipment related to "access channel capacity" is shorter than originally anticipated for accounting purposes. Shaw submitted that the equipment has a lifespan of five years. "This vague claim is unsupported by evidence and should therefore be rejected by the Commission. These assets should retain their economic 10-year life for costing purposes," CNOC wrote, arguing that Shaw has not provided any evidence that would justify the halving of the lifespan. When the CRTC first approved Shaw's new speed tier back in April, the regulator also rejected three proposed conditions upon which Shaw wanted to provide the service: that interim rates will remain in place until completion of the CRTC review of wholesale rate-setting methodology; that rates will not be subject to retroactive adjustments; and that the company would have the ability to destandardize the 1.5 Gig wholesale service following the removal of the service from the retail market. The CRTC rejected all three conditions, as well as a request from TekSavvy Solutions Inc. for administrative monetary penalties for Shaw having failed to file a competitor tariff on the same day as it launched its retail service. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

CNOC takes issue with Shaw’s proposed costs for new 1.5 gigabit service

News | September 7, 2022

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CNOC takes issue with Shaw’s proposed costs for new 1.5 gigabit service

News | September 7, 2022

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