OTTAWA – When the federal government announced it was proposing a new telecommunications policy direction to the CRTC back in May, it emphasized how it would improve competition.
This is supposed to help ensure telecommunications services are affordable and encourage innovation in the industry.
The proposed policy direction compels the CRTC to consider, among other things, how its decisions “encourage all forms of competition and investment”. But while several telecommunications service providers (TSPs) that submitted comments to the government on the proposed policy direction seem to agree competition is important, there is disagreement on what kind of competition the CRTC should be directed to focus on and how it should help foster it.
“Cogeco cautions the government against a telecommunications regulatory framework that favours resale competition over facilities-based competition” – Cogeco
Xplornet argued in its submission that Canadian telecommunications policy “must continue to rely on market forces “to the maximum extent feasible,” noting it is “highly concerned” the proposed policy direction does not explicitly recognize “the importance of market forces to a properly functioning marketplace”.
Cogeco also indicated in its submission it believes the CRTC should be directed to rely on market forces “to the maximum extent feasible” while also arguing for the need to emphasize the importance of fostering facilities-based competition.
“Cogeco cautions the government against a telecommunications regulatory framework that favours resale competition over facilities-based competition, and believes that the role of market players of all sizes who choose – and take the considerable risk – to invest and ensure that Canadians from coast to coast to coast benefit from high-quality and reliable broadband Internet services, ought to be recognized,” its submission reads. The TSP argued against wholesale rates that “undermine incentives to invest in network infrastructure.”
Challenges facing facilities-based providers were highlighted in Beanfield’s submission with the TSP indicating it faces different competitive barriers than service-based competitors that “are no less real”.
“We acknowledge that the service-based competition towards which much of the Proposed Direction is scoped represents a significant portion of non-incumbent share, particularly within residential markets,” its submission reads. “But Beanfield, and other independent carriers in both urban and rural settings, continue to compete vigorously, invest carefully in our own end-to-end fibre networks, and attract outside investments that accelerate our ability to do so.”
Beanfield argued the government’s proposed policy direction to the CRTC is a chance to ensure the Commission address challenges faced by facilities-based entrants and independents.
The service provider suggested several changes to the policy direction including adding that the CRTC should address barriers not only to market entry and competition generally, but to facilities investment specifically.
Beanfield also recommended an objective of the CRTC be “improving consumer choice in all settings”. As Cartt.ca has previously reported, the TSP has argued the CRTC needs to ensure end-user choice, which includes ensuring those who live in multi-dwelling units have access to multiple service providers and are not restricted by bulk agreements.
On the question of wireless competition, there was some push back on both the CRTC’s current facilities-based mobile virtual network operator (MVNO) framework and the government’s directions to the CRTC regarding MVNOs.
The current MVNO framework mandates access to incumbent wireless networks for facilities-based service providers with the intention being for those providers to build out their own networks over time and for the mandated access to be phased out after seven years.
The government’s proposed policy direction says the CRTC “should revise its approach to encourage broader service-based competition if the effectiveness of the approach in fostering mobile wireless competition is lessened due to changes in the mobile wireless market structure or circumstances of competition.” An accompanying government backgrounder further indicates, “The government is prepared to move to a full MVNO model, if needed, to support competition in the sector.”
“One month before the CRTC concluded its proceeding, Rogers Communications Inc. announced that it had concluded an agreement to acquire Shaw Communications Inc., the parent company of Freedom Mobile, essentially making a mockery of the Competition Bureau’s “four providers” strategy and rendering the CRTC’s wholesale mobile service policy obsolete before it was even published” – Iristel
Cogeco and Xplornet pushed back on the suggestion the Commission should be directed to mandate service-based MVNOs and expressed support for the CRTC’s current approach.
Cogeco, which has been planning to start offering mobile wireless services for a while now, cautioned against the government encouraging service-based competition, arguing it “could frustrate the considerable efforts regional carriers have deployed over the years – and that Cogeco is currently deploying – to progressively build out their own competing wireless networks.”
Cogeco argued while there have been numerous delays and challenges to the implementation of the CRTC’s mandated MVNO framework, the CRTC should focus on ensuring its success “before any serious consideration is given to a full resale model.”
Xplornet argued it “is entirely inappropriate” for the proposed policy direction to already look seven years into the future and direct the Commission to mandate service-based competition if the current framework is not effective.
The TSP made the case that future decisions should be based on evidence as well as an understanding of the market at the time rather than the government making a decision now that would see regional providers abandoned, undercutting years of investment.
Xplornet said the CRTC and the Competition Bureau both “believe that regional wireless service providers are best able to bring strong, sustainable competition to the national mobile providers,” and pointed out neither have recommended Canada adopt service-based wholesale competition.
“As part of its participation in the CRTC’s Wireless Review proceeding, the Competition Bureau specifically recommended that the CRTC mandate an MVNO service that empowers the regional providers to more rapidly expand their serving territories to bring new choice for Canadians and new competition for the national providers,” Xplornet’s submission reads.
Iristel, however, argued the Competition Bureau’s argument no longer makes sense because of the pending Rogers/Shaw merger. The bureau believed having “four facilities-based mobile service providers operate in every region would address the abnormally high prices of mobile services in Canada,” Iristel’s submission reads.
“One month before the CRTC concluded its proceeding, Rogers Communications Inc. announced that it had concluded an agreement to acquire Shaw Communications Inc., the parent company of Freedom Mobile, essentially making a mockery of the Competition Bureau’s “four providers” strategy and rendering the CRTC’s wholesale mobile service policy obsolete before it was even published.”
Iristel recommended ISED propose the Governor in Council direct the CRTC to include service-based competitors in its wholesale wireless framework, noting there was a “substantial amount of evidence” provided on the value of doing so during the CRTC’s proceeding on the matter.
“No matter the outcome of the Rogers-Shaw transaction, a model focused only on a handful of regional players not paired with increasing markets’ contestability by new comers with new innovations to bring will always teeter on the edge of a consolidation funnel that sucks choice down its drainpipe.” – Data on Tap Inc.
Business-to-business service provider EGATE Networks indicated in its submission to the government it had hoped the CRTC would have fostered more service-based competition.
“Wireless access is essential to EGATE’s ability to design, assemble, and deliver redundant access connections and, with it, the resilience that enterprise and other business customers expect,” its submission reads.
Because of this, “the prospect of increased service-based competition and, with it, differentiated wireless services that could be better tailored to our and to our customers’ requirements, was a meaningful one to EGATE,” it said.
Pointing out the prospect did not pan out, EGATE indicated it has “no doubt that the threat of market entry would result in more competitive wireless pricing, just as it has done for wireline.”
EGATE proposed ISED adjust its policy direction to indicate the CRTC should adjust its approach to MVNOs, including by extending the duration of the regime and extending the basis on which providers have access to it, should it determine doing so “is necessary to effectively foster market permeability.”
Data on Tap Inc. (dotmobile) also proposed the government emphasize the need for market permeability in its submission and cautioned against an approach to regulation that favours regional providers.
“Enhancing market permeability translates the competition goal of holding existing players’ feet to the fire of competition by ensuring that, if they do not satisfy any particular need, a competitor may rush in to pip them at the post – so that any success results from satisfying needs and interests, not from incumbency or the moat of sunk costs,” the service provider’s submission reads.
dotmobile argued there is a lack of digital-first business models being adopted by service providers in Canada, representing “a lack of market permeability that prevent incumbents from being exposed to the constant threat of efficient, disruptive, and differentiated new competitors.”
The only digital-first offerings Canadians are exposed to come from vertically integrated, regional competitors like Videotron’s Fizz and SaskTel’s Lum Mobile, according to dotmobile. “But, as the continuing Rogers-Shaw travails illustrate, even once a facilities-based competitor becomes viable, regional-carrier-first experiment remains vulnerable to consolidation,” its submission reads.
“No matter the outcome of the Rogers-Shaw transaction, a model focused only on a handful of regional players not paired with increasing markets’ contestability by new comers with new innovations to bring will always teeter on the edge of a consolidation funnel that sucks choice down its drainpipe.”
Cartt.ca received copies of the submissions discussed in this article from the service providers. Last Friday, the government made all submissions on the proposed CRTC policy direction public. (You can download them here.) We previously reported on CNOC and PIAC’s submissions and on TekSavvy and Bell’s submissions.
