By Ahmad Hathout
A consortium of large cable companies is blasting a proposal by Telus to significantly increase its pole attachment rate in British Columbia and Alberta, saying it will unjustly cost third parties millions of dollars in extra payments annually.
In April, Telus filed a proposal to increase its rate per pole by just over 50 per cent, from $19.33 annually, or $1.61 monthly, to $29.83, or $2.49 per month. It said it needs to do this because of significant cost increases since the last approved tariff in 2010, which include a faster-than-average replacing of existing poles and increased costs related to labour, materials and tools.
It also said those costs reflect a decision by the CRTC in February 2023 that ordered all corrective work be paid by the pole owner, which Bell said is part of the reason it is also requesting an adjustment to its rate. The Vancouver-based telecom said its proposed rate increase will still be “significantly lower than other utility companies,” which it claims has increased by 147 per cent over the same period of time.
But Rogers, Quebecor, and Eastlink, which require those poles to expand their telecommunications services, are unhappy about the proposal in part because they say there is insufficient evidence provided by Telus to justify the increase.
Much of the complaint centers on the methodology or an alleged lack thereof used to justify the proposed increase, including, for example, building in unreplicable costs to build out its fibre-to-the-premises network – some of which, they alleged, could have even been subsidized by public funds.
The cable companies also point to alleged inflated depreciation costs through the inclusion of retirement costs; use of single-year estimates for maintenance, removal, vegetation and trimming “without any detailed explanation of the estimation methodology or comparison to actual historical data;” unsubstantiated sampling methodology for estimating new corrective work costs; new and inflated warehousing and distribution and indirect labour costs; and “opaque and inflated” single-year estimate of productivity loss costs.
“The cost information filed by Telus in support of the proposed pole rate increase is essentially a black box,” the cable consortium said. “Much of the supporting data has been filed in confidence based on vague and unsubstantiated confidentiality claims. Even with disclosure, Telus has filed insufficient information to determine a just and reasonable pole attachment rate consistent with the Act and the Policy Direction.
“In the circumstances, the Cable Carriers submit that it is not possible to assess Telus’ cost estimates and proposed rate increase based on the current record,” the group added. “Rather, the Commission should seek additional information from Telus, through a comprehensive interrogatory and disclosure process, followed by a further comment process. In the absence of such a process, there is no credible record for the Commission to establish a just and reasonable pole attachment rate in accordance with its statutory mandate and the Policy Direction.
“Telus’ unjustified rate increase will not improve access to Telus poles. Rather, it will act as a barrier to facilities-based competitive entry and expansion, with negative impacts on consumers and the attainment of the objectives of the Act and the Policy Direction,” it added.
Telus said in a reply submitted last month that the cable companies did not take into consideration the “impact of different sections in the costing exercise. All embedded costs are calculated on a per-pole basis, while annual incremental costs are calculated in aggregate as incurred by [Telus]. By only focusing on total cost increases, intervenors ignore the benefits associated with an increased pole footprint. Naturally, these costs are expected to rise in parallel with the growth of the asset base when third parties choose to attach to this asset.”
Telus accuses the cable companies of being selective on certain data points that put a spotlight on the higher rate, but not on the factors that are driving down said rate. For example, Telus says the cablecos focus on a decrease in the average number of third-party attachers, but ignore the fact that would mean a lower percentage-utilization ratio, reducing the rate. It is urging a comprehensive review of all the factors together to understand the rate increase proposal.
Telus is the dominant provider in British Columbia, with joint ownership of a network of poles with the province’s utility, BC Hydro.
That means British Columbia-based organizations and telecoms had something to say about the proposal.
The British Columbia Broadband Association said the proposed increase is unnecessary and unreasonable, which it said could curb the ability of regional and small infrastructure-based operators to compete. “The increase in pole rental rates will become a significant financial barrier for our members that currently own fibre infrastructure to continue their operations sustainably. Having affordable pole access rate is a key to enable rural fibre builds,” it said.
Prince Rupert’s CityWest is similarly concerned about the proposed rate, according to its submission.
“Pole rental costs make up a significant but necessary portion of [CityWest’s] cost base,” the telecom said. “Any additional cost burden resulting from [proposed tariff] will divert scarce financial resources away from network expansion and up-grade projects and merely hand it over to the wildly profitable large Incumbent Local Exchange Carrier in BC.
“Certainly an astronomical, unreasonable and severe 55% price increase to such an important cost input will cause CityWest to reallocate funds and reevaluate its expansion plans over the short to medium term. The result will be that the Policy Direction’s goal of fostering competition will be frustrated in rural BC.”
The Lytton Area Wireless Society, which serves with high-speed internet rural and First Nation communities, said in its submission that, “not only would this proposed change to rental rates be a disaster to our ability to service the 11 First Nation bands that we service, it would likely mean that many other rural areas in our service area would lose access to affordable high-speed access.
“We urge the commission to carefully evaluate the negative effects this proposal would have on rural and indigenous people groups of Canada,” it added.
The CRTC said last week that it will not meet the deadline to make a decision on the tariff update, but will aim for a decision by the end of October.
Telus said it is expecting to file a new cost study for its poles in Quebec in the future.
