Competitors oppose incumbents’ stance in second phase of FTTP access review

The debate over what the future of the wholesale high-speed-access (HSA) framework should look like continues, after conflicting interventions from incumbent carriers and competitor internet service providers (ISPs) were published by the CRTC earlier this week. Incumbent local exchange carriers (ILECs) and cable carriers stand opposed to the CRTC’s consideration to mandate aggregated access to fibre-to-the-premises (FTTP) facilities, ISPs are saying access cannot come soon enough. Carriers argue that mandating aggregated access will force them to cut costs and reduce investments in expanding their infrastructure, while ISPs say they cannot afford to compete under the current framework, pointing to the high cost of laying fibre and accusing incumbents of giving preferential treatment to their flanker wholesale brands. The industry has seen a number of independent ISPs acquired by incumbents recently, which the Competitive Operators of Canada (CNOC) said are now being used as flanker brands to “dramatically undercut the retail pricing of the remaining service-based competitors, far below commission-approved tariffs.” Montreal-based ISPs Bravo Telecom and Transat Telecom, had similar concerns. The two quoted the policy direction orders given by the Industry Ministry in February, which stated, “prices for select incumbent affiliated flanker brand plans in the market are below what a competitor ISP could reasonably charge based on the wholesale rates.” “This observation, which is alarming to say the least, supports all our complaints about the planned erosion of TPIA market shares due to unfair competition from historic operators via their secondary brands,” wrote Bravo, according to a translation. The Public Interest Advocacy Centre (PIAC), in a joint submission with advocacy group OpenMedia, agreed. They also claimed to see a pattern of retail internet packages being priced well below their equivalent wholesale rates, urging the CRTC to look into the alleged discrepancies and prohibit supplementary markups. “This pricing strategy seems to be carefully calibrated to suppress competition by offering retail promotions that wholesale-based providers cannot provide, thus driving them out of business likely within two years, after which point incumbents are free to impose ever-higher prices on consumers,” argued PIAC and OpenMedia. Incumbents blamed the price differences between their retail offerings and their wholesale rates on the range of services that can be provided through FTTP access. “Proponents of comparing wholesale rates to retail rates are comparing apples to oranges,” wrote Telus Corp., adding that off-tariff agreements are good for competition because they allow facilities-based carriers to compete with each other for wholesale business. BCE Inc. said such complaints are the equivalent of a “retail-minus approach,” which “inherently ignores the problem that Gateway Access Service (GAS)-FTTP can be used to provide multiple services (Internet, phone, and TV for example) and thus inappropriately limits the examination to just one Bell retail service (Internet).” Infrastructure investment is a key sticking point for those opposed to an aggregated wholesale framework, who claim that mandating access to wholesale competitors would disincentivize them from laying their own fibre while making it too costly for fibre-owners to pursue future builds. “The proposed aggregated mandate is simply a corporate subsidy for resellers, private entities who do not make any meaningful investments in Canada’s telecommunications system,” argued Telus. Saskatchewan Telecommunications Holding Corp. argued, if the CRTC goes through with mandating aggregated access, it will have used regulation to “prop up resale-dependent competitors who have no networks,” and disincentivize facilities-based providers from continuing to improve their facilities. The First Mile Connectivity Consortium (FMCC) represents eight First Nations ISPs and organizations, and Eeyou Communications Network (ECN) is a Cree-majority owned non-profit operating in northern Quebec. Their comments focused on the challenges competitors face in rural and remote regions. Arguments against access to FTTP facilities in order to incentivize competitors to build their own infrastructure, and other cases against wholesale regulation for the sake of competition, are misguided and exclusionary, said ECN and FMCC. Such arguments are “based on a false assumption that all fibre facilities are competitive,” said ECN, “this is an inappropriate regulatory approach to connectivity in rural and remote regions.” ECN and FMCC explained that HSA services are essential for remote households and businesses, but internet transport services in rural and remote regions are highly monopolized and expensive to build. ECN also countered the disinvestment arguments, explaining that as a fibre carrier, it has been providing aggregated wholesale access on its own network without any detriments to capital investment into upgrading and expanding its infrastructure. “The disinvestment threat is a tired canard of Canadian telecom regulation, and it is time that the canard retires,” said CNOC, arguing that the Phase II costing approach will provide incumbents a return on their investments. Quebecor Inc. agreed, adding that the majority of investments in remote and Indigenous communities – which incumbents have said could be cut – are subsidized through initiatives like the Broadband Fund and local governments. To help the CRTC’s decision, which first began back in March, the Competition Bureau submitted its own comments, including an analysis of the state of competition in the wholesale internet market. The bureau presented indicators of competitive outcomes, and the competitive dynamics between facilities-based and wholesale-based competitors. The watchdog made several key findings: wholesale competitors generally sell slower download speeds than facilities-based competitors, generally below 100 Mbps; wholesale competitors predominately operate on cable companies’ networks, and their presence on ILEC networks has been declining since 2018; wholesale competitors do not have a significant presence in Alberta, British Columbia and Manitoba; wholesale competitors in the Atlantic region have been growing since 2018, particularly on cable networks; and wholesale competitors have been declining in Ontario and Quebec since 2018, particularly on ILEC networks. They also looked at flanker brands in Ontario and Quebec, and found that they have approximately doubled their number of subscribers while the number of subscribers served by wholesale-based competitors on ILEC networks declined by over half. The Competition Bureau emphasized that although it observed these trends, it does not have a definitive explanation for why they are happening. Beyond the debate over whether or not aggregated FTTP access should be mandated, incumbents made some concessions for what should be done if it were. Telus and Bell agreed that if it were mandated, it should be done on a rolling basis, once the facility owner has recouped the costs of their investment. SaskTel and Rogers Communications Inc. also referred to the time it would take to recover the costs of these “generational investments.” The incumbents proposed certain exclusions from the framework, arguing for XGS-PON and other next generation technology to be excluded from the framework. Cogeco Inc. proposed certain exemptions in order to balance improved wholesale access with protecting smaller or non-ILEC carriers who have not yet made any substantial gains from their new infrastructure. The telco said the CRTC should either grant an exemption to FTTP deployments in networks that pass fewer than 350,000 homes, or exempt all carriers’ FTTP deployments for the first three years. Rogers took it a step further and said non-ILECs should be entirely exempt, or at least from the mandated wholesale rates. Cogeco also reiterated its concerns about the wholesale model, criticizing the incumbents for using it to access other networks and asking the CRTC to make it exclusive to smaller, regional providers, barring large carriers from purchasing the capacity of small players. “The threat of increased dominance by the big three incumbents in Canada’s telecommunications markets is both real and persistent,” said Cogeco. “It will find a damaging new outlet if the big three incumbents are able to purchase the mandatory wholesale HSA services of their regional competitors, then drive these competitors out of their traditional retail markets.” – Reporting by Phalen Tynes-MacDonald at pcreed@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca

Competitors oppose incumbents’ stance in second phase of FTTP access review

News | October 19, 2023

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Competitors oppose incumbents’ stance in second phase of FTTP access review

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