The incumbent slashes network investment in response to the CRTC’s decision to require wholesale aggregated access to FTTH networks for competitors
CRTC to require aggregated access to FTTH networks for the first time
On 6 November 2023, the Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision requiring fixed network operators to provide aggregated wholesale high-speed access services via their fibre-to-the-home (FTTH) infrastructure. The requirement is directed specifically at Bell and TCI, and only applies to the operators’ Quebec and Ontario networks, which cover an estimated five million households. Bell and TCI will have six months to comply with the directive, and the CRTC has already determined interim, cost-based access charges, which it considers will ensure large incumbents continue to have the incentive to invest in their networks. The requirement to provide aggregated access to FTTH networks follows the limited take-up of disaggregated access that the regulator had previously imposed on incumbents.
The regulator identified a need for immediate action
The CRTC’s latest decision has been issued on a temporary basis as it is conducting a larger public consultation on wholesale prices, which remains ongoing (and could see a 10% reduction in selected rates). While disputed by Bell and TCI, the CRTC considered that urgent action was needed to protect competition in the broadband market and issued its decision on an interim basis before the conclusion of the consultation. The CRTC pointed to a 47% decrease in households served by smaller, retail competitors in Quebec and Ontario since 2020. That reduction in these provinces was particularly concerning as the majority of the market share of competitors was in eastern Canada, with over 80% of their consumer base located in either Quebec or Ontario.
A strengthened focus on competition and consumer choice
In issuing its expedited decision and in launching its broader consultation, the CRTC cited the need to increase competition in order to improve consumer choice and reduce retail prices. The renewed effort by the CRTC is a response to the Government’s directive under the Telecommunications Act to prioritise the promotion of competition. The directive also seeks to expand coverage to rural, remote and Indigenous communities, as well as to increase research and innovation in telecoms services. Canadian policymakers have pursued similar efforts to increase competition in the country’s mobile market, specifically through wholesale access for virtual operators (or MVNOs). In both the fixed and mobile markets, the Government linked the accumulation of market power by large incumbents to the potential for increased prices for consumers.
In response, Bell pulls back capex investments
In response to the CRTC’s decision, Bell announced that it would be cutting at least C$1bn (£591m) in capex during 2024-2025. Up to C$600m (£355m) of that will be lost in 2024 alone. This pullback compounds the C$100m (£59m) already cut this year in anticipation of the CRTC’s decision. Also, the plan to decrease capex translates to a reduction in build targets by around 700,000 locations in 2025. Bell was explicit in characterising their spending cuts as a “direct result of the CRTC's decision”. The operator also took issue with the focus of the decision being on eastern Canadian markets, which leaves out the three million fibre locations in the west of the country that are dominated by rival Telus. The Canadian Telecommunications Association joined Bell in criticising the decision, highlighting a nearly 8% decline in prices for consumers over the past year. As the CRTC’s consultation continues with another public hearing scheduled for 12 February 2024, tensions between network investments and measures to drive competition are only likely to grow.
