Competitors are left wondering about rates and implications of five-year access immunity
By Ahmad Hathout
The CRTC on Tuesday ordered the largest telephone companies to provide wholesale access to their existing last-mile fibre networks across the country by February 13, 2025, but is shielding from the regime any new builds for five years.
The order is an expansion of the temporary regime ordered in November 2023 that forced Bell and Telus to provide competitors bundled access to their middle- and last-mile fibre networks in Ontario and Quebec, which has been in force since May 7. The CRTC will keep the existing rates for that temporary regime until it finalizes new ones and will determine interim rates for the rest of the country by the end of this year.
The incumbent telcos, which includes SaskTel, have six days to file tariff pages for all provinces, including new ones for Ontario and Quebec.
“Overall, this long overdue decision is a step in the right direction, but we only know part of the picture,” said Andy Kaplan-Myrth, vice president of regulatory and carrier affairs for TekSavvy, the third-party wholesaler that has been at the forefront of the fight for competitor access to incumbent facilities.
Kaplan-Myrth said it’s good that the CRTC acknowledged that the status quo isn’t working, but we “wont’ really know” how the expansion of the FTTP regime will work, “if it can work at all, until we know what the rates are,” saying that the current fibre rates are too high and it’s “far from certain they will get the rates right later this year.”
The Competitive Network Operators of Canada, a rep for wholesalers, also said it commends the CRTC for moving quickly on the file. “We are excited about the expansion of workable and effective FTTP wholesale competition to new markets, which has the potential to bring increased home internet choice to millions of Canadians,” CNOC’s Chair and President Paul Andersen said in an emailed statement.
“As we review the full decision, we remain committed to advocating for a framework that promotes fair competition and benefits all Canadians. We look forward to participating in the upcoming rate-setting process, which will play a pivotal role in the success of this new framework,” he added.
“This positive decision by the CRTC is entirely consistent with our desire to increase competition, continue our expansion and offer Canadians lower prices for high-speed Internet services,” Quebecor CEO Pierre Karl Peladeau said in a statement. “However, the final rates will be critical. We urge the CRTC to set rates that are just and reasonable, and reflect market realities, as soon as possible. Real competition is not possible at this time, as the regulated rates of $68.94 and $78.03, depending on speed, are far higher than the retail rates charged by Bell and Telus, making the business model unviable for competitors and forcing Canadians to stay with these two providers.”
The regulator is also banning large internet service providers and their affiliates from leasing any wholesale internet services from competitors in areas where they already have their own networks, lest those ISPs feel they don’t need to invest in their own networks. Instead, the CRTC will allow them to use the wholesale framework for areas outside of their operating footprint. That means smaller regional players, including Cogeco and Eastlink – who have pleaded with the CRTC to protect them against large player encroachment in their territories – will need to negotiate with the incumbents on their cable networks; and it also means Rogers will be able to lease capacity in areas outside of its operating territory, which Bell warned against.
A Rogers spokesperson said the cable giant is still reviewing the decision. Eastlink and SaskTel, similarly, said they were examining the details to see how they impact their business and operations. Telus, Cogeco, and Bell, whose CEO correctly predicted the result of the access decision, did not return a request for comment in time for publishing.
In this case, the CRTC effectively granted Telus’s wish. The Vancouver-based telecom had asked the CRTC during February’s wholesale internet framework hearing to block incumbents from leasing capacity in areas where they had their own networks and allow them to compete in those areas where they don’t. Meanwhile, Rogers and Bell argued that allowing such access to large players would create an existential crisis for regional wholesalers.
“The Commission considers that where an incumbent operates out-of-territory, it is acting as a new competitor with the potential to disrupt the status quo, to the benefit of consumers,” the CRTC said in Tuesday’s decision. “Such access enables the incumbents to provide new competitive offers and puts pressure on all competitors to deliver additional benefits for consumers.”
For those customers still on the previous wholesale framework that allowed incumbents to lease in-territory, the CRTC is accepting a proposal from Bell and the Competitive Network Operators of Canada (CNOC) that would allow those subscribers to continue getting services under that previous framework so as not to cause a service disruption. However, while they will be able to change speed plans, they will not be served with upgraded technologies or be able to change locations. It is also allowing a 30-day transition period for orders that have yet to be processed under the previous regime.
The decision, however, also has a drawback for Telus, which must now assume a greater burden on its fibre networks, as the interim last-mile decision meant it had only a small area of Quebec subject to the November decision. But the impact will have to be seen as the CRTC determines interim rates for the rest of the country.
The CRTC also used the same reasoning Tuesday as it did nine months ago to exclude cable companies from the regime, noting that the cable companies — which use largely hybrid fibre-coax technology — are relatively new to the last-mile fibre space. The fibre builds from the cablecos, the CRTC said, affects only about five per cent of Canadian households and therefore “does not currently justify an additional wholesale fibre requirement,” it said.
But the CRTC has reserved its right to reexamine the framework in the event of a “significant increase in the percentage of homes passed by the cable carriers’ [fibre-to-the-premises].”
On this matter, the CRTC also said it will be examining the issue of decommissioning of older copper technology in favour of fibre, which has already triggered two separate competitor concerns that their subscribers would be left behind because they won’t have access to the last-mile fibre.
“I’m concerned the Commission may have downplayed how much cable fibre is in use and being built, which could create downstream challenges for competition,” TekSavvy’s Kaplan-Myrth said. “But again, we’ll have to see what the Commission does in its promised follow-up process on decommissioning. And similarly for disaggregated interconnection: Yes, this is a detail, but it’s critical for competitors once they reach a certain scale and, while this decision does leave the door open for disaggregated interconnection, it punts the details to a later process.”
On a technical briefing with media Tuesday, CRTC officials conveyed that they were walking a tight rope, balancing high-speed internet choice for Canadians and ensuring that the large telcos will still have the ability and incentive to invest in their own networks.
On choice, the CRTC noted in its decision that more than four million Canadian households buy gigabit internet. The expansion of the regime across the country, it reasoned, would mean those households would see more competition in those speed tiers, as direct fibre to the premesis provides the fastest speeds of any technology.
But it also said 17 per cent of households are not yet connected to a network capable of providing gigabit internet speeds, so it must ensure continued investment.
Therefore, the CRTC heeded last resort calls by large ISPs that, in the event it does mandate access, to implement a safe harbour for new builds, finding five years was the sweet spot for the telcos to recoup their investments and better prepare for competitor access.
This, however, has caused some concerns for competitors.
“The five-year monopoly for new builds is totally unprecedented in the wholesale framework and could potentially make things difficult operationally for competitors,” Kaplan-Myrth said, with CNOC’s Andersen saying the organization “will need to fully evaluate the challenges presented by the delays and disparities created by the Commission’s decision to include head starts and asymmetrical obligations between incumbent wholesale providers.”
However, Kaplan-Myrth noted that the head-start means their “incentive to build is decoupled from the wholesale rates. In theory at least, that should translate into a lower markup on the rates, and lower wholesale rates. Basically, the Commission may be taking an opportunity here to lower rates by shifting some incentives to build from rate-setting to the five-year head start.”
The decision will mean to large cable companies that the playing field is starting to be leveled, as they had to carry the weight of the vast majority of wholesale subscribers on cable networks.
“In recent years…rapidly changing market conditions have challenged the HSA framework’s ability to promote competition,” the CRTC said in its decision. “Consumer demand for higher-speed Internet services has grown rapidly and ILECs have swiftly deployed fibre-to-the-premises (FTTP) facilities. However, competitors have not been successful in making use of disaggregated HSA over FTTP (disaggregated FTTP services) and many have struggled to compete for customers at these higher speeds. This has contributed to market instability, and independent ISPs have found it increasingly challenging to bring attractive services to market.”
Because this review of the framework was a top-to-bottom examination, the CRTC had to revisit some previous assumptions and opinions it made in decisions going back to 2015, when it determined that the disaggregated regime was effectively the way forward.
As such, Tuesday’s decision affirmed that mandating leasing of high-speed internet capacity from the established incumbents is essential; and the decision to separate the middle- and last-miles for the purposes of direct fibre access has failed because duplicating the middle mile has been untenable for competitors. (The CRTC said by the end of 2022, competitors had fewer than 3,000 subscribers on the disaggregated model.)
“The Commission’s prior regulatory approach, which prioritized facilities-based competition, has not brought about sustainable competition that delivers more choice and more affordable services to Canadians, nor has it resulted in universal access to higher-speed Internet services,” the CRTC said in the decision. “The Commission must therefore set objectives that continue to incentivize network investment and facilities-based competition while supporting increased choice and greater affordability for Canadians.
“Based on that analysis, the Commission determines that all of the incumbents’ wholesale HSA services, including aggregated HSA and disaggregated HSA provided over digital subscriber line (DSL), hybrid fibre-coaxial (HFC) cable, fibre-to-the-node (FTTN), and FTTP facilities, are essential and that aggregated HSA should be mandated,” it added.
There are now two outstanding things left to determine: whether there will be an appeal of the decision — the interim one was challenged by Bell — and what the rates will look like. Because if there’s a constant in the wholesale framework debate of yesteryear, it’s those two things.
Screenshot of CRTC chair Vicky Eatrides
