By Ahmad Hathout
The commission should not fear threats of lower investment in incumbent networks when it comes to set wholesale internet rates, the benefits of which will allow independent service providers to build their own networks, the CRTC heard on the final day of its wholesale internet hearing.
The CRTC has been wrangling during the week-long hearing over the question of what the sweet spot is for a rate on which independent internet service providers can lease capacity from the incumbents’ networks. Adam Scott, the CRTC’s vice chair of telecommunications, referred to the risk of the commission falling on either extremes of the rate being too high or too low as the “Goldilocks” issue.
The Competitive Network Operators of Canada (CNOC), a rep for independent ISPs, told the commission Friday that setting the rate too high would have far graver impacts than if it were to set the rate too low.
Christian Tacit, CNOC’s counsel, urged the CRTC to reflect on why a large number of ISPs were purchased by their larger peers. The pace accelerated after the CRTC’s decision to ditch its proposed lower wholesale internet rate in 2021, signaling to wholesalers that the road ahead was going to get more difficult, Tacit said.
“Those [acquired] companies received the signal that it was unlikely going forward into the coming years that they would have a good business case, so they exited quickly,” he said, noting the quickness with which this all occurred.
Some of the larger players have said the recent spate of acquisitions actually show a healthy market, with Bell claiming that some of these deals were related to succession planning and were not wholesale rate-related.
“On the other hand, if rates are too low, even if there are investment consequences, they are much slower and they’re smaller, so there is a lot of time to adjust,” Tacit said.
“So if, for example, Bell or Telus says to you, ‘well, we’re going to delay these projects; they’re not really stopping investment, they are just slowing down temporarily,” he added. “Bell Canada is not going to go bankrupt if wholesale rates are too low. So, in terms of that calibration, we just want to urge caution as to how you perceive, directionally, the perils.”
Bell announced a fibre spending cut of over $1 billion in the hours after the CRTC’s November decision to temporarily allow competitors to aggregate the middle and last mile fibre of Bell and Telus in Ontario and Quebec – a decision that primarily affects the former.
The large telco rifled off a petition to cabinet and an application challenging the decision at the Federal Court of Appeal, which decided to hear the matter but not to immediately suspend the commission’s decision in part because Bell failed to convince the court its investment announcement constituted irreparable harm.
That means, at least in the meantime, that competitors will be able to access those incumbent facilities by May 7, the deadline established by the commission.
Paul Anderson, chair and president of CNOC, said the organization’s members are preparing to use the interim framework.
And so will TekSavvy, its representatives told the commission Friday.
The largest independent telecom would be the example, it would argue, of the instance that Tacit gave of the risk of setting a rate too high for access to incumbent facilities.
Andy Kaplan-Myrth, TekSavvy’s vice president of regulatory and carrier affairs, reflected on the decision by the telecom to cut back on fibre plans after the 2021 rates decision.
He said while the interim fibre rates are still high, a key takeaway is that lower rates will allow these wholesalers to generate enough revenue to build their own networks – a driving factor behind the rationale for the wholesale framework to begin with.
“If it’s [rates] properly tuned, you will have competitors who grow enough that they can then build parts of their own networks — maybe some transport…and maybe our own fibre-to-the-home networks locally,” Kaplan-Myrth said. “That has been part of the goal to grow and become local service providers with the kinds of facilities that people expect a service provider to have.”
TekSavvy has its own fibre network in its home territory of Chatham-Kent, Ontario, which it said the commission should protect against incumbent use.
Quebecor, which has urged the commission to set lower rates, has already formally asked the CRTC to adjust the disaggregated tariff to be more in-line with the interim aggregated rate, which TekSavvy agreed with.
“How reasonable it is to expect us to build facilities, of course, depends on the wholesale rates because if the wholesale rates are properly set, then we may have enough density in an area where we’d have a reason to build there and we might have money to actually invest in it,” Jessica Rutledge, TekSavvy’s director of regulatory and consumer legal affairs, told the CRTC.
“But if the wholesale rates are as they are now, it’s certainly not reasonable for us to invest in those facilities.”
Screenshot of Andy Kaplan-Myrth, TekSavvy’s vice president of regulatory and carrier affairs.
