Northwestel may provide FTTP services 35% below price floor and discount to Wholesale Connect: CRTC

The CRTC approved an application by BCE Inc.’s Northwestel to modify the tariff approval process for the company’s terrestrial retail residential internet services by allowing the company to discount Wholesale Connect and to provide existing and new fibre-to-the-premise (FTTP) internet services, at most, 35 per cent below the price floor without a cost study. “The commission determines that there is little risk of predatory pricing, since Northwestel will not be able to recoup its losses by charging higher prices in the future without commission approval, and appears to be offering a legitimate and pro-competitive response to a competitor,” the commission wrote in its Tuesday decision. The commission noted that the Competition Bureau’s 2019 Abuse of Dominance Enforcement Guidelines states that pricing below cost is not considered predatory if there is credible evidence that it is in pursuit of a pro-competitive or efficiency-enhancing rationale. Northwestel filed a Part 1 application with the commission this time last year requesting, on a temporary basis, that the requirement to pass the price floor test be waived for terrestrial residential internet service tariff filings, arguing that it was facing increasing competition from Space Exploration Technologies Corp.’s Starlink offering. The CRTC first established a price floor test in 1994, in order to ensure that incumbents could not price competitors out of the market, and in 1997 extended the price floor test to retail services. The price floor test (previously referred to as the “imputation test”) required that, when proposing a new service or a rate reduction for an existing service, an incumbent local exchange carrier would have to demonstrate that the proposed rate for the service would be sufficient to recover the costs of the service. “The commission also determines that rigid adherence to the price floor test under the circumstances of Northwestel’s application may in fact deter pro-competitive conduct by undermining the company’s incentives to innovate, outperform rivals, and engage in vigorous competition. For example, Starlink’s entry into the market puts competitive pressure on Northwestel, which provides an incentive for Northwestel to reduce its rates,” the commission wrote in its Tuesday decision. Eleven intervenors, which consisted of Telus Corp., First Nations communities, town and city councils, and the Government of Northwest Territories, supported the application with most citing a need for more affordable internet services. The Public Interest Advocacy Centre and SSi Micro opposed the application arguing that it would harm the ability for smaller existing and prospective companies to compete. Telus counter argued that “the competitive threat of Starlink also threatens small competitors, and that preventing Northwestel from responding to Starlink’s prices will not protect smaller competitors because it will not affect Starlink’s prices,” according to the decision. The commission found that it has other measures in place to support northwestel’s three competitors – Iristel Inc.’s Ice Wireless, SSI Micro, and Inuvik internet and cable service provider New North Networks – such as reducing the tariffed rates for Wholesale Connect service by the same percentage that it reduces its revenue-weighted average terrestrial residential internet service rates. The commission noted that the discount to Wholesale Connect service will not help New North (which accesses wholesale transport services via the Mackenzie Valley Fibre Link) but argued that the Government of Northwest Territories could consider providing a similar discount. In addition “the commission considers that Ice Wireless and SSi Micro provide services that customers may not consider to be a substitute for the internet services offered by Northwestel or Starlink, since they are portable. With respect to New North, Northwestel already offers services at higher speeds for lower prices while still retaining some room to reduce its rates above the price floor for those services,” the CRTC wrote. Northwestel originally proposed to provide FTTP internet services, at most, 20 per cent below the price floor without a cost study. The commission capped it to 35 per cent based on confidential information submitted by Northwestel. “The commission considers that lowering the price floor for FTTP internet services by 35 per cent will more appropriately align the minimum price thresholds for FTTP and cable residential internet services. “ would be an appropriate way to avoid the possible negative consequences of denying the application, particularly on vulnerable populations in DSL-dependent communities. At the same time, it would (i) promote Northwestel’s ability to compete efficiently with Starlink, (ii) maintain appropriate safeguards for smaller and regional service providers in the Far North, and (iii) bring timely benefits to consumers in terms of affordability and quality services through facilities-based competition.” The commission is also currently studying telecommunications services in the Far North but decided not to postpone a decision on the tariff application because rate ranges for tariffed services, and changes to the rates for Wholesale Connect service are out of scope of that consultation. “Many parties supported Northwestel’s application on the basis that there is an urgent need for more affordable Internet services in the Far North. Further, parties raised concerns regarding the timeliness of commission decisions affecting the Far North. This supports a determination to not postpone the issuance of a decision on Northwestel’s application,” the CRTC wrote in its Tuesday decision. – Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Northwestel may provide FTTP services 35% below price floor and discount to Wholesale Connect: CRTC

News | December 20, 2022

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Northwestel may provide FTTP services 35% below price floor and discount to Wholesale Connect: CRTC

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