Is the CRTC sending inconsistent messages?
In my blog post last night, I indicated that the CRTC’s determinations to mandate wholesale access to next generation fibre networks took Bell, and likely the other major wireline carriers, by surprise.
Let’s look at a chronology.
The CRTC had open proceedings examining the wholesale regimes for each of wireless and wireline service in 2015, processes that began in 2013 [see: Wireless notices 2013-685 and 2014-76; and, Wireline notice 2013-551].
On May 5, 2015, the CRTC issued its decision on the wireless file in its Telecom Regulatory Policy CRTC 2015-177. Among the issues being examined was whether the CRTC should mandate access to facilities-based wireless networks by MVNOs – Mobile Virtual Network Operators. Many similar arguments regarding the impact on investment were raised by the wireless carriers as we heard in respect of wireline facilities. It was a key concern of the CRTC on the wireless side, and the following statement is found in the Commission’s summary at the top of the decision:
The Commission’s determinations in this decision will facilitate sustainable competition that provides benefits to Canadians, such as reasonable prices and innovative services, as well as continued innovation and investment in high-quality mobile wireless networks.
But the CRTC reached a very different conclusion on mandated resale on the wireless side from how it ruled for fibre. Despite finding “the barriers to entry into the retail market are very high” and the difficulty of “wireless service providers to obtain wholesale mobile wireless services from other wireless carriers, in particular the national wireless carriers, at reasonable rates, terms, and conditions”, the CRTC rejected mandating resale for wireless.
- Investment in wireless network infrastructure by wireless carriers is important to ensure that Canadians have access to mobile wireless networks and services of high quality in all regions of Canada. The new entrants have made and are planning to make significant investments in spectrum and their wireless networks. The Commission considers that mandating wholesale MVNO access at this time would significantly undermine these investments, particularly outside urban core areas.
- Accordingly, if the Commission were to mandate GSM-based wholesale MVNO access provided by the national wireless carriers, this permanent network access would likely discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.
That was in early May. The wireline decision was still outstanding, but in mid-June, Bell and TELUS made multi-billion dollar announcements for major fibre-to-the-home (FTTH) investments in their largest cities. At the time, many observers wondered if the telephone companies were anticipating a similar approach by the CRTC for wireline.
In July, the CRTC finally released its Telecom Regulatory Policy CRTC 2015-326 with the wireline wholesale policy. It acknowledged that the impact on investment was a consideration in the development of its policy [see paragraph 51]:
Innovation and investment – mandating or not mandating the facility or wholesale service could affect the level of innovation/investment in advanced or emerging networks or services for incumbents, competitors, or both, or impact the associated level of adoption of advanced or emerging services by users of telecommunications services.
The telephone companies warned that mandating access to FTTH access facilities would impact investment decisions, as acknowledged by the CRTC in the decision:
- All of the ILECs raised concerns regarding the impact that mandating the provision of FTTP access facilities could have on their investment decisions. For example, the Bell companies argued that the business case for investment in FTTP access facilities was challenging, and would only worsen if the Commission proceeded to mandate the provision of wholesale HSA services over these facilities. Bell Aliant cited its FTTP deployment program in Ontario, which it scaled back in light of unforeseen costs, to demonstrate the fragility of the business case. Moreover, Bell Aliant argued that mandating the provision of FTTP access facilities may reduce or delay future technology upgrades in areas currently served by FTTP, thereby broadly harming consumers.
- Similarly, TCC argued that the mandated provision of FTTP access facilities would result in less fibre deployment, and that this would occur not just in lower-density areas, where the already-challenging business case will be eliminated, but more broadly throughout Canada. TCC indicated that if the Commission is not prepared to reject the mandated provision of FTTP access facilities, the negative effects of this regime on investment in next-generation broadband facilities should be attenuated through a moratorium on mandated access to Internet access services at higher speeds.
Similar concerns, but different conclusions. In the case of wireline wholesale, the CRTC shrugged off the impact on investment with a simple statement at the end of a somewhat unrelated paragraph dealing with implementation: “any investment risks associated with mandating the provision of wholesale HSA services over FTTP access facilities can be attenuated by providing the incumbent carriers with a reasonable rate of return.”
Under the Policy Direction, the CRTC is required to take into account the principles of technological and competitive neutrality.
At the bottom of each of the CRTC decisions, there is a section dealing with whether the orders are consistent with the Policy Direction. In particular, the wireline policy says:
- Consistent with subparagraph 1(b)(iv) of the Policy Direction, the Commission’s determinations, as they relate to network interconnection arrangements or regimes for access to networks, are technologically and competitively neutral and do not artificially favour either Canadian carriers or resellers. In this regard, the Commission notes that its determinations regarding disaggregated wholesale HSA services apply to all incumbent carriers, and require such services to be provided over any underlying technology, including FTTP access facilities.
The wireless policy has a similar paragraph:
- Consistent with subparagraph 1(b)(iv) of the Policy Direction, the Commission considers that its determinations, as they relate to network interconnection arrangements or regimes for access to networks, are technologically and competitively neutral and do not artificially favour either Canadian carriers or resellers.
Perhaps considered independently, the determinations technologically neutral, but are the two policies consistent when considered together? Both proceedings were open at the same time. Did the CRTC ensure that the conclusions of both wireless and wireline wholesale proceedings would be technologically neutral?