Incumbents could have fared worse in wholesale wireless decision: analyst

GATINEAU, Que. — Wireless incumbents are going to have to play by a different set of rules than smaller carriers when it comes to providing network access to competitors, though one industry analyst said it could have been worse for the major carriers. The CRTC said Tuesday it will regulate the wholesale wireless rates BCE Inc., Rogers Communications Inc. and Telus Corp. charge smaller carriers, but the roaming rates of smaller carriers and rates the big three charge each other will be left to “market forces." The new rules apply to GSM-based technologies, which include LTE and LTE-Advanced technology, but do not apply to older CDMA networks, CRTC officials said during a technical briefing. “The CRTC has found that there is an insufficient level of competition among the national wireless companies — Bell, Rogers and Telus — in the provision of wholesale roaming services. These companies can maintain rates and impose terms and conditions that would not prevail in a competitive market,” the commission said in a press release. The new regulated rates will be calculated based on how much it costs carriers to provide the service, the CRTC said. The decision said calculating roaming rates based on retail costs is not a reasonable approach because of prevalence of bundled pricing, and because retail rates include voice, text and data in one price. Troy Crandall, a telecom analyst with 3Macs, said in a phone interview it was somewhat surprising to see rules that so explicitly target incumbent carriers. However, he added that there are details within the decision the big players can take comfort in. "Any time you have a regulated rate, it's basically negative if you're on the incumbent side, but it could've been worse," Crandall said. For example, Crandall said it's good for major carriers that the CRTC will take into account the costs for each company — and do so separately for voice, text and data —and set differentiated tariffs between them rather than imposing standard rates across the board. He added that the major carriers will get a chance to promote the quality of their networks thanks to a provision that requires customers to see on their phone displays the network they are roaming on. Bell, Rogers and Telus must their file final proposed rates by Nov. 4. In the interim, the three carriers cannot charge more for roaming than they do right now, officials said. Bell spokeswoman Jacqueline Michelis said in an email the company will "comply with all requirements, including all tariff-filing deadlines." Other decisions issued by the CRTC in recent months, such as banning simultaneous substitution for the Super Bowl starting in 2017 and requiring that mobile-TV services be billed like other data, are being challenged by Bell at the Federal Court of Appeal. Rogers spokesman Kevin Spafford said in an email: "We're reviewing the decision." A response from Telus was not immediately available. When asked about whether Tuesday’s decision was unfair to incumbents, who invested in spectrum and networks, CRTC Chairman Jean-Pierre Blais said in an interview with The Wire Report that the commission's focus is “fairness for Canadians, to make sure Canadians have a dynamic and competitive retail marketplace.” He added that the policy of both the CRTC and the government “has always been to support facilities-based competition, and we did not want to put their investments at risk, particularly outside of core urban areas.” Blais said the CRTC decided to focus the decision on the big three carriers, and not regional carriers like Manitoba Telecom Service Inc. or Saskatchewan Telecommunications Holding Corp., because it conducted an economic analysis that showed “the dominant players are .” It showed those three carriers are “essential” for anyone to enter the marketplace, while the newer entrants and regional carriers are not, he added. Blais said he expects to see wholesale rates fall, though he would not specify by how much. “The way we look at it is not by saying we want X price," he said. "What the tariffing application on the final basis will look at is what is the cost. We’ll look at those cost studies, and then apply, like we do in every other tariffing application, apply a markup.” He added that smaller carriers can decide to take advantage of the savings by either lowering their retail prices or investing in their own networks. “So how a carrier actually acts with lower wholesale is something we can’t control, but globally… if the wholesale level is healthy, you would expect a more healthy and dynamic retail level as well.” Blais said he expects the decision to give smaller carriers more stability, since the rates will be fixed for five years. “We’re hoping it creates an environment where we’re encouraging a more dynamic and sustainable marketplace,” he said. In response to a question about whether the CRTC was concerned the decision could result in another court challenge, Blais said: “When we make decisions, we don’t make them lightly. We think they are always sound, both from policy and legal perspectives. And every decision since I’ve been involved here since 2012, we’ve put that lens on. And some people disagree with us, and we let the courts decide.” The regulator recommended the government repeal the legislation it put in place last year to cap roaming rates to a level no higher than retail rates. The rules announced Tuesday affecting Rogers, Bell and Telus supersede that legislation, officials clarified. Still, the decision noted that until that legislation is repealed, it will continue to apply to carriers other than the Big Three, to wholesale roaming those three companies provide each other and to all CDMA-based roaming. CRTC said in its decision that “market forces should apply” outside of the wireless roaming provided by Bell, Telus and Rogers to other carriers. It said that “even though the wholesale roaming caps have provided some relief to smaller wireless carriers, the interests of users are not sufficiently protected because collectively have market power in the national market for GSM-based wholesale roaming, and wholesale access to their GSM-based networks is essential to providing broad or national network coverage so that smaller wireless carriers may compete sustainably in the retail market.” Industry Minister James Moore issued a statement praising the CRTC's decision, though he did not specify whether the government would repeal its current cap on wholesale wireless rates. “This is a good day for consumers," Moore said. "Today's decision will create greater competition in the wireless sector and that is why our government has continuously advocated for these changes. We know that more competition means more choice, lower prices and better services for Canadian consumers. As a result of our government's actions, wireless rates have decreased by 22 per cent since 2008.” It wasn't immediately clear whether the decision went far enough for Quebecor Inc., whose CEO Pierre Dion told the Canadian Telecom Summit last June that regulation on wholesale wireless access would be key to whether the company takes its Videotron mobile service national. Quebecor spokesman Martin Tremblay said in an email Tuesday that the company would not comment on the CRTC's decision right away. Wind Mobile said in a press release that the CRTC's ruling "will lead to better, stronger competition for Canadian consumers." Bob Boron, Wind's chief regulatory officer, said in the release: "The first phase of changes to wholesale roaming rates allowed Wind Mobile to reduce roaming charges for its customers by up to 90 per cent. We urge the CRTC to push ahead quickly with the cost-analysis phase, so we can bring even more choice and better pricing to Canadians." The Public Interest Advocacy Centre (PIAC) issued a press release saying "customers are the winners" in this CRTC's decision, while OpenMedia said in a release that it was "a significant step forward." The CRTC decided not to fully regulate access for mobile virtual network operators (MVNOs). It said in the decision that while it considers that “MVNOs can play a role in increasing consumer choice and value in the retail market,” it is “not appropriate to mandate wholesale MVNO access at this time.” Doing so would “significantly undermine” the investments new entrants have made in their networks, CRTC said, adding that mandating MVNO access “would likely discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.” It did, however, put in place two measures to benefit MVNOs, including that they should be able to acquire their own mobile network codes and forbidding restrictions put in place by some carriers preventing MVNOs from operating on their networks. There was no immediate reaction from Cogeco Cable Inc., which has said it was considering launching MVNO service, subject to favourable wholesale regulations. Blais said he hopes that “the conditions we put in place will support the rollout of MVNOs on a market basis, rather than a mandated basis, by removing some of the barriers, because I do think some MVNOs, in certain circumstances, could be the source of more choice and services for Canadians.” The Canadian Network Operators Consortium (CNOC) said in a press release Tuesday the CRTC’s decision did not address the “serious lack of competition” in Canada’s wireless market, and that the move not to mandate MVNO access, as well as not to impose the tower and site sharing measures CNOC had proposed, is a “missed opportunity." The CRTC also said Tuesday that it would not “mandate or require general wholesale tariffs for tower and site sharing at this time.” It said that it determined that “its existing powers and processes are sufficient to address tower- and site-sharing issues related to rates, terms and conditions.” During the hearing held on wholesale wireless market last fall, a number of the companies that appeared said they would prefer to have the CRTC mediate disputes around tower-sharing instead of Industry Canada. Officials speaking on a background basis pointed out that CRTC processes for such resolutions do exist and that means companies do have the option to use CRTC processes for these disputes. — With reporting and editing by Anja Karadeglija at akarad@thewirereport.ca and Derek Abma at dabma@thewirereport.ca

Incumbents could have fared worse in wholesale wireless decision: analyst

News | 05/05/2015 8:10 pm EDT

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