Regulator should buck tradition and set low wholesale rates on fibre to spark super-fast services.
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With the dust starting to settle from last week’s rejection by the federal government of Bell’s appeal on the CRTC’s fibre broadband access ruling, it’s time to start thinking about the nitty gritty of what super-fast service is going to cost Canadians.
As I wrote last week, the rejection paves the way for faster and cheaper broadband, since smaller internet providers will be able to use parts of big companies’ networks to deliver their own services. ISPs such as Teksavvy and VMedia are promising to sell fibre-based speeds for less than the likes of Bell, Rogers and Telus. Bell, for one, charges $150 a month for gigabit service.
How much less will be determined by the Canadian Radio-television and Telecommunications Commission as it sets the wholesale fees the companies must pay bigger rivals for using their networks. The process is expected to take a year, although it would surprise no one if it takes longer.
As with previous price-setting proceedings, the process will likely involve the CRTC requiring network owners to state what their actual network costs are. Indie ISPs will, inevitably, then argue that the stated costs are overinflated, leaving the regulator to settle somewhere in between.
In the past, when the CRTC was similarly contemplating wholesale pricing on what are now considered slower-speed services, it ruled on the high side. Bell, Rogers and the rest were effectively given permission to overcharge. The indies complained, but they got on with things and were still able to provide services for less than the big guys.
The CRTC only just recently realized the error of its ways and in March ruled that some of those wholesale fees it was allowing were neither “just” nor “reasonable.” Network owners are now in the process of resubmitting costs. Once the mess is sorted out, indies will likely have the ability to lower some of the prices they charge customers.
With faster fibre, the CRTC now has the opportunity to do something different. Rather than erring on the side of network owners and coming in on the high side with fees, it could change course and give indies a low wholesale rate that will allow them to set relatively low retail super-fast internet prices. The lower the indies go, the more likely the big players are to follow.
The stage is set to do so. Big network owners have enjoyed years of overcharging, the federal government now apparently has the CRTC’s back, and the regulator just heard from a number of participants in its “Talk Broadband” hearings about how expensive internet service is in Canada, especially for low-income families.
The CRTC thus has all the ammo and support it needs to make super-fast broadband cheap on a wholesale level, which would result in lower retail prices too.
The big companies would complain loudly and likely resort to the old standby – that cheap wholesale access, or wholesale access of any kind for that matter, will cause them to curtail investing in those fibre networks. As the argument goes, if they can’t make oodles of money on such networks, why build them in the first place?
Such arguments should be ignored because history repeatedly suggests the threats are empty.
U.S. broadband providers made similar noises a few years ago when regulators there were considering implementing strong net neutrality laws. The laws went through and broadband investment… went up.
Canadian providers also threatened to curtail investment last year if wholesale access was allowed to continue. Yet Bell chose not to wait for the CRTC’s ruling and announced its gigabit expansion a month before, knowing full well the decision might not go its way. Rogers and Telus, meanwhile, went ahead with their plans shortly after the ruling.
The fact is, super-fast broadband is the future – and increasingly the present – so without continuing investments, these companies won’t see much revenue growth. Investing isn’t a choice anymore, if it ever was.
Canada’s big telecom companies have innumerable advantages over smaller competitors, from content holdings and service bundle options to retail presence and marketing budgets, which means they will always likely have the lion’s share of the market. For them, stamping out wholesale players isn’t about investment, but rather about establishing and maintaining market power.
For once, the CRTC should give smaller players an advantage, because that small change could result in a big difference when it comes to what people are going to pay for super-fast internet service.