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For more than two decades Telus has argued that resale is counterintuitive in a facilities-based regulatory regime. The reason for this is obvious. If a company like Telus builds facilities to serve geographies and customers broadly as a business, then forcing it to resell those facilities to competitors who don't will necessarily discourage Telus from building more facilities to serve certain geographies and customers in the future. The logic is as valid today as it has been for the last 20 or more years.
That has been Telus' steadfast position at least, until now. What has happened that would change Telus' fundamental position? The regulatory Calvinball that has come to be practiced by ISED and the CRTC for one. For Telus' part, because there are no longer principles or norms in Calvinball, it has done what any self respecting company would do and that is to act expediently. In this case, acting expediently means embracing the resale of Bell's and other incumbent competitors' fibre and hybrid fibre coaxial networks in Ontario and Quebec at the CRTC's invitation because it is in Telus' self interest to do so. While it might work nicely for Telus, it is a terrible idea for consumers, smaller independent ISPs for whom the wholesale regime is designed and any other company who builds their own facilities to serve Canadians.
Neither of the "regulators" considered that this would serve to hasten the predicaments of all the small independent reseller competitors and seriously undermine the efforts by regional competitors like Eastlink, Videotron and Cogeco to launch new competing service bundles or, more problematically undermine any incentive Telus has to invest in expanding its services outside of its legacy operating areas. Of course, I would guess that Telus realized this as an opportunity and to its credit it raced to take advantage of the latest own goal by their regulatory overlords. Telus would resell its major competitors' fibre networks in Ontario and Quebec without any fear of retaliation. Doing so would assist in lowering its capital expenditures and would effectively hamstring its competitors. That is how Calvinball works.
I identified the Telus cause and effect in a post last February. When the CRTC limited its temporary unbundled fibre mandate to Ontario and Quebec, it exposed the small ISPs that operate in those provinces, to another multiservice competitor who could access the mandated rates imperilling the very future of those independent competitors. It invited even more competition into the most competitive areas of the country and unwittingly it set the conditions for significantly reducing or eliminating network expansion by incumbents or any other provider whose business plan was predicated on network investment rather than resale. While it wasn't in the plan of either ISED or its proxy the CRTC, it was the effect. Realizing the significant consequences of its error, the Governor-in-Council issued an Order to the CRTC to reconsider its original decision which the CRTC duly set in process two weeks later.
That brings us to today where the positions of the various parties have been uploaded to the CRTC's website for all to see. Virtually everyone agrees except for Telus, that allowing incumbents to resell each others' networks is a very bad idea and more particularly would ultimately harm competitors and consumers. It would also would reduce the investment incentives of providers like Telus because they become resellers instead. As I wrote in February:
I do not agree with the proposition that the big three incumbent network providers should be encouraged or permitted to resell their primary competitors' networks.
...the greatest benefit of longstanding Government and CRTC policy favouring facilities-based competition has been the near ubiquitous building of competing physical networks by the big three carriers. It has delivered choice, lower prices, innovation and rivalry between them. That's like winning the trifecta in a race for the best performing public policy. The CRTC should double down on it.
...Telus' proposal could imperil the prospects of smaller providers who are or want to invest in building competing networks in the East and the West and I thought both Cogeco and Videotron did a very good job of highlighting the asymmetry of that as did Bell Canada, who while not a small provider, is being discriminated against in the current version of the proposal before the Commission.
...I believe that Telus' position could intentionally or otherwise have the effect of muting competitive responses in the West as it faces a stronger competitor in Rogers. These are not outcomes the Commission would favour or want. It was also a theory that the Competition Bureau seemed to recognize as a distinct possibility.
So, as the title to this post asserts, sometimes the right answer is simply NO!
I don't think it could have been any clearer than that but here we are. ISED has now directed the CRTC to reconsider the decision.
So what does Telus have to say to justify its volte face? I will dispose of the canard that neither the Governor-in-Council nor the CRTC can alter the Final Decision that expanded the mandated fibre wholesale requirement nationally as I have seen some suggest. That is simply not a fair reading of section 12 of the Telecommunications Act. As Telus well knows, the issue the Governor-in-Council is concerned with is the fundamental error that was made in allowing incumbents to resell each others' fibre access at all. It is not limited in that sense to the geography in which it was first ordered on an interim basis and it certainly does not violate Telus' participatory rights which it exercises across 36 pages of its lengthy and full throated submission. Telus' argument is without merit.
Telus throughout its submission positions itself as engaged in a pro consumer quest to bring more competition to Ontario and Quebec through mandated resale. While that may be how Telus wants to position itself, it fully knows that Ontario and Quebec are the geographic markets that are already the focus of the most competitive activity. If there was any confusion on this point, the CRTC has already determined that as a question of fact. Telus argues that the public interest favours the CRTC's mandated fibre resale decisions because it preserves the incumbents' investment incentives within their own legacy serving areas. Telus' argument is counterintuitive because the investment incentive the regulator is interested in preserving is not within its existing network footprint but beyond it.
Telus has itself said to investment analysts that it's capital expenditure program associated with its fibre overlay project is either completed or near completion within its existing serving areas so there is no incentive to invest to protect. The reality is that with Telus' entry through resale in Ontario and Quebec it is demonstrating that it does not intend to continue investing in service expansion anywhere and nothing about that is in the public interest nor is it what the Minister intended in his revised Policy Direction to the CRTC. Telus' submission in that respect is entirely self serving.
As a result, as I have observed on a number of occasions since February, the CRTC should give little to no weight to Telus' submission. The CRTC has the ability to reconsider that part of both the Temporary and Final Decisions that is the subject of its consultation. The correct course is clear; incumbents should be prohibited from reselling each others' fibre accesses nationally.
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