CRTC Enforces Wholesale Access to High-Speed Networks

Canada's larger operators have been responding to the CRTC's recent decision to require them to provide third-party ISPs the same speeds enjoyed by their retail customers. The CRTC also allowed the larger telecoms and cable TV operators to charge third-party ISPs a 10% mark-up over their costs to access higher-speed options. However, the regulator resisted some calls from alternative operators to force the larger telecoms operators and cable TV operators to reconfigure their networks to enable third parties to provide differentiated services over these networks. The CRTC indicates that should it have acceded to these requests, it would have disincentivised the larger operators from investment in higher speed networks.

Bell Canada and Telus have contradicted the CRTC's claim that its recent decision would not deter investment in next-generation networks (NGN). Reuters cites Bell Canada and Telus spokespeople as saying, respectively, that the 10% mark-up was insufficient to guarantee returns on investment and that "forced unbundling" would put a chill on investment at a time when government is seeking to promote investment in broadband networks. MTS Allstream took a more positive view of the ruling, although as a smaller broadband provider it arguably has less to lose than its incumbent rivals. What the decision does do is make it easier for alternative operators to access cable-modem-based networks and therefore, addresses, at least in part, the uneven way the fixed and cable incumbents have been regulated. The CRTC raised the prospect of unravelling these rules once alternatives such as wireless or satellite "become more acceptable as substitutes".

Outlook and Implications

• Issue to Rumble On: Given the adverse reaction from some incumbents and alternative operators to the CRTC's decision, this is unlikely to be the last heard on this issue (see Canada: 2 June 2010: CRTC Looks Again at Wholesale Market for Fibre Networks). The CRTC has an most impossible job in striking a balance between the need to encourage investment and to stimulate competition, but there could be a slowdown in some of the existing NGN plans of telcos and cable TV operators (see Canada: 8 July 2009: Bell Aliant Partners with New Brunswick Cities for FTTH and Canada: 9 February 2010: Bell Aliant Details 2010 Fibre Deployment Plans).
• Competition Does Need a Boost: The CRTC will feel that its recent annual report will vindicate its decision. In 2009, resellers, utility telcos, and other carriers controlled only 6% of residential fixed internet access revenues and 25% of business fixed internet access revenues. Both incumbent fixed and cable TV operators are moving towards the argument that mobile (3G and HPSA-based) technologies are a genuine alternative for fixed internet and therefore the CRTC underestimates the state of competition in the internet segment. The CRTC, however, unlike the U.S. FCC, currently does not view wireless as a substitute (see United States: 3 June 2010: AT&T Drops Unlimited Data Tariffs As FCC Sees Wireless Competing with Wired).