High interim tariffs, logistics still mire disaggregated system

The CRTC's goal of fuelling wireline competition by jumpstarting the industry’s rollout of the disaggregated wholesale regime Tuesday will be constrained if interim access fees remain high and if the issue of how small providers will connect to fibre facilities is not addressed, representatives of small providers say. “The interim rates are obviously a concern, but that’s not the primary issue that, I think, would prevent a provider from launching a service,” Matt Stein, spokesman for the Canadian Network Operators Consortium (CNOC) and CEO of Distributel Communications Ltd., said in a phone interview. “In order to connect the first customer in a single central office, first you have to spend close to $20,000 just in fees to set it up, just to turn it on in a single central office — and there’s over 800 of them — so you’re spending enormous dollars just to be able to start in a single neighbourhood then to hopefully make that back on the circuit,” Stein said. Tuesday’s decision by the CRTC effectively put in motion a plan it outlined in 2015 that moves the industry toward a disaggregated regime, which allows smaller providers to access fibre-to-the-home (FTTH) facilities from the incumbents — something that was not allowed under the current and to-be-phased-out aggregated system. The new system will also mean small providers need to invest in their own middle-mile or transport facilities to carry traffic from the incumbents’ central office to their customers, or lease them separately from another carrier. The move is a push to more facilities-based competition. The CRTC added in the decision that it will begin implementing the system first in Ontario and Quebec to assess demand and “review and establish proposed configurations.” “The actual configuration is too up in the air, there are too many unanswered questions, the complexities of rolling out this service in a disaggregated way as it has come together are extreme,” Stein said, adding “it presents its own substantial barriers to competition.” The CRTC also set interim access rates for that fibre access. The rates that incumbents can charge small providers include BCE Inc.’s fibre-to-the-premises (FTTP) rate, which is set at $121.79. On Tuesday, internet advocacy group OpenMedia said those rates are far too high for smaller providers to compete. VMedia Inc. co-founder George Burger agreed Thursday. “It doesn’t look like a good business to get into based on how we see the pricing,” he said in a phone interview. The concern applies a counterweight to what those same providers are saying is an otherwise important decision to allow them to compete against the incumbent telco and cable companies in the fibre business and to keep pace with the ever increasing speed demands of consumers. On Tuesday, Stein told the Wire Report that the decision is a positive step toward wider access to higher speed facilities, but there were still “implementation items and details” to review, he said. In an email Thursday, Iristel Inc. CEO Samer Bishay that while the rates are still expensive, “it’s a step forward in the right direction.” Burger, for his part, said “it’s definitely good news that we’ve been granted access — access is important — but I think it’s equally important that the access be at rates where it allows us to provide a competitive service.” The high interim rates cut into already tight margins for small providers, Burger said. “The premise that we’ve always operated under, is that there is a very, very significant margin in the pricing that the incumbents offer to their customers, and it’s in that wide margin that we are able to provide equivalent services at lower prices, because we’re prepared to take a lesser margin,” Burger added. Burger said the company has been able to survive dealing with high wholesale rates and offer better prices and pricing discipline in the market, but added “at these current levels, it doesn’t look like we’ll necessarily be able to offer that.” That’s especially the case, he said, when the incumbents can offer the same service at much a lower rate to their subscriber base without even taking into consideration promotional pricing. Stein said if those interim rates were or become the final rates, “that would absolutely undo the whole intention of this new regime.” However, he said he has “faith” that the commission is aware that the rates are “very high” and will address them. In the meantime, “I suspect that what the commission is doing is saying, ‘look, we’ll sort this out, but let’s at least get the show on the road; nothing can begin until an interim price is set,’” Stein said. The CRTC is now looking to get revised tariffs from Bell, Cogeco Inc., Rogers Communications Inc. and Quebecor Inc.’s Videotron, which are due Sept. 8. If the tariffs remain as they are, Burger said then “it is what it is,” and some small providers may have to sell some services as loss leaders. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

High interim tariffs, logistics still mire disaggregated system

News | August 31, 2017

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High interim tariffs, logistics still mire disaggregated system

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