Telus’ arguments for incumbent access to wholesale regime not supported by competitors

Telus Corp. appears to be fighting a solo battle at the CRTC in support of the country’s largest telecom companies being allowed to resell internet services over each other’s high-speed networks. A variety of players in the Canadian telecommunications sphere have this week challenged Telus’ stance that allowing the Big Three incumbent carriers – BCE Inc., Rogers Communications Inc., and Telus – to use the wholesale mandate to access each other’s fibre-to-the-premises (FTTP) networks in Ontario and Quebec, so long as it is outside of their traditional serving territories, is good for competition. The CRTC is considering whether or not it should block the Big Three from the regulatory regime, which allows internet service providers (ISPs) to sell services over other companies’ fibre networks for a wholesale fee in those two provinces, after the Canadian government ordered it to do so. Wholesale regime history In November 2023, the CRTC issued a temporary measure requiring Bell and Telus to open up their FTTP networks to competitors in Ontario and Quebec through the regime. At the time, there were no restrictions on the Big Three from using it to access each other’s networks. Bell was opposed to this interim decision and petitioned the government to either overturn it, or change it so that it would apply across the country and restrict all incumbents from using the regime. Early last month, cabinet responded to Bell’s petition and ordered the CRTC to reconsider whether all incumbents should be blocked from using the wholesale access framework in both provinces.That order is the focus of this proceeding. However, at the time of cabinet’s order it had been a year since the interim decision was made and the CRTC had already issued an updated, final decision in August 2024 – which expanded the regime nationwide and restricted Bell, Telus, and the newly added Saskatchewan Telecommunications Holding Corp. (SaskTel) from using wholesale services within their traditional serving territories. According to the CRTC, the incumbents are still free to use them outside of those territories because it gives them the potential to act as a “new competitor” and disrupt the market. With a broader Canada-wide framework on the table at the same time as this proceeding, some intervenors have taken the opportunity to have their say on incumbent access to the wholesale framework countrywide as well as the Ontario/Quebec decision. Majority of respondents want incumbents access’ restricted In their reply comments to the interim decision reconsideration proceeding this week, the majority of respondents took shots at Telus’ arguments that it is a “new entrant” in areas outside of its home market in the west. Telus meanwhile maintained its position, challenging the “theoretical concerns” and “fearmongering” allegedly coming from the other parties. READ MORE: - Telus calls wholesale cabinet order ‘protectionist play,’ ‘not fair to consumers’ - Bell responds to CRTC decision by cutting fibre investment - Bell won’t participate in subsidized broadband projects if wholesale access for Big Three continues, signs agreement with CNOC Telus strongly opposes arguments from Bell that incumbent access to the wholesale framework will disincentivize them from investing in their own networks, maintaining that investment decisions are driven by multiple factors, not just the availability of wholesale. Telus points to its own experience using other forms of wholesale access in recent years, during which incumbents have continued to invest in their networks. Telus alleges that Bell provided no evidence of the greater risks to investment that a wholesale framework with the participation of incumbents can cause compared to one without them, “other than its own self-serving threats to pull investment.” In its submissions, Bell has said it would not be participating in future government-subsidized broadband projects if incumbents continue to be allowed to use mandated wholesale access. Competitors concerned about potential ramifications of incumbent access Telus rejects concerns raised by other parties, such as the Competitive Network Operators of Canada (CNOC) and TekSavvy, that incumbent access to the regime could lead to predatory pricing and collusion. It also dismissed arguments they raised, along with Bell, that it could put competitors’ businesses at risk of shutting down. These concerns are “unfounded,” the company argues, and are being used to “distract” the commission from “their obvious goal: insulating themselves from the competitor that is most likely to discipline prices in the market.” “The commission should not be protecting old business models,” said Telus, accusing its competitors of trying to shield themselves from competition instead of making their services more enticing to consumers. As it went further, the company took a jab at the financial decisions of the other incumbents. Telus’ competitors “have chosen not to innovate at all, or to focus on investments outside Canada – or on purchasing assets like sports teams – instead of closing the digital divide and innovating their service offerings. These are deliberate business choices, and having made those choices, Telus’ competitors cannot now ask for regulatory protection of their revenue,” it states. In its reply, Bell highlights that the groups representing small and regional competitors have filed interventions that strongly disagree with Telus’ position, which it says is evidence that incumbents’ entry into the wholesale market poses a real threat to the viability of smaller players. Telus has only shown that incumbent access is good for its own business, alleges Bell, and argues it does not address cabinet’s concerns regarding the disproportionate size of the incumbents. Incumbents benefit from size, brand recognition, respondents state The company called Telus’ claims that it is a new entrant in other markets “tortured and technical,” adding that it is “beside the point and does not address the government’s concerns.” “As detailed by numerous parties, the disproportionate size, brand awareness, retail presence, and national mobile wireless networks of the large national incumbents preclude them from being new entrants in any sense relevant to the government’s concerns,” said Bell. These are distinct advantages the incumbents have over smaller regional players, Bell also argues, which is further magnified by the large incumbents' ability to bundle wireless and wireline services, something smaller competitors often lack. For its part, Eastlink says it is not enough to block incumbents from accessing competitor networks in their own traditional serving territories. It states that any argument that incumbents would be “new entrants” out-of-territory ignores two key factors: the Big Three’s presence as national wireless service providers, and their overall size, level of resources, and economies of scale. “When these companies enter a new internet market, they already have consumer brand recognition and likely existing physical retail presence in these markets. In this sense, they cannot be considered a ‘new entrant’ in the same way as a regional competitor or small independent Internet provider,” Eastlink states. TekSavvy Solutions Inc. has opinions on Telus’ “vision of incumbent use of the wholesale framework” and what that access would mean for competition “and the industry as a whole.” “Telus’ argument that it will use the wholesale framework to advance competition is inconsistent with the purpose of that framework… Bell, Rogers, and Telus are simply not the types of service providers that were ever intended to use the wholesale framework,” TekSavvy argues. “On the contrary, they are exactly the types of dominant national incumbents that have the market power from which the wholesale framework is intended to protect the retail market.” Cogeco Communications Inc. raised similar concerns. “With their substantial resources, the Big 3 do not require regulatory support to compete in any parts of the country. Further, their use of the wholesale HSA regime will compromise the viability of smaller facilities–based carriers and diminish the presence of small, independent resellers,” it states Cogeco states that while incumbent access might offer short-term benefits for consumers, such as lower prices, over the long term it would pose “existential risk” to regional facilities-based and service-based competitors.” “This would ultimately result in greater consolidation in the wireline and wireless market, greater multi-market coordination among large incumbents, and Canadian consumers being increasingly captive to the Big 3,” Cogeco wrote. Rogers largely shared the same position as Bell, agreeing that Telus cannot be considered a new entrant or regional service provider. Like Bell, Rogers opposes the notion that the proceeding is limited to whether the temporary FTTP mandate should be changed. The company argued that nothing is forcing the CRTC to ignore the “broader context” of cable carrier’s mandate to provide wholesale services over their own networks. “The temporary decision was not made in a vacuum and cannot be varied in a vacuum,” said Rogers. PIAC, CNOC weigh in The Public Interest Advocacy Centre (PIAC) argues “there is overwhelming argument and evidence” to back up blocking the incumbents from the wholesale framework in Ontario and Quebec. “All parties except Telus recognize that Telus is an incumbent, and as such should not be a beneficiary of a regime that is designed to discipline incumbents on price, customer service and innovation,” the PIAC states in its reply. CNOC’s reply also focuses on Telus’ arguments. “Telus is not a wholesale or service-based competitor. It is one of Canada’s largest and most capitalized telecommunications companies. Telus has had no difficulty building physical networks or growing its market share and admits such in its intervention,” asserts CNOC. Bell, Rogers, and Telus have a competitive advantage by being able to bundle services, CNOC argues, while other competitors face barriers to entry and expansion. “The temporary decision was meant to assist service-based competitors, not create a market where the Big 3 effectively offer wireless-wireline bundles using a mix of their physical infrastructure and wholesale access. If such an outcome is permitted, the result will be the entrenchment of a tight oligopoly, which will be terrible for Canadian consumers of telecommunications products,” writes CNOC, which goes as far as urging the CRTC to block the incumbents from accessing wholesale HSA services anywhere in Canada on a permanent basis, as part of its final decision. CNOC says it does not deny the “short-run benefits” of Telus’ expansion in Ontario and Quebec because of its ability to bundle services, but it posits that that type of competition would be short-lived and the loss of wholesale competitors in the market would “invariably lead to higher prices down the road.” phalentm@thewirereport.ca With files from Hannah Daley

Telus’ arguments for incumbent access to wholesale regime not supported by competitors

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By Phalen Tynes-MacDonald
| December 20, 2024

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