OTTAWA – Comments filed on the CRTC’s reconsideration of speed matching strike a familiar refrain: Would-be competitors say Canadians will suffer if the CRTC doesn’t mandate speed matching and access to higher-speed local access facilities for them, while incumbent telcos tell the Commission that doing so will threaten future network investments.
Telcos were already required under CRTC regulations to provide speed matching (also referred to as service parity) to competitors over both legacy copper facilities as well as their faster fibre, or next-generation networks (NGNs). But the implementation of the rule was put on hold following appeals to the Governor-in-Council (GIC) from Bell Canada and Telus Corp. Cabinet subsequently ordered the Commission to reconsider its previous ruling through a more fulsome review of related matters not considered the first time around.
The battle has its roots in the CRTC’s essential facilities decision and revolves around whether incumbent telcos should give competitors access to their advanced fibre facilities at cost-based rates. To implement speed matching for example, the incumbent telcos would have to give competitors access to fibre-based Internet services.
Bell and Telus argue that NGN’s are new services and therefore aren’t covered under the essential services decision. Besides, if access to NGNs is mandated at cost-based rates, they will have to reconsider their fibre rollout plans, they say.
“The business case for investing in NGN facilities is founded on the potential retail revenues from the companies ‘winning the broadband home’. Being required through CRTC rulings to cede the use of those facilities to competitors, at wholesale rates, will cause a substantial review by the companies of their investment programs,” Bell states in its submission.
In its comments, Telus acknowledges that it will continue to invest, but adds riskier investments will be shelved.
“Telus does not have to invest where returns are less or made negative by artificial arbitrage. It will be forced to invest in only those markets and services where the prospects for reward are commensurate with the risk,” the company tells the commission. “In fact, Telus guarantees that the greater the margin reduction forced by regulation, the less extensive will be its rollout in smaller communities.”
This is a veiled threat, according to competitors. They say Bell and Telus will continue to invest so they can effectively compete on their home turf against cable companies such as Rogers and Shaw.
Describing the telco arguments as “simply not credible,” Distributel Communications Ltd. points to evidence demonstrating that Bell and Telus continued to invest in fibre facilities despite the uncertainty surrounding the speed matching regulation. For instance, Bell had capital investments, including its fibre to the node (FTTN) program, of nearly $2.4 billion in 2009 and built out its FTTN network to 500,000 more homes last year.
“If Bell were to cease to invest in the 14 cities named in Bell’s petition to the GIC, then Bell would steadily lose ground to its cable competitor in those locations. A refusal to invest would be equivalent to handing the market over to the competition,” states Distributel.
Competitors also say that access to incumbent fibre facilities will allow them to proceed with measured investments in their own infrastructure contrary to telco suggestions that this won’t happen.
TekSavvy Solutions Inc. argues the “stepping stone” approach would allow smaller competitors to earn enough revenue and a customer base to then invest in rolling out their own network. The company points to the success in European markets that have enabled this kind of growth model through effective wholesale regulation.
The argument that NGNs constitute new services doesn’t fly with competitors either. Distributel says it’s “false” to suggest that deploying fibre in the telco network is new or revolutionary. It points to previous activities by the now defunct Stentor in the 1990s as evidence that fibre deployment has been ongoing and should be considered evolutionary.
“Since those days in the early 1990s there has been an ongoing and continuous upgrading of the ILECs’ networks, including both the installation of fibre optic cable further out into the network and the introduction of more advanced transmission and switching equipment as it becomes available,” writes Distributel. “The process of upgrading the ILECs networks has been evolutionary not revolutionary. Fibre optic cable has been installed incrementally and transmission speeds have increased gradually over time. There has been no bright line in time or technology between ‘yesterday’s’ network and the ‘next generation’.”
Limiting competitor access to copper facilities would be devastating, according to Primus Telecommunications Canada Inc. “The appropriate application of the essential services framework cannot stop where fibre begins, or competition will be relegated to the dust heap,” the company writes in its submission.
The commission will hold an oral hearing on the speed matching matter on May 31, 2010 and is expected to rule on the issue by September 1, 2010.
The speed matching review is part of a broader consultation the CRTC launched last May. Telecom Notice of Consultation 2009-261 is considering the feasibility of giving competitors access to incumbent phone companies’ central office-based ADSL (CO-ADSL) services and head-end-type wholesale access to cable networks. A public hearing on these two matters is scheduled for November 15, 2010.
