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Telecom at the CRTC

January 25, 2017

In a forborne environment, what is the role of the CRTC in telecom?

That is a question some are asking in the wake of the December 11 announcement by the Minister to propose a variance in the rules for local telecom service forbearance.

We have already seen that there will be a few challenges operationalizing the intent of the variance. As I wrote last Thursday, it is not yet clear what the criteria will be for business services. For the next few years, the CRTC will assess applications against these factors.

We suspect that the proceeding to assess wholesale essential services, launched in November, will be even more important in a forborne environment, in order to ensure sustainable competition. As described earlier in the week, the recognition of the importance of the wholesale regime found its way into the modifications made in the final version of the Minister’s policy direction this past Monday. Yesterday, the issue of billing and collection rates is an example of the types of concerns some industry players will have in the determination of which elements are in fact essential.

Access to essential facilities, at a fair price, even in an environment with facilities-based competitors, will ensure that resellers and new entrants can continue to discipline the marketplace, maintaining incentives for innovation and price competition for consumers. It remains the responsibility of the CRTC to regulate the wholesale access regime.

Quebecor signals cellular ambitions

January 25, 2017
In the wake of Industry Minister Bernier’s announcement to overturn the CRTC’s local forbearance decision, Quebecor issued a statement that calls for further moves by the government to liberalize other communications sectors.

Pierre Karl Peladeau said:

we encourage the Government to follow its own logic by proceeding with the deregulation of the entire cable and broadcasting sectors as quickly as possible because, in our opinion, this could permit consumers to benefit from reduced cable bills.

The issue of regulatory symmetry for cable companies and telcos is familiar. At last June’s Canadian Telecom Summit, Robert Depatie spoke of the complex regulations that apply to the cable industry.

Quebecor Media also appears to be asking for the Government to put in place incentives for new entrants to offer mobile services. It says that it wants the phone companies to use their wide profit cellular margins to offer Canadians the latest technology and to lower prices for mobile wireless services.

Presently Canadians pay 60% more than Americans for mobile telephone service and do not have access to the same advanced technology available everywhere else in the world. This is unacceptable and can only be explained by the existence of a Canadian oligopoly that controls this business sector.

Once again, Videotron is proving that it is prepared to be a disruptive force in the converged telecom sector.

Robert Depatie, the president and CEO of Videotron, will be speaking at The Canadian Telecom Summit in June.

Is wireline telephony dying?

November 13, 2006
Two and a half years ago, Om Malik spoke about a study from Probe Group that spoke of the impending death of the fixed line business model – to be replaced by wireless. As it turns out, the research group that produced the warning disappeared well before the wireline business did.

Is wireline telephony going away? The attraction of traditional landlines is in decline. Fax usage is diminishing. Second lines for dial-up internet are pretty much historical artifacts. So, at least some of the decline in number of residential lines in the recent past may be attributed to changes in adoption of second lines.

On the business side, VoIP-based systems change the way we need to count enterprise lines. Business PBXs may use numbers without corresponding lines or ‘Network Access Services’.

Still, wireless substitution is a reality that needs to recognized. A new report came out last week warning the cable companies of the same troubles that Probe forecasted in 2004: the risk of going after a share of a dying business. On the other hand, a refutation of the report says that the fixed line market is so big that it is still attractive for cable companies. Which is it?

It is worthwhile looking at the Canadian cable approach – cable companies with both wireless and wireline offerings. Among such companies, Rogers is best positioned operating with its own wireless facilities, the largest national mobile services provider, bundling with its cable-based services in Ontario and parts of Atlantic Canada, and telephony wireline in the rest of Canada.

With a different angle, Videotron announced Duophone, offering unlimited calling between Videotron wireless residential cable telephone subscribers.

With nearly two thirds of the wireless market tied up in the hands of incumbent telephone companies, there may have been conflicting incentives for the mobile operators to aggressively target wireline substitution.

Videotron appears prepared to disrupt the stability of the marketplace. Their approach is non-traditional.

Among questions to ask: will Videotron bid for spectrum in the next wireless auction?

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Essential telecom services

January 25, 2017

The CRTC has issued a Public Notice (PN 2006-14) to examine the regulatory framework for wholesale services and definition of essential service.

This proceeding will be significant and it includes live hearings scheduled to be held in Gatineau in October 2007. Yes, a year from now. Following the hearings, there will be further exchange of arguments and reply, meaning that the file won’t close until January 2008. A decision will be rendered within 180 days.

The timing should be perfect for The 2008 Canadian Telecom Summit.

This is a major regulatory proceeding. Among the more more significant issues in looking at relaxing regulation of retail services is whether there is still a need to regulate wholesale services. If so, what are the essential wholesale services that should be regulated, as contrasted with those that are provided according to what the market will bear.

As the CRTC notes in the Public Notice:

The Commission notes that to date it has not conducted a comprehensive framework proceeding with respect to wholesale services and that, as noted above, its current regulatory regime for wholesale services evolved on an incremental basis. … The Commission, therefore, considers there is a need to conduct a comprehensive proceeding to review the regulatory framework for wholesale services, including, in particular, a review of the definition of essential service and the associated pricing principles.

…

The Commission notes … that the complexity of the interrelationships between several of the wholesale services means that to deal with them in isolation could create unforeseen problems.

The Commission’s conclusion … is that any limitation of scope in the interests of time would ultimately create a longer overall timeline as it would be necessary to conduct several significant lengthy related proceedings in sequence.

[PN 2006-14, p.15-21]
In other words, the CRTC recognizes that this is creating an 18 month process, but it wants to deal with this issue comprehensively, given the fundamental importance to the overall regulatory framework.

The report of the Telecom Policy Review panel looked at the issue of wholesale services and the CRTC’s public notice appears to be advancing in a manner consistent with a number of the TPR recommendations. For example, recommendation 3-19 states:

The regulatory framework should continue to require owners of essential wholesale facilities to make them available to competitors at regulated wholesale rates. Regulatory requirements to provide non-essential wholesale services or facilities should be phased out in order to provide increased incentives for innovation, investment and more widespread construction of competing network facilities.

The TPR report also calls for

A working group of CRTC and Competition Bureau members should be established as soon as possible to develop recommendations to the CRTC on the definition of essential facilities and its application to today’s telecommunications networks.

The CRTC’s public notice recognizes the draft Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry, issued by the Competition Bureau in September. This type of cooperation with the Bureau is consistent with TPR panel recommendations for joint activity on wholesale services.

Key to relaxing the regulation of retail services is for us to get the regulation of wholesale services right. This Public Notice will set the tone for the future of competition in the telecom industry.

Innoculation against telco IP-TV

January 25, 2017

Effective today, Videotron has announced more High Definition programming, bringing its total to 20 HD channels, many of them available with no monthly charge.

We have written before about the power of HD as a means to confound telco IP-TV plans. For the near future, homes with multiple HD TV sets will find IP-TV to be incapable of providing sufficient capacity to feed HD broadcast programming to more than one receiver. The more channels that are available in HD, the more likely a home will be to demand more than one HD feed.

In the meantime, Videotron and other cable companies are locking-in subscribers with sales of set-top boxes and personal video recorders that serve as disincentives for subscribers to switch to IP-TV. Each time an analog cable subscriber converts to digital represents an even more expensive acquisition for telco IP-TV service. A subscriber that has just paid $300-$600 for a cable set-top box is going to be less likely to switch service providers.

When will we see more than MTS with telco HDTV service? We’ll have a look at MTS financials later today.

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