Cable / Telecom News

In wholesale rate review, CRTC prioritizing mandated access to last mile fibre



Commission will release decision on last mile fibre access before wholesale rate hearing

Note: This story has been updated with comments from the CRTC chair, CNOC, and TekSavvy

By Ahmad Hathout

OTTAWA – Just three weeks after receiving a new policy direction from Innovation Canada that emphasized broadband rates, the CRTC on Wednesday launched its proceeding to revisit the wholesale internet access framework to correct what it says are increasing prices for Canadians.

The commission is seeking updates from the public on aspects of the wholesale regime, including the state of competition, the importance and the future of the aggregated and disaggregated regime, measures to develop competition for retail internet services, and areas where retail regulation can protect consumer interests.

It is also temporarily forcing the large players to reduce their wholesale access prices by 10 per cent for some traffic services, which it said is in anticipation of a reduction in cost of those components of the network since the commission last reviewed the rates in 2021. The large telecoms must file new rates with those reductions by March 17.

“The Commission considers that market conditions associated with retail Internet services have not changed materially for the betterment of competition over the past few years,” the CRTC said in its order. “This has led to concerns that the current trends in the market will only increase the potential for incumbent carriers to exercise market power.”

The commission cited a June 2022 report from Innovation Canada showing prices for mid- and top-range internet plans in Canada are higher compared to international peers.

The CRTC will hold a public hearing on the matter, to be announced at a later date. In an interview with Cartt, CRTC chair Vicky Eatrides said the hearing is likely to come next year, considering the volume of information the regulator will need to process.

But a decision on third party access to last mile fibre will come sooner, as Eatrides clarified the CRTC will make a decision on that before the wholesale rate hearing.

Comments on the last mile fibre access are due on April 24. All other matters are due on June 22.

The review touches on not just the prices incumbent telecoms charge smaller ones for access to their wireline networks, but also whether those independent internet service providers should have access to the last mile fibre of the large telcos.

The Competitive Network Operators of Canada told Cartt.ca that the order is a “very positive move by the CRTC” and that the commission under new leadership “acknowledged what the industry has warned for some time: that the current wholesale structure was not allowing our members to provide competitive options to consumers and businesses.” And while CNOC said the 10 per cent reduction is a “step in the right direction,” it is only a portion of the wholesale prices its members pay.

Andy Kaplan-Myrth, TekSavvy’s vice president of regulatory and carrier affairs, told Cartt that the 10 per cent reduction in some services is a fraction of a fraction of its costs that it “does not have a particularly significant overall impact.”

Otherwise, Kaplan-Myrth said the order Wednesday is the CRTC understanding that “previous decisions have decimated the competitive market for internet services and led to higher prices for consumers. “While additional interim rate reductions are required to have a meaningful impact, we are pleased to see a proper focus and fast-track toward more competition and better prices.”

Third party internet service providers have complained that the lack of access to last mile fibre, which offers much faster speeds than older technology, have relegated those competitors as second-class in choice for Canadians increasingly taking up faster internet speeds in today’s digitally-focused society.

The CRTC on Wednesday acknowledged and reaffirmed that point and said it would prioritize that access “above all other” concerns. It is proposing that access to those facilities under the aggregated regime be granted on a temporary and expedited basis.

“The Commission is concerned that competitors, many of whom are currently losing subscribers, and the wholesale market as a whole, may suffer significant harm if it does not take action sooner,” the CRTC said about access to last mile fibre.

Under the current aggregated regime, a competitor cannot get mandatory access to last mile fibre. The idea spawned from a CRTC decision in 2015 that access to last mile fibre should be incentivized by having the competitors move over to the new disaggregated regime, which separates the leasing of the traffic transport network and the last mile.

The commission said Wednesday that the disaggregated regime has not panned out. In a separate order, the CRTC ruled that the regime that was to replace the aggregated system “has not fulfilled its mandate” and that demand for it “may be limited to a handful of dense urban areas where competitors had a large and established customer base.

“The Commission also considers that efforts to reconfigure disaggregated wholesale HSA services would be ineffective and only serve to further delay the realization of the objectives being pursued, namely competitive dynamics in the retail Internet service market that serve to ensure the achievement of the policy objectives,” the order said.

As a result, the CRTC said it is of the preliminary view that the aggregated regime should be mandated with no restrictions on access to last mile fibre and can exist alongside the disaggregated regime without being phased out. The commission is, thus, soliciting comment about the essentiality of the current aggregated regime to competition in the wholesale internet market.

The findings are in-line with the policy direction from Innovation Canada last month, which said both regimes could exist simultaneously. The CRTC, in fact, laid out that its order is aligned with that direction.

Independent service providers have complained for years about the financial difficulties of connecting to many more transport locations under the new disaggregated regime in Ontario and Quebec. While the CRTC said the regime will remain for those provinces, Wednesday’s preliminary review may provide some reprieve – for whichever independent is left.

It’s been nearly two years since the CRTC decided against adopting proposed lower rates it made in 2019, which it said was based on some costing errors. Since then, the independent telecoms have complained about an impending doom in the industry.

There has been a recent trend of larger telecoms purchasing smaller ones, including Ebox going to Bell, Distributel to Bell, VMedia to Videotron, and Start and Altima going to Telus. The CRTC also noted that competitors collectively lost nearly two per cent market share (10 per cent to just over 8 per cent) from 2019 to 2021.

In a recent filing to the CRTC, the Competitive Network Operators of Canada urged the commission to mandate last mile fibre access as a consequence of a problematic wholesale internet regime. The industry representative for independent telecoms was responding to an outstanding application by TekSavvy that is asking the commission to review whether wholesale agreements offered to certain competitors below the rates regulated by the CRTC are illegal.

On Wednesday, the commission separately denied CNOC’s application from January 2021 that requested the regulator give third party providers access to last mile fibre on a wholesale basis, citing the current proceeding.

The industry has been optimistic about the new-look commission, which added three new members since December. Since the installation of Eatrides in January, the CRTC has also released its long-awaited decision on pole access and a proceeding on network resiliency.

Eatrides said in the interview that the speed at which the commission has been releasing decisions and notices — which is also outlined in the policy direction from ISED — is part of the CRTC’s commitment to move quickly on addressing issues critical to Canadians.