OTTAWA – Telus executives told the CRTC today that it might resort to becoming a reseller of DOCSIS 3.0 high-speed cable services if the Commission changes the value proposition of the company’s network investments by giving competitors access to its high-speed next-generation services.
“If you make those margins large enough, I will look at opportunities to use cable DOCSIS versus build options, and then choose the most economical path, if that serves the economic interests of our shareholders,” Eros Spadotto, executive vice-president of technology strategy at Telus told commissioners on day two of the hearing looking at mandating certain wholesale high-speed access services.
Spadotto said the company weighs its network investments based on the potential return resulting from those. He notes Telus is investing in next-gen networks to roll out IPTV, but is also reselling satellite TV service where IPTV doesn’t make economic sense.
Michael Hennessy, senior VP of regulatory affairs, added that if the quest for more Internet competition is driven by regulation, it could create “significant and lasting” negative impacts on the constructions of new networks and the provision of high bandwidth services and applications to Canadians.
“This arises because wholesale arbitrage changes the economics of each separate facilities-based provider and that affects the build or lease decisions carriers make before allocating capital,” he said.
CRTC commissioner and vice-chair of telecommunications Len Katz picked up on the cable resale statement in his line of questioning, asking whether this is a viable alternative for Telus.
Hennessy noted that while there may be some technical difficulties, reselling cable DOCSIS could be well worth it. Just as when rolling out fibre for IPTV no longer makes economic sense, Telus will be to offer a satellite TV option, the same case can be made for leasing cable. “If you’re playing around with creating margins,” he said, “it may equally make sense that while there are technological difficulties with marrying our engineering group with the DOCSIS type thinking that the margins are so attractive that it’s a lot better than building.”
Commissioner Elizabeth Duncan wondered why Telus’ investment decisions will be affected by a CRTC decision to mandate access to next-generation facilities when the cable companies, as well as SaskTel and MTS Allstream say it won’t.
“I think for the cable companies in particular if you unbundle their service they can still offer TV (via RF). We can’t (as an IP television provider). So it’s as much in their interests since you’re already unbundling them to say that they’re going to continue to invest anyways because they know that screws us. I would say it’s as probably as simple as that,” Hennessy said in response. “The nice thing about SaskTel [is] they don’t report to shareholders who have invested their own capital. They report to a government. They don’t pay taxes. They have different economics and they have incredible loyalty in the province.”
Stated Duncan: “Your position is that Telus would be better off not investing in fibre to the home if our decision is to mandate access to these services.”
“We will definitely turn down our investment,” said Spadotto, noting this comes in the form of decreased network expansion in smaller centres across the province or even refusing to invest in parts of major urban centres.
“We would modify our decisions,” said Spadotto, noting that if the regulations require mandated access, then investments will be decreased in certain markets.
