Expect slower network investments if speed matching not overturned, Bell warns

Bell Canada says it could cutback investments in next-generation networks (NGNs) in cities across Canada unless the federal government overturns and rescinds two recent CRTC decisions on speed matching. The incumbent telco says that the original speed matching decision and a subsequent order on the matter undermine Bell’s investment strategy. “Although the companies are under tremendous pressure to build networks that can compete with cable providers, the business case for investments in 2009-2012 in certain cities will no longer be viable under the CRTC’s ruling which in effect will dictate the rates and commercial terms under which the new fibre network will be resold,” reads Bell’s petition to Cabinet, filed last week. Bell points to several communities in Ontario and Quebec, including Ottawa-Gatineau, Quebec City, Hamilton and others where investments will have to be re-evaluated if the commission’s decisions are allowed to stand. Equally, Bell Aliant is expected to revisit investment in several Atlantic Canadian communities such as Moncton, Fredericton, Saint John, Charlottetown and Sydney. “Simply stated, the pace, speed and location of significant, planned internet investments by the companies in their residential networks to enable the delivery of higher speed internet service will have to be reviewed, given that the CRTC decisions radically alter the financial case for accelerated deployment of NGNs in some geographic areas. This will result in some urban communities being delayed in the buildout of NGNs and some communities not having such networks built at all,” Bell states in its appeal. In an interview with Network Letter last week, Bell’s senior VP of regulatory and government affairs Mirko Bibic reiterated the company’s position that the commission’s speed matching decision significantly changes the business case for providing fibre-to-the-node services in smaller cities. “When you’re talking about having to wholesale at rock bottom rates because of some regulatory scripture you have to start wondering what it does to the business case and re-evaluate what it does to the net present value of the investment,” he says highlighting the several communities whose FTTN investments might have to be reassessed. “Perhaps many of those will make the cut, I’m not sure all will because at some point you’ve got to say if the net present value of the investment in ‘pick your smaller community’ doesn’t make sense with FTTN we can harvest the existing network make it to go as fast as it possibly can and redirect those dollars to wireless.” Chris Peirce, chief corporate officer at MTS Allstream Inc., describes Bell’s position as untenable, pointing to recent comments its president and CEO George Cope made to analysts regarding a decision to slow investment in its CLEC operations Bell West. “We think the economic returns on that versus using it as a channel of distribution don’t work for our shareholders, and so we’re being very, very careful how we invest capital in our CLEC. We have it for competitive reasons – and that’s why we have that,” Cope said during Bell’s February 11 call with analysts. Peirce says this shows the contradictory position Bell is taking. “Here you have the largest incumbent in the country saying they don’t see a business case for investing in competitive infrastructure and at the same time, they have no intention of giving competitors access.” Treating copper facilities and newer broadband networks differently in a regulatory sense will only hurt the customer, says Peirce. “If you allow an incumbent now deregulated in terms of retail pricing to use that technological evolution as a means to thwart competitive entry, then you’re putting the customer completely in a beholden position to the incumbent.”

Expect slower network investments if speed matching not overturned, Bell warns

News | March 16, 2009

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