GATINEAU – The argument which says the incumbent telcos would simply stop investing in fibre networks if competitors were granted access to them is just not true, according to the Canadian Network Operators Consortium (CNOC) and Primus Telecommunications Canada.
Chris Tacit, legal counsel to CNOC, told the CRTC on the second day of the hearing that telcos will continue to build because they need to compete with the cable companies (and vice versa, for that matter).
“First of all, they have a natural incentive to build wherever there is a cable carrier because otherwise the cable carrier will eat their lunch,” he said in response to a question from Peter Menzies, the vice chair of telecommunications. “And there’s a reason why they’re sinking all that money into FTTP (fibre to the premises), it’s because they have to keep up. I don’t believe for a minute that they’re going to stop investing if they have to grant wholesale access to FTTP or anything else. We’ve heard this story before and it’s proven not to be true.”
Michael Nowlan, CEO at Primus, noted that both cable companies and the telcos will continue to invest in networks “to support the rapidly growing bandwidth requirements of their vertically integrated media assets.”
The second day of the Commission’s wholesale wireline hearing was dominated by close to three-and-a-half hours of testimony from CNOC (the group of independent Canadian ISPs). Discussions delved into a broad variety of matters including the need for wholesale broadband access services (BAS), adjustments to the rates under capacity-based billing (CBB), unbundled local loops as well as why more wholesale network access would stimulate competitor investments in their own facilities.
Marc Gaudrault, CEO of TekSavvy, considered the most successful independent ISP in Canada, argued that access to BAS is critical for competitors’ ability to build out their own networks. Without it, there’s little incentive to invest in middle-mile facilities, and without middle-mile facilities, competitors will be unable to add more customers to their networks.
“If you want to enable not just market entry, but sustainable competition, the BAS model is essential because it unshackles competitors to substitute bundled transport components with competitive supply.” – Marc Gaudrault, Teksavvy
“If you want to enable not just market entry, but sustainable competition, the BAS model is essential because it unshackles competitors to substitute bundled transport components with competitive supply,” he said.
CNOC has argued that the Commission must not forbear from regulating wholesale access to FTTP unless there is the presence of four, unaffiliated, competing providers and that certain market share loss thresholds have been achieved. Menzies wondered though where the organization came up with the number four.
Tacit noted that this is what the federal government has determined is an appropriate number of stimulate competition in the wireless sector so this figure should be applicable in the wireline market. Other market dynamics come to the fore when there is the presence of four competing providers at the wholesale level, he added.
“What we’ve observed though in other countries and especially in the wireless context is that when you get to around four competitors that’s where you start getting a lot more competitive behaviour in wholesale markets. So we see that as a good benchmark in telecommunications generally to apply,” he said.
“What we’ve observed though in other countries and especially in the wireless context is that when you get to around four competitors that’s where you start getting a lot more competitive behaviour in wholesale markets.” – Chris Tacit, CNOC
This is where access to BAS comes into play, Tacit added. He noted that as competitors take advantage of this wholesale service, they will begin to deploy their own networks which would ultimately result in a market that sees four wholesale competitors: the telco, the cableco, and two other competitors.
Primus, in its appearance, countered arguments from the Competition Bureau that having two facilities-based carriers is enough to protect the interests of users and therefore warrants forbearance. The company noted that a if “triopoly” of Bell, Rogers and Telus in the wireless market isn’t good enough for the federal government, then surely the duopoly in the wireline market is even worse.
The company generally agrees with the CRTC’s 2008 essential facilities decision and that the Commission should reject calls from the big telecommunications service providers (TSPs) for less wholesale regulation. There are improvements to be made, Primus added, pointing to competitor digital network (CDN) and Ethernet among others. On this service (which was at one point under a mandated access provision), the firm said that the commission needs to ensure that it takes a more granular approach to forbearance.
Rather than doing it on a national level, it should be done for each community.
During questioning, Primus argued that while in the larger centres, there is considerable competitive rivalry in CDN and Ethernet, the same can’t be said for regions beyond them.
Commission staff wondered about the impact of a forborne unbundled local loop (ULL) market on Primus. It noted that approximately 95% of its central office co-locations are connected to ILEC ULLs and therefore forbearing this market from regulation would have a significant negative impact on the company.
Nowlan said in essence that all of these assets would be stranded.
The CRTC’s hearing continues on Wednesday with Bell Canada and Videotron appearing.
