TORONTO – Consolidation on the wholesale front in Canada’s telecom industry is not reducing competition, Bell’s executive vice-president and chief financial officer Glen LeBlanc (above, right) told BMO Capital Markets media and telecom analyst Tim Casey (above, left) at BMO’s 23rd annual Media and Telecom conference yesterday.
“There’s a very large reseller market… I think there’s 950 competitors in Canada,” LeBlanc said. “The barriers to entry are minimal, the largest is still in business – TekSavvy – and appears to have zero intention of selling.”
LeBlanc’s appearance at BMO’s conference comes not long after Bell announced it reached an agreement to acquire independent Internet service provider Distributel in the latest of a series of acquisitions of independents by larger service providers. (Bell also acquired EBOX earlier this year and Quebecor’s Videotron acquired VMedia.)
The acquisitions allow “us to accelerate our Internet subscriber growth,” LeBlanc explained, while also noting the company does not have plans to consolidate Distributel into Bell Residential. “We will leave that as a self-standing entity and operate it as such. We will consolidate it with EBOX,” he said of their plans.
LeBlanc told Casey it will probably take “three to five months to get regulatory approval” but added they believe it will be approved.
He argued the wholesale access rate regime currently in place makes it easy for new entrants to enter the market. “So, from our perspective, consolidation in our industry continues to be a reality on this wholesale front and I don’t think that in any way reduces competition when you see the number of players that still exist including the largest one in TekSavvy.”
Later in the day, Cogeco president and CEO Philippe Jetté (below, right) spoke to Casey and took issue with Canada’s wholesale rates regime.
“The problem is that wholesale rates are too low,” he argued. “The CRTC model doesn’t really work.” The Commission is not working from actual costs, Jetté said, after explaining the wholesale rates have not been adjusted for inflation.
The Cogeco CEO called on the CRTC to change the costing model so it starts from real costs then reaches a rate that works for everyone. “We’ve always said… wholesale rates need to be reasonable. Reasonable means it has to support investment and innovation,” he told Casey.
“Very often, people forget that we have to increase speeds and products, add features, and continually reinvest in those networks, so when you add financing the build and maintaining these networks, the current rates are too low, they need to be relooked at and we need to include the formula for yearly inflation rates,” he said.
“So, the CRTC needs to take action and fix that problem… When you see resellers not investing in building their own networks, it suggests that the rates are too low.”
Jetté also called on the CRTC to come up with reasonable terms and conditions for the new framework for regulating mobile virtual network operators it announced last year – “reasonable per the same definition of allowing innovation and investment,” he said.
Cogeco has been looking to enter the mobile market for a while now. The company is exploring the option of entering the space as a mobile virtual network operator, with the intention of building out its own network as required by the CRTC’s framework, but is still waiting for the terms and conditions associated with it to be approved by the CRTC.
Screenshots taken from the webcasts of BMO’s Media and Telecom conference.
