Regulator argued Rogers’s investment capacity won’t be harmed
By Ahmad Hathout
OTTAWA – The CRTC has selected Quebecor’s price to access Rogers’s wireless network for the purposes of building out its mobile virtual network operator business, the regulator announced Monday afternoon.
The two parties were granted a final offer arbitration hearing in May after they couldn’t hammer out a deal on their own. The process involves the two sides presenting their own price offer for access and the regulator choosing one.
The CRTC ruled that despite its finding that both offers would have satisfied the policy objectives, it was Quebecor’s offer that would allow it to best compete and expand its network.
“The Commission considers that either offer would enable QMI to provide plans at lower prices than those currently available in the retail market,” the decision said. “Using the RCCI rate, however, QMI would need to offer lower data allocations than what is currently offered, which would run counter to the interests of many Canadian consumers.”
The regulator added that while the Rogers offer would have allowed Quebecor to offer low-priced plans and compete “to some extent, it would limit the amount of data, and therefore the range of plans, that QMI can offer without incurring losses.”
Rogers justified its comparatively higher rates – which it said was based on its offer in Quebec – by its ability to recover its operating and capital costs and that below-cost rates could not be considered just and reasonable under section 27 the Telecommunications Act.
But the regulator said Rogers’s “view of the Commission’s rate-setting authority is too narrow, given that the Commission must exercise its powers in accordance with the policy objectives in section 7 of the Act and any direction provided by the Governor in Council.
“This enables the Commission to take a more holistic approach to rate setting than that proposed by RCCI,” the decision said. “This means that the Commission does not necessarily have to ensure that costs are recouped over the short term for a rate to be considered just and reasonable under the Act.”
The regulator also concluded that its interpretation of “just and reasonable” could allow for “an otherwise profitable enterprise to incur a modest or temporary loss in one line of business while other lines remain profitable.”
Quebecor argued its offer would allow it to cover retail costs, counter commercial strategies from the incumbents, earn a modest profit and reinvest in expanding the network. It warned that, if the commission did not select its offer, it could be operating the MVNO at a loss that would ruin the business case.
Ultimately, the CRTC said Rogers’s investments would not be harmed by choosing Quebecor’s offer.
“[Rogers’s] ability to attract capital for such investments, remain intact, given the relative size of revenues RCCI would accrue by providing QMI with MVNO access for data services compared to its overall revenues,” the CRTC said.
“Although the Commission is of the view that it is likely that any costs that may be unrecoverable through the sole application of the data rate at issue in this proceeding would, at most, be minimal,” it added. “The Commission also considers that RCCI will retain its capacity to recover any outlying costs associated with the provision of MVNO access services to QMI through other telecommunications services it offers without undermining its ability to compete effectively in the retail market.”
In a statement, a Quebecor spokesperson said, “Today’s decision by the CRTC in the final offer arbitration process between Quebecor and Rogers is consistent with the expressed desire of the government and regulatory authorities to continue their policy of encouraging competition in Canada’s wireless industry.
“The decision indicates that the CRTC and its new leadership are committed to increased competition in Canada’s telecom industry and to encouraging network investments,” the statement added. “The rates selected by the CRTC today will enable Quebecor and its subsidiaries to continue offering plans that are still more affordable, accessible and competitive and to extend Quebecor’s services across Canada, to the benefit of consumers.”
Quebecor, which earlier this year closed its acquisition of Freedom Mobile, was also granted last week a final offer arbitration hearing on the same matter for access to Bell’s wireless network.
Incumbents and regional carriers have until August 7 to hammer out a commercial deal.
