Proposed rates for wholesale HSA over FTTP are inflated: CNOC

The Competitive Network Operators of Canada (CNOC) told the CRTC that Canada’s incumbents are proposing “unconscionable” rates for aggregated wholesale high-speed access (HSA) service over fibre-to-the-premise (FTTP) that “are inflated above the just and reasonable levels” mandated in the Telecommunications Act. “Wholesale access to aggregated FTTP, at just and reasonable rates based on true costs that stand up to scrutiny, and service configurations that competitors can actually use, will be a game-changer for telecommunications competition in Canada,” CNOC wrote. In a July 10 filing submitted to the CRTC, CNOC proposed the commission reject requests for supplementary mark-ups, reject access rate differentials, and that tariffs include flexible payment plan options. Last week, the commission committed to the continued use of its Phase II costing approach with some adjustments. CNOC said the “positive” decision will allow for rates that ensure fairer competition. “On the other hand, if the commission accepts the laundry list of arbitrary methodologies and inflated cost inputs the incumbents seek to link to the cost of their FTTP service, the result will be wholesale rates that continue to exceed retail rates, and a failure to implement the 2023 Policy Direction, CNOC wrote. CNOC urged the commission to ensure that Canada’s incumbents are complying with the costing requirements and that Phase II costing methodology is being applied correctly. “Whenever incumbents did not comply with the costing requirements, the commission must issue directives that correct the instances of non-compliance, with corresponding adjustments to the resulting rates,” CNOC wrote, adding that is the only way to ensure reasonable rates. CNOC told the CRTC that Telus Corp., Rogers Communications Inc., and Bragg Communications Inc.’s Eastlink supplementary mark-ups should be rejected because there is no need to account for FTTP investment risks. “FTTP investment risks are greatly overstated,” CNOC wrote. “Any actual FTTP investment risk is greatly outweighed by benefits the incumbents have had from a years-long regulatory holiday, i.e., the market share they have been able to capture by not being required to provide wholesale access to FTTP competitors.” CNOC argued that there is long-term demand for FTTP, its technology is mature, there are competitive incentives for the continued investment in FTTP, and FTTP network technology “is unmatched in terms of scalable capacity for decades to come.” CNOC pointed to the Communications Monitoring Report (CMR) which found that in 2021 FTTP internet service was available at 54 per cent of households and that almost 24 per cent of households were subscribed to FTTP services. The organization further noted that their credibility was weakened by the fact that Quebecor Inc.’s Videotron, Cogeco Inc., and Saskatchewan Telecommunications Holding Corp. did not claim these markups. The three companies only proposed a “standard” 30 per cent mark-up to recover a contribution for their fixed and common costs. Rogers and Telus also filed rates with “deeply troubling and arbitrary adjustments” that create an artificial access rate speed, according to CNOC. “Access costs are speed agnostic. The commission should therefore closely scrutinize and make necessary adjustments to all cost studies and proposed rates that do not reflect this reality,” CNOC wrote. CNOC argued that a 2010 CRTC decision to implement a 10 per cent markup cost to small internet service providers that access the higher speeds does not naturally extend to FTTP-based wholesale services. The 2010 policy was unique to the circumstances of fibre-to-the-node (FTTN). “The applicable facts, policy considerations, and costing requirements require the approval of access rates that reflect the speed agnostic nature of the FTTP platform,” CNOC wrote. Finally CNOC requested that the commission direct incumbents to provide flexible payment plans so competitors can recover from the charges. — Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Proposed rates for wholesale HSA over FTTP are inflated: CNOC

News | July 14, 2023

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Proposed rates for wholesale HSA over FTTP are inflated: CNOC

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