The Mayor's views on broadband competition: a counterpoint

I was interested to see recently, pointed out by the Sun’s Jon Willing in social media, that the Mayor has submitted comments to a key telecommunications process. I spent several years at the CRTC as a manager and executive, and try to keep up with what’s going on in that fast-changing sector.

The process into which the Mayor commented has to do with a key CRTC decision taken last July that, at the risk of oversimplifying, would require companies such as Bell Canada to make their new fibre networks available to smaller companies to provide competing services.

Many residents are likely using services that work on that basis. TekSavvy, for example, provides cable Internet services using Rogers’ facilities. The CRTC decision would extend that approach to more advanced networks. Bell has objected to the ruling, and is asking the federal Cabinet to overturn (review & vary) the decision. This R&V request is the process into which the Mayor submitted.

I can’t in this post run through the history of what is called “facilities-based competition” that has been the preferred approach to telecommunications regulation since the 90s when the industry was deregulated. In short, when the government stopped regulating the price for things like local and long distance phone service, it empowered the CRTC to require the telcos to make their networks available at reasonable prices to competitors in order to offer service without building their own, very expensive, networks. This is how, for example, Sprint Canada was able to enter the market back in the day. The original premise was that while using someone else’s network to offer service would be a tough go, if the terms were right there would be enough profits to be made that could then be plowed into building their own facilities.

While the price at which consumer telecommunications services are offered isn’t regulated, the existence of competition is – at least in theory – enough to discipline the market. My former colleagues at the Commission may disagree, but that competition is important since many of the other consumer protections in place rely on codes rather than hard-and-fast rules.

In the absence of price regulation, or of access to networks for small competitors, the only real competition would be between two big duopolists in any given market. I share the concerns of those who argue that’s not enough competition to keep prices low.

There is an argument made, the case made by the Mayor, that if the regulator enforces access to networks by competitors who don’t own their own physical networks, that the business case for rolling out advanced networks such as fibre is compromised. In his letter, the Mayor has expressed fears that mandated wholesale access will delay rollout by companies such as Bell. No argument, this would be a very negative outcome.

But, I don’t buy that that’s the inevitable result. The imperative to roll out fibre networks isn’t some internal decision, but an absolute requirement for Bell in order to compete in the marketplace with Rogers. There has always been a race between “cable” companies and “phone” companies to win an advantage with faster Internet speeds. Bell might choose not to roll fibre networks out, but it would be clobbered by Rogers in the market. The same holds true in every market where “cable” and “phone” facilities-based players duke it out.

Residents have often looked to municipalities to demonstrate leadership on broadband issues. At one point, the City of Ottawa was even an emerging ISP with wireless spectrum and “dark fibre” networks. Rural residents justifiably complain of a “digital divide”, and the City has appropriately made efforts over the years to address that. In the CRTC hearings that led to last summer’s decision, I’m told that Calgary city staff made particularly helpful and well-thought-out submissions in favour of mandated access. Their comprehensive submission to Cabinet on the appeal is similarly nuanced. Broadband is an important part of cities’ sustainability and prosperity, and it’s no wonder that some municipal officials want to influence the process.

It’s completely appropriate for the Mayor, of course, to weigh in. It’s very much an issue in which municipalities are interested. However, to observers and consumers, I think it’s important to point out that the Mayor’s position is not a big-C City of Ottawa position. There are, presumably, a spectrum of views at both the staff and political levels. Certainly, I am inclined to believe that mandated access to facilities strikes a good balance between unregulated, market-driven duopoly and a more European approach that sees state ownership of networks made available to all comers on equal terms.

I’ll be fascinated to see how this one turns out. Comments to the process are closed, and the feds will now presumably start consulting with the provinces. Whether it supports the CRTC decision or not, the implications for Ottawa residents will be important.