Bell files petition to Governor in Council to reverse CRTC wholesale rate decision

Bell wants the decision to be changed so it won't impact investment and rollout of network infrastructure

Montreal-based national carrier Bell has filed a petition to have the Governor in Council “restore wholesale rates that were in place,” before the CRTC decided to set new rates.

Wholesale rates are paid by competitors — such as TekSavvy or Distributel — which then get access to high-speed networks of larger telecommunications companies like Bell, Rogers, Telus and Shaw. Rates are set so that incumbents can charge for this access after the CRTC reviews information regarding how much it costs to operate networks.
The new rates were announced in August and the Canadian Radio-television and Telecommunications Commission (CRTC) said that they were lower than the interim wholesale rates implemented in 2016, which were also set to foster competition at the time.

“The monthly capacity rates are 15 percent to 43 percent lower than the interim rates,” the CRTC said in the new decision. “As for the access rates, they are three percent to 77 percent lower than the interim rates.”

In 2016, the CRTC cut proposed rates for network access by up to 39 percent and reduced the rate for the transport of internet data by up to 89 percent. It’s important to note that the final rates will be applied retroactively, but that a decision on rates for fibre-to-the-home will be “forthcoming.”

According to the document filed to the Governor in Council on November 13th, Bell said: “restoring the pre-existing rates and maintaining the status quo will allow resellers to continue to grow and at the same time preserve incentives for network investment at a critical juncture in the investment cycle as Canada transitions to higher speed fibre and 5G wireless networks and the benefits these bring to urban, rural and remote communities across the country.”

Bell added that by granting the petition it will avoid negative outcomes for Canada.

At the time that the CRTC made the rate decision, Bell indicated that it would have an estimated $100 million impact on its business. It also said that it would reduce the scope of Bell’s broadband internet buildout for smaller towns and rural communities by 20 percent, or about 200,000 households.

Bell’s chief operating officer Mirko Bibic at the time said that having a dramatic change like this doesn’t help the continued development of infrastructure in Canada.

According to the document, obtained by MobileSyrup, Bell listed reasons that indicate the CRTC’s decision creates major impacts on the industry.

The carrier argues that the CRTC has been favouring resellers “by systematically lowering wholesale broadband rates,” which now has “reached to the point that the rates are below our costs, incentives to invest are in many instances eliminated and consumers are being deprived of higher speed internet service as providers withdraw uneconomic offerings from the retail market.”

Bell also cited the Competition Bureau’s study on broadband competition in Canada, which indicated that there is a challenge in setting these rates to preserve investments. It is important to note though that the study also indicated that Canadians would benefit from more internet service options.

Bell also feels that resellers “are already thriving in the market.”

“Since early 2016 (and, in fact, since 2013) resellers benefitted from a healthy gross margin of at least 44 percent, allowing them to charge below the average retail price,” Bell wrote. “The effect of the order’s lowering of wholesale rates increases the resellers’ gross margin to 71 percent. The result of these wholesale reductions ahs been to cut in half the resellers’ cost of providing service.”

Changes to wholesale rates will have impact on rural development, 5G rollout

Bell added that these changes would also have a severe impact on the rollout of 5G networks in the future.

It added that an order like this would “further slowdown the ability of companies to invest in 5G at a time when Canada has already been ranked last in terms of 5G readiness because of government delays that are beyond the industry’s control.”

Bell’s goal to improve network infrastructure in rural and remote communities would also be affected, the carrier implied. Especially if it were to keep up with the government’s intention and plan to connect 100 percent of Canadians to high-speed internet by 2030.

“It is facilities-based carriers, not resellers, that will build networks in these rural areas,” Bell wrote. “The order has forced us to reduce our investment goals for rural and remote communities.”

Bell also argues that resellers and smaller players have a history of not investing in the buildout of network infrastructure.

The carrier cited that between 2012 and 2017, Bell invested $38.4 billion in networks and equipment while resellers invested $160 million.

“The order will only serve to ensure that resellers have even less of an incentive to invest in networks of their own as they can now ride on the networks that others build at rates that are well below cost,” Bell writes, adding that the burden will only be on big carriers.

Bell’s petition urges the Governor in Council to restore the order to what it was before as “this will improve the balance between the competing objectives of affordability and investment, as well as return certainty and predictability to the industry.”

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