Bell says it ‘competes in fair manner and follows all regulations’
By Ahmad Hathout
Videotron has filed two complaints to the Competition Bureau Tuesday alleging Bell is using anticompetitive pricing tactics to push competitors out of markets in which it is the dominant provider, according to the applications seen by Cartt.
In the first complaint already raised to the CRTC in March last year, the regional competitor alleges Bell is forcing Videotron’s Fibrenoire subsidiary, which provides fibre services to businesses, to take up long-term contracts to use its traffic transport fibre network or face higher monthly costs in areas where the telco is the dominant provider of such services.
Videotron says its business customers want to use the same service provider, but it can be prohibitively expensive for it to build the requisite networks in the areas in which Bell is dominant. That circumstance in part forces Videotron to rely on Bell’s fibre transport to reach its customers, which puts the cableco at the whim of Bell’s long contracts or high monthly fees, making it harder for it to compete against the giant, it said.
The alternative is Bell being the only player in those areas, Videotron warns.
“Bell’s hold on the fiber transport network in Canada is so significant that competing TSPs are forced to accept the terms that Bell imposes on them for leasing passage on its network,” Videotron says in its application to the Competition Bureau, translated from French. “When faced with opposition from Videotron, Bell threatened to disconnect its customers. Such anti-competitive actions are only possible because of Bell’s almost total commercial dominance.
“Given the high barriers to entry, the lack of substitutes, the maturity of the market and Bell’s already very high market share, the latter’s market power is only increasing over the years,” it added. “Unless the Competition Bureau intervenes quickly to put an end to Bell’s anti-competitive actions, it is expected that the pace at which the latter continues its abusive practices will increase.”
In the second complaint that has already been raised in front of the CRTC, Videotron argues that Bell is squeezing competitors out of retail markets by providing its fibre internet services directly to subscribers far below the price it charges competitors for the same services in certain markets it allegedly dominates – specifically in Quebec and Ontario, where Videotron has services.
For example, Videotron alleges Bell has regularly offered Quebec customers certain unlimited fibre internet service packages for $60 per month while charging wholesale competitors $121 for the same service under the tariffed rate. But those prices can be more than double in other Canadian cities, Videotron alleges.
The downstream impact of the asymmetry in wholesale and prices is illustrated as such: For third parties to compete, they must undercut the internet service prices of the incumbent, which means taking a loss per customer, according to Videotron.
Videotron claims a recent experience with Bell in the Adelaide area of Toronto where its wholesale subsidiary VMedia purchased gigabit services from Bell at the tariffed rate of $121 per month while Bell offered it to customers at $50. VMedia had to turn around and sell the service at $45, Videotron claims, meaning a monthly net loss of $92 per customer and more than $1,100 per customer on an annual basis.
Part of the problem, Videotron says, is that Bell regularly files to the CRTC these higher wholesale rates in the form of tariffs that are supposed to reflect its costs, but the CRTC has said it is hard to know the true operating costs of the network.
“Ultimately, either Bell lies to the CRTC about its costs, or it systematically sells at a loss in markets where it wants to oust the competition,” Videotron says in its application. “Both hypotheses constitute an artificial compression of its margins intended to harm (or oust) competition.
“In both cases, this is clearly a practice of anti-competitive actions on the part of Bell,” the application added.
Videotron cites what the Competition Bureau has called “margin squeeze,” which the watchdog said can be exercised in three ways: very high wholesale rates, very low retail rates, or a combination of the two.
The end result, Videotron argues, is a market with a dwindling supply of competitors and, therefore, consumer choice: it, like other competitors, have already pointed to the increasing number of third-party acquisitions by the giants as a result of higher wholesale rates.
“This strategy orchestrated by Bell has two main objectives: (i) maintain supra-competitive margins in regions where competition is weak and (ii) impose maximum pressure on its competitors in regions where competition could be stronger, so as to be able to raise prices as it wishes, when said potential competition weakens or disappears, which is inevitable,” Videotron’s application alleges.
Bell said the following in a statement to Cartt on Thursday morning: “While we have not been officially notified of these complaints, Bell competes in fair manner and follows all regulations. As always, we will collaborate with the Competition Bureau.”
Videotron has already asked the CRTC to bring down the cost to lease the last mile fibre of the incumbents under the disaggregated regime, which mandates access to those facilities in exchange for competitors getting their own traffic transport network.
The CRTC in November temporarily mandated access to a bundle of the transport and last mile fibre facilities of Bell and Telus in Ontario and Quebec until it makes a determination on the revamped wholesale internet framework.
Bell challenged the order to the Federal Court of Appeal, which said it will hear the arguments but won’t immediately suspend the decision. Videotron claims the fact the telco challenged the decision shows it is concerned about competition.
Some executives from the incumbents argued before the commission during the wholesale internet hearing earlier this month that these competitors can add many more services on top of the capacity they purchase, so there are revenue opportunities outside of just internet services.
But TekSavvy executives argued during the same hearing that the wholesale price doesn’t reflect all the costs to run the actual business: technical, customer and marketing support – making the cost of doing business as a competitor even more difficult than the discrepancy between the wholesale and retail prices suggests.
Pierre Karl Peladeau, CEO of Videotron parent Quebecor, who raised these concerns before the CRTC at the wholesale internet hearing, said last week that the corporation plans to bundle Freedom mobile plans with the home internet plans of VMedia – bundling being a key strategy for success, he said.
He noted, however, that the only uncertainty is whether or not the network owners from which VMedia leases capacity will make life difficult for it.
