VANCOUVER – For a guy who has supposedly moved to the boardroom from the CEO’s chair, Darren Entwistle still did a lot of talking during the Telus Q2 conference call with financial analysts.
The Telus executive chairman primarily spoke to a pair of important regulatory files which have the potential to dent the big wireless and wireline carrier’s performance (along with Rogers and Bell, for that matter): wholesale wireless roaming rates, and wholesale wireline broadband access.
Entwistle hammered home his point that facilities-based competition (where operators are required or incented to build their own networks) has served Canada very well and that it should remain a bedrock of government policy. “I think it would be strange to see the government depart from an infrastructure-based or facilities-based competition model in this country that has served us particularly well,” said Entwistle, responding to an analyst question during the Telus conference call Thursday morning.
“When you contrast the quality of wireless networks and services in Canada with other jurisdictions that have followed different regulatory models, I do think it reinforces the efficacy of a facilities-based competitive model in Canada and I would expect any type of adjudication that the government would conclude with, as it relates to the wholesale roaming review, to be consistent with the regulatory thesis of infrastructure-based competition that has served the country and customers effectively well.”
The federal government, as readers will recall, decreed in December domestic wireless wholesale roaming rates must be held in place and just prior to that, the CRTC announced it would hold a public hearing on the matter, which will begin September 29. “I would expect to see consistency and continuity in terms of the facilities-based competitive model in Canada as being reflected in the outcome of the wholesale roaming review,” predicted Entwistle.
“The other component is that a roaming rate is not a panacea to a successful future for any new entrant… the roaming component is but one parameter that a new entrant has to consider… and I'm dubious as to deep-seated concessions that would be forthcoming in this area because that would be inconsistent with established regulatory policy.”
Others, such as Scotiabank analyst Jeff Fan, have a different point of view. “we are concerned that the upcoming regulatory decisions (such as a low mandated roaming rate) will be unprecedented and dramatic, and that these decisions will limit future ARPU growth and margin expansion beyond what we currently forecast in our model. We believe this change will have an impact on wireless returns and valuation for the entire sector, including Telus,” he wrote, in a research note to clients yesterday.
The Commission will also examine the wholesale wireline broadband access market in a hearing later this fall and Entwistle was asked what Telus would do if the CRTC decided that independent third party internet service providers must get access to the company’s fibre-to-to-the-premises plant.
“I can give you a very conclusive answer to that. We would stop deploying fibre facilities,” – Darren Entwistle, Telus
“I can give you a very conclusive answer to that. We would stop deploying fibre facilities,” said Entwistle. The wireline business model, he continued is “entirely discretionary and modular in nature. It's a bandwidth view that's different than stepping into spectrum on the wireless side where you have to be all-in from the outset.
“It's a progressive, modular build plan that is dictated by market circumstances and if (those) change because someone is commoditizing the value of the asset that's being deployed – and the return that you would be expecting to derive from the capex investment, then you'll change your capex investment decision and, if necessary, retrench until the market is more favorable to getting a fair return,” he explained.
“When you're in a country like Canada that has our topography, our vast geographical expanses and our demographics, we are in deep need of technology deployment. That's a good thing for us to do, and… I would think that government policy would be loathe to forsake those advantages when technology is such an important underpinning of knowledge-based economies and your competitive standing within G7 and G20 groups.”
