GATINEAU – Here we go again.
Several years after the CRTC set the rules for mandated access to essential broadband facilities, the big telecommunications service providers (TSPs) and their smaller competitors who rent space on those TSP networks, will once again take their turns before the Commission beginning Monday to argue about mandated access to incumbent networks, specifically the deep fibre networks built by the large cable and telco incumbents.
As can be expected, the incumbents are going to argue that the retail broadband market is already highly competitive, the result of vigorous battles among facilities-based competitors. Any unwarranted regulation of their wholesale services will only serve to harm consumers and their investment decisions.
The paper part of the proceeding reveals their stances.
Bell Canada said in its October reply that the evidence of a competitive retail broadband market is already on the books. It points to a Charles River & Associates report that indicates prices have declined 64% since 2008, broadband penetration rates have grown and capital intensity has increased and is outpacing the U.S. market.
A Lemay Yates Associates report also notes that whereas cablecos led the broadband market in the early years, the telcos have fought back and taken share away from their competitors. For example, ILEC penetration of 5Mbps service increased by 50% between 2008 and 2012 and monthly household usage has tripled over that same period.
Competitors, on the other hand, say local broadband markets aren’t competitive at all and that they’re in a fight for their corporate lives. Continued mandated access to existing and additional incumbent network facilities is their only way to survive. In fact, they say they must have access to fibre to the premise (FTTP) networks if they are to compete with the big TSPs.
The Canadian Network Operators Consortium (CNOC) argues that the broadband market is highly concentrated with 91% of retail subscribers controlled by the telcos and cablecos combined, so consumers have just two choices. It wants to break this dominance, but needs mandated access to wholesale access services so that it can climb the ladder of investment (LOI). Two services critical for competitors in CNOC’s view are disaggregated wholesale high speed access services (WHSAS) and broadband access service (BAS).
"They provide an important step on a ladder that is currently missing several rungs. Additional rungs have the effect of encouraging competitors to invest more." – CNOC
“In fact, one of the reasons that CNOC is advocating for BAS and disaggregated WHSAS is that they provide an important step on a ladder that is currently missing several rungs. Additional rungs have the effect of encouraging competitors to invest more,” it writes in its October reply.
The group of independent broadband and telecom service providers says access to FTTP infrastructure is also crucial for their survival – and that suggestions from incumbents that they will decrease investments in deep fibre if forced to grant access to third party providers ring hollow.
Telus countered that by noting it’s the communities which need broadband the most who would be the ones to see the most harm from this type of interventionist policy.
“By reducing the incentive of all players to deploy FTTP, mandated access would cause a direct reduction in investment at the margins, meaning that communities where the business case is already very challenging are unlikely to ever get access to FTTP,” it says.
“By reducing the incentive of all players to deploy FTTP, mandated access would cause a direct reduction in investment at the margins.” – Telus
Competitors and the big TSPs are also at odds over the substitutability of wireless for wireline broadband. CNOC acknowledges that wireless data is advancing, but it will always play second fiddle to wireline.
Rogers Communications argued in its filings that it’s important to remember wireless is evolving rapidly and that regulations under consideration in the proceeding must take that into account. “The situation in the mobile broadband market is evolving quickly in terms of both technology and pricing, and consumer behaviour will shift in response to changing market conditions. The dynamic nature of the industry underscores the importance of analyzing potential substitutes for wireline broadband services on a forward-looking basis,” the company says.
Of course, these are just a few of the issues; it’s much more complicated than that and the Commission will certainly get into the weeds with each intervener. Other matters to be discussed at length and dissected in great detail are numerous. They include whether aggregated wholesale services such as gateway access service (GAS) and third party Internet access (TPIA) as well as local loops are essential; the re-regulation of competitor digital network (CDN) access and Ethernet; and more.
In a nutshell, competitors want continued mandated access to the incumbent telco and cableco’s wholesale high speed broadband services including FTTP, while the big TSPs believe the retail market is already highly competitive and therefore ongoing and additional mandated wholesale access rules for competitors are unnecessary.
Telus perhaps sums up the situation facing incumbents the best. It says the proposition facing the Canadian broadband market is simple: adopt backward policies that discourage investment and innovation in networks such as those being espoused by the smaller competitors and have shown to be a failure across Europe or implement rules that stimulate more network spending as has been done in the United States and South Korea.
“Canadian consumers and businesses deserve policies based on real-world evidence, and the evidence on the record is that mandated wholesale access reduces investment and deployment of new facilities, leaving consumers with poor quality networks, older technology, and, in the long run, higher prices,” it writes.
Certainly, CNOC and its members – and others – believe otherwise. They will get their chance starting Monday to try and convince the commission that without mandated wholesale access broadband, consumers will suffer.
The Competition Bureau is up first on Monday, and the hearing is scheduled for nine days. Cartt.ca will cover it all.
