VMedia Files Submission Opposing Bell’s Petition to Cabinet

VMedia today filed with the Clerk of the Privy Council and Secretary to the Cabinet its submission opposing a petition to Cabinet by BCE Inc. (Bell Canada). Bell Canada’s petition, a highly unusual procedural step, asks Cabinet to roll back the recent decision by the CRTC to give VMedia and other independent internet service providers wholesale access to Bell Canada’s fibre-to-the-home (FTTH) facilities.

VMedia believes there is no legal or policy justification for Cabinet to assist Bell Canada, and that the petition is a blatant attempt to put independent competitors like VMedia out of business.

This is a crucial issue for Canadians, as without independent competitors, access to internet service, which now underpins all of our everyday lives, will be restricted to at best two providers in each market, a telco and a cableco. Without competition, this duopoly will be empowered to extract increasingly exorbitant rents from hard-working Canadians for an essential utility service, one which costs the duopoly virtually nothing to supply.

VMedia sets out below its summary of its submission.

VMedia hopes that all of our subscribers become aware of this important process, and communicate VMedia’s position to your network of friends and contacts. Without the engagement of all Canadians Bell Canada’s petition may succeed, with irreversible and grievous consequences for us all.

SUMMARY

1. In its Petition, Bell wants to reverse the CRTC ruling requiring wholesale access to FTTH. Bell also asks, in the name of “competitive neutrality”, to reverse mandated wholesale access to certain high-speed cableco facilities (which largely do not use FTTH). Bell believes that the CRTC ruling both misreads Government policy and CRTC precedent, and will lead to reduced investment in FTTH.
2. Contrary to Bell’s view, Canadian Government policy favours competition including by independent operators like VMedia. In the Prime Minister’s recent mandate letter to the Minister of Innovation, Science and Economic Development, Mr. Trudeau set out as a top priority:
   

   Increase high-speed broadband coverage and work to support competition, choice and availability of services, and foster a strong investment environment for telecommunications services to keep Canada at the leading edge of the digital economy. (underlining added)

3. The pro-competition policy is consistent with a central element of the Prime Minister’s message of standing up for the middle class. It is precisely the middle class, and others less fortunate, that will suffer most if high-speed internet access, so central to all of our lives, continues to be controlled by a telco/cableco duopoly.
4. Bell describes mandated FTTH as some unprecedented regulatory event which undermines facilities-based competition. But the CRTC has for more than 30 years welcomed all manner of competitive entry including by facilities-based, non-facilities-based and hybrid operators. Indeed, Bell and other telcos readily employ sharing and resale of other telco facilities and services in formulating their own retail service offerings. The CRTC’s FTTH ruling is thus fully consistent with the CRTC’s longstanding regulatory approach, and is fully consistent with the federal Government’s 2006 Policy Direction to the CRTC.
5. Independent competitors like VMedia will be devastated if Bell’s Petition is granted.   Independent competitors use incumbent wholesale services in their retail offerings. Consumers are demanding higher speed services to access the growing number of high-resolution streaming services and more downloads, which is precisely the reason why Bell is rolling out FTTH. The independent competitors must be able to respond with their own competitive offerings, otherwise they will wither and die.
6. It is no answer to say that the independent competitors should ubiquitously install their own FTTH. Some will install FTTH in select areas, but the telcos like Bell hold such enormous legacy advantages, including large customer bases, long-standing customer relationships, large amounts of legacy infrastructure and brand recognition, that only they can realistically be expected to install FTTH in a widespread manner. After all, Bell has not announced any grand FTTH investments in Calgary, Saskatoon and Vancouver, and Telus is silent on installing FTTH for homeowners in Toronto, Halifax and Ottawa at the same time as it announces its ambitious FTTH plans for Vancouver.
7. Bell’s key complaint with the CRTC decision is that mandating wholesale access to FTTH will decrease Bell’s incentive to invest in FTTH especially in small cities and rural communities. Bell believes that mandated FTTH access will lead to reduced triple-play (internet/TV/phone) revenues from consumers, which cannot be adequately compensated by the CRTC-mandated pricing for its wholesale services.
8. Bell’s investment argument is not new. It was carefully examined and rejected by the CRTC in the proceeding leading to TRP2015-326. The CRTC determined that Bell and other telcos will continue to invest in FTTH to meet consumer demand and in order to compete with the cablecos. This makes good sense as the telco DSL offerings are at a competitive disadvantage to cableco DOCSIS offerings.
9. Building the facilities needed to ensure that Bell can deliver internet services to Canadians at speeds that match and exceed those offered by cablecos is central to Bell’s business strategy. That strategy will not be undermined by the possibility that independent competitors, which together serve a small fraction of the market, will have wholesale access, at reasonable prices, to those facilities.
10. Post-decision events confirm the appropriateness of the CRTC’s findings. Bell has announced plans to spend billions of dollars on FTTH, and it has publicly indicated it can well afford the investment, which it calls “table stakes” in competing with cable.
11. Bell’s Petition is nothing more than attempt to preserve a telco-cableco duopoly, at a time when triple play competitors, such as VMedia, are launching their services. Why else would Bell call for eliminating mandated wholesale access on cableco DOCSIS 3.1 facilities – which has nothing to do with FTTH investment – while recognizing that the cablecos still offer their own triple play packages? Bell’s rationale about “maintaining competitive neutrality” is simply a code for “maintaining a duopoly”, a marketplace construct that is an invitation to anticompetitive abuse and that can never be in the best interest of consumers.
12. The fact is that the price that Canadians pay for triple play bundles under the current duopoly is very high by world standards, which shows why it is so much in Bell’s interest to suppress independent competition.
13. Bell’s investment argument is a lose-lose proposition for Canadians. Bell is saying: eliminate mandated wholesale access to FTTH, and thus destroy independent competition, or it will underinvest in FTTH, particularly in under-served rural areas. But Bell does not actually commit to invest in FTTH even if all independent competition is destroyed. And given Bell’s many other businesses, and an ever changing investment environment, there can be no certainty that Bell will indeed invest in FTTH in preference to other opportunities. For example, Bell’s entire investment in FTTH in the 5 years before it bought Astral Media was but a fraction of Bell’s purchase price for that acquisition.
14. Despite the incoherence of Bell’s investment thesis, somehow Canadians are supposed to take it on faith that Bell will do the “right thing” with FTTH roll-out, provided that all of its independent competitors are first wiped out. This is nothing but a Bell fairy tale – but with no happy ending.
15. We ask that the Governor in Council to reject Bell’s Petition – and to do so expeditiously. Bell’s Petition creates uncertainty as to key elements of the CRTC’s wholesale framework, and therefore impacts the business plans of independent competitors such as VMedia. The earlier that this uncertainty can be lifted, the earlier that independent competitors can move forward with turning their business plans into reality, and thus developing the competitive service offerings that Canadians want to see.