In recent weeks, Telus started offering 'PureFibre' internet over Bell’s network in Ontario and Quebec, bundled with its mobile phone services.Frank Gunn/The Canadian Press
The federal cabinet has directed Canada’s telecom regulator to reconsider whether the country’s three largest carriers should be allowed to resell internet services over each other’s networks at regulated prices. The move could alter a controversial part of the wholesale regime aimed at improving telecom competition.
The cabinet’s directive late last week spurred a number of telecoms and industry groups to weigh in on the issue, prompting a rare near-consensus in an industry that is perpetually in disagreement about the best way to promote lasting competition in Canada.
Cabinet’s concern is that allowing the “Big Three” carriers – Rogers Communications Inc. RCI-B-T, BCE Inc.’s BCE-T Bell and Telus Corp. T-T – to access each other’s networks at mandated rates could allow those players to use their market dominance to steamroll local competitors.
In a statement, Industry Minister François-Philippe Champagne said cabinet had concerns about “the viability of small and regional internet service providers that provide alternatives” and about maintaining investments in internet infrastructure.
Cabinet has given the Canadian Radio-television and Telecommunications Commission (CRTC) 90 days to review this aspect of the interim wholesale regime, which requires Bell, Telus and SaskTel to grant competitors access to their fibre-optic internet networks at mandated prices.
Currently, under the interim fibre wholesale regime, the CRTC allows the Big Three and their subsidiaries to resell fibre internet outside their networks. It said in August that the incumbents would be “new entrants” outside their markets, and cited the Competition Bureau’s view that the benefits of allowing them to do so would “likely outweigh the risks.”
However, independent internet service providers, as well as two of the three large carriers, have argued that allowing the incumbents access at mandatory rates is contrary to the regulator’s goals of supporting competition. Telus has taken a different view.
Among those who have submitted applications to the CRTC in recent days are Cogeco Inc. CCA-T, Bragg Communications Inc.’s Eastlink and the Competitive Network Operators of Canada (CNOC), an industry association representing independent internet service providers.
In a joint submission, they argued that the regulator had failed to properly consider the long-term impact of bundling – or selling multiple services as a discounted package – by the Big Three incumbents. Many regional competitors either could not offer mobile wireless at all, or in a limited capacity, the group said, and therefore could be undercut.
“While this may create short-term benefits for consumers, it will, over the longer term, pose an existential risk to the regional facilities-based and service-based competitors and ultimately result in even more consolidation in the internet market,” the group wrote in its submission.
Both Bell and Rogers have also asked the CRTC to make all three large carriers ineligible for access to each other’s networks at mandated rates.
Rogers spokesperson Zac Carreiro directed The Globe and Mail to the company’s Nov 12. submission to the CRTC, in which it also asked the regulator to make its hybrid fibre coaxial cable ineligible for mandated access.
In its submission, Rogers says that it would be disproportionately disadvantaged relative to Bell and Telus because it has invested in competing wireline access facilities in both the East and West of Canada, therefore ineligible in more places.
Bell spokesperson Luc Levasseur referred to the company’s initial submissions to cabinet, and said it agrees with Cogeco, Eastlink and CNOC’s application “that allowing the three incumbents to resell on each other’s networks is bad for competition and network investment.”
Historically, the Big Three have positioned themselves against wholesale regimes of any kind, arguing that allowing competitors on their networks would mean unfairly bearing the risks and high costs of building infrastructure, and discourage competitors from creating their own facilities, instead encouraging them to become resellers.
But Telus has broken from this pattern. In recent weeks, it started offering “PureFibre” internet over Bell’s network in Ontario and Quebec, bundled with its mobile phone services.
Telus spokesperson Richard Gilhooley referred The Globe to the company’s April submission to the CRTC, in which it argued that Telus is “very much a new entrant competitor” outside its wireline network in Western Canada, and that attempts by competitors to limit certain providers from accessing the mandated rates were “an obvious attempt to shield themselves from real competition.”
Rogers and Bell may eventually offer resale services outside their home markets as well. As the CRTC’s decision initially only applied to Ontario and Quebec (Bell’s territory), and was only later expanded to Alberta and British Columbia (Telus’s territory), Telus had a head start.
The two providers can start accessing Telus’s network starting in February, if they choose, though Telus has requested that the CRTC extend that start date to June.