Telecom Regulatory Policy CRTC 2024-180 on wholesale FTTP access
Competitors' wholesale access to incumbent telephone companies' fibre-to-the-premises networks
In this press release from the CRTC yesterday they announced their policy on wholesale FTTP access. Here is a link to a CBC news video covering the decision and coverage by the Globe and Mail.
This decision means non-dominant carriers and facilities-based regional ISPs will now be able to sell fibre optic-based Internet services across Canada over incumbent telephone companies’ FTTP networks. Cable companies such as Rogers, Cogeco, and Videotron were exempted from the decision based on the fact cablecos have very small FTTP footprints at this point. Cablecos have been steadily overbuilding their coax networks with fibre in the core and distribution networks, but the exemption really gives them an incentive to accelerate their last-mile coax replacement while completely protected from wholesale competition. This, of course, is the idea behind the CRTC decision, however, it will also allow the incumbent cablecos increase their market dominance which is already far too strong which raises the barriers to entry for smaller competitors.
Non-facilities-based competitors to the big 3 will not have access to their FTTP networks as the CRTC remains tied to failed concept of facilities-based competition as the best way for telecoms to compete. The regime is based on the idea that competitors should build fibre cable facilities to the same civic addresses . This only happens in the most densely populated urban areas because the cost to build per premises is lower than in small urban and rural communities where the distances between address is longer and the number of addresses is fewer. However, on its face, the building of duplicative infrastructure makes no economic sense in the first place, any more than it would be to build duplicative water, roads or electricity systems. With respect to this decision, the requirement that competitors must be facilities-based will severely limit the number of potential competitors needed to significantly lower rates consumers pay for Internet when competition is more robust. We see the same marginal impact on prices consumers pay in the mobile wireless MVNO market, where only facilities-based wireless providers are permitted to compete by the CRTC.
In addition, the CRTC announced third-party access to FTTP of telephone companies only applies to their existing fibre cable plant, but all new builds will be exempt from the wholesale access regime for 5-years. Like the cableco exemption, this is to encourage telcos to build more fibre to more of their residential subscribers while giving them enough time to achieve a return on investment before opening it up to competitors. It’s not clear why a 5-year period was chosen and the exemption will give the biggest telecom providers who have enjoyed a distinct competition advantage on FTTP for over 20-years more rope to hang their competitors out to dry.
The CRTC did not announce new wholesale residential rates and won't till the end of the year and they won’t come into effect until February 2025. The interim wholesale rates currently in place are too high compared to incumbents’ retail rates making it difficult for competitors to be sustainable. In some cases, during the interim FTTP period, Bell and Telus flanker brands were found to be offering retail rates below the wholesale rates available to third-party competitors. Moreover, the CRTC’s history of rate setting has been generally favourable towards the incumbents. So, if the permanent rate decision leaves the wholesale rates too high and/or flanker brands are permitted to offer retail rates below their parent companies’ wholesale rates, then little or no competition will emerge over FTTP. In the medium to long term, more competitors to the big 3 will fail or be acquired by them if the Competition Bureau doesn’t intervene, so the net result will be a reduction in competition, not an increase. It’s not specified if or how the decision will be applied to commercial subscribers in terms of access or rates, many or most of whom are already connected by FTTP.
Another potential disaster for competitors is the big 3 are also permitted wholesale access into each other’s networks. This includes their flanker brands. Given the long history of the large incumbents acting in concert or given how they frequently use their flanker brands in predatory pricing schemes to knock out smaller competitors, this aspect of the decision is likely to undermine the viability of FTTP competitors even if the CRTC does get the wholesale pricing right.
Lastly, this decision will no doubt be followed by appeals to Privy Council, Minister of ISED, and the courts by Bell and Telus as they did successfully in the original 2021 wholesale FTTP access decision. In that case, incumbents, led by BCE, successfully created delays through the CRTC review and intervention process, and when that failed, appealed the case to the Privy Council (Federal Cabinet), and when that failed, took the case to the Federal Court of Appeals, and when that failed, went to the Minister of ISED who then asked the CRTC to review their original decision, whereby the CRTC reversed their decision, returning to a 2016 decision, where FTTP access by third-parties was not permitted. This process lasted 3-years and during the period a dozen small ISPs went out of business or were acquired by the incumbents because the ISPs were only permitted to compete over incumbent copper facilities which were being rapidly decommissioned by the incumbents in favour of new fibre facilities.
More to come as the wrangling continues.