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Telecom Order CRTC 2019-288 Follow-Up to Telecom Orders 2016-396 and 2016-448 – Final Rates for Aggregated Wholesale High-Speed Access Services

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Telecom Order CRTC 2019-288 Follow-Up to Telecom Orders 2016-396 and 2016-448 – Final Rates for Aggregated Wholesale High-Speed Access Services Petition to the Governor in Council pursuant to Section 12 of the Telecommunications Act Re: Telecom Order CRTC 2019-288 Follow-up to Telecom Orders 2016-396 and 2016-448 – Final rates for aggregated wholesale high-speed access services By: Bragg Communications Incorporated (carrying on business as Eastlink) Cogeco Communications Inc. Rogers Communications Canada Inc. Shaw Communications Inc. Videotron Ltd. 13 November 2019 Executive Summary Canada’s major Cable Carriers (Eastlink, Cogeco, Rogers, Shaw and Videotron) file this Petition pursuant to section 12 of the Telecommunications Act to request that the Cabinet order the CRTC to reconsider its August 15, 2019 decision concerning wholesale internet access rates (Telecom Order CRTC 2019-288). The Government of Canada has made it a priority to expand broadband infrastructure and high- speed internet access to all Canadians. Access to high-speed internet services is critically important to Canada’s economy, as well as to the ability of Canadians to live, work and socialize with each other and to participate fully in society. In connecting Canadians from coast to coast, and driving economic development and innovation, the expansion of high-speed internet access is as important to Canada today as construction of railways was more than a century ago. The Cable Carriers are proud of the world-leading high-speed internet infrastructure they have built. They compete vigorously with the telephone companies to design, finance and build ever faster, more advanced and innovative networks. Moreover, they provide internet access to consumers at rates that The Economist Intelligence Unit ranks as first overall in affordability worldwide. The CRTC has required the Cable Carriers and telephone companies to provide wholesale access to their networks to internet service providers who do not have their own network infrastructure (“Resellers”). The CRTC’s purpose in doing so was to provide greater retail price competition and, over time, to promote network construction by Resellers. Although the first goal has been achieved, the second has not. The Cable Carriers are not asking the Cabinet to eliminate the CRTC’s regime for wholesale access. However, the CRTC’s decision of August 15, 2019 fundamentally disrupts the regime by promoting the financial interests of Resellers above all else. For this reason, the CRTC should be required to reconsider its decision in order to ensure that it takes a balanced approach to achieving the Government’s key public policy objectives: affordability, competition, investment, innovation and the expansion of high-speed internet access to rural, remote and Indigenous communities. If left unchanged, the CRTC’s August 15, 2019 decision will seriously undermine the Government’s policy objectives: • by reducing wholesale rates payable by Resellers to Cable Carriers by 15 to 77%, the decision reallocates industry revenues away from network builders to resale marketers; • by making the wholesale rate reductions retroactive to 2016, and not requiring Resellers to invest in infrastructure, the decision creates a massive windfall for Resellers with no benefits for consumers or incentives to upgrade Canada’s broadband infrastructure; • by not recognizing that Resellers have increased their market share to between 16% and 18.6% in the major markets they choose to compete in, and nearly 50% or more in certain other markets, the decision gives a huge regulatory boost to Resellers at a time when they do not need it – they are already competing effectively under the existing wholesale rates; - 2 - • by requiring Cable Carriers to make their high-speed networks available to Resellers at below-cost wholesale rates, and doing so before any rates have been imposed on telephone companies’ fibre-to-the-home networks outside Ontario and Quebec, the decision creates a grossly unfair competitive disadvantage to Cable Carriers compared to the telephone companies (particularly in Western and Atlantic Canada); • by creating flat wholesale access rates for all broadband speeds, the decision removes the financial capability of and incentives for Cable Carriers to invest in and introduce higher speed broadband services; • by undermining the Cable Carriers’ investments in infrastructure, the decision threatens the ability of the Cable Carriers to maintain current levels of employment of engineers, technicians and other Canadians whose skills are necessary to build, expand and improve wireline networks; • by deterring investment in technologically advanced wireline infrastructure, the decision threatens the successful implementation of 5th Generation (5G) wireless networks in Canada; • by reducing available revenues and reallocating market share to Resellers, the decision will reduce the Cable Carriers’ operating margins by an amount that translates to as much as 54% of their planned investments in expanding and improving their broadband networks over the next five years (as demonstrated in the economic analysis attached to this Petition as Appendix “A”) • as a result, the Cable Carriers’ business case to invest in network expansion to many rural, remote and Indigenous communities will become unviable. The Cable Carriers therefore ask the Cabinet to order the CRTC to reconsider its August 15, 2019 decision in conjunction with the CRTC’s previously announced review of the entire wholesale regulatory framework. We also ask that the Cabinet order the CRTC to take Canada’s broader telecommunications policy objectives into account as part of the reconsideration and review. Finally, we ask that the Cabinet vary the August 15, 2019 decision by cancelling the windfall granted to the Resellers and making the final wholesale rates that the CRTC establishes, after reconsidering its decision, applicable only on a forward-looking basis. This will substantially reduce the unfortunate regulatory uncertainty to which the decision has given rise. - 3 - Petition to the Governor in Council pursuant to Section 12 of the Telecommunications Act Re: Telecom Order CRTC 2019-288 Follow-up to Telecom Orders 2016-396 and 2016-448 – Final rates for aggregated wholesale high-speed access services TABLE OF CONTENTS A. OVERVIEW .......................................................................................................................... 4 B. BACKGROUND ................................................................................................................... 6 (i) Broadband Internet Access in Canada ................................................................................ 6 (ii) The Cable Carriers ............................................................................................................ 12 (iii) The Wholesale High-Speed Access Regulatory Framework ............................................ 16 (iv) Resellers ............................................................................................................................ 19 (v) Resellers’ Minimal Investments in Broadband Infrastructure .......................................... 23 (vi) Interim Wholesale Rates Established in 2016 .................................................................. 27 C. THE CRTC ORDER OF AUGUST 15, 2019 (TELECOM ORDER CRTC 2019-288) 31 (i) The New Wholesale Rates ................................................................................................ 31 (ii) The Harmful Consequences of the CRTC Order .............................................................. 35 D. IMPORTANT POLICY OBJECTIVES UNDERMINED BY THE CRTC ORDER .. 42 (i) The CRTC Order Will Negatively Affect Rural, Remote and Indigenous Communities in Canada....................................................................................................................................... 42 (ii) The CRTC Order Will Hamper Innovation and Cause Canada to Fall Behind International Peers in the Global Digital Economy .................................................................. 51 E. RELIEF REQUESTED ...................................................................................................... 60 - 4 - A. Overview 1. Bragg Communications Incorporated (“Eastlink”), Cogeco Communications Inc. (“Cogeco”), Rogers Communications Canada Inc. (“Rogers”), Shaw Communications Inc. (“Shaw”) and Videotron Ltd. (“Videotron”) submit this Petition to the Governor in Council pursuant to section 12 of the Telecommunications Act. The Petitioners (collectively, the “Cable Carriers”) respectfully request that the Governor in Council refer Telecom Order CRTC 2019- 288, issued on August 15, 2019 (the “CRTC Order”), back to the Canadian Radio-television and Telecommunications Commission (the “CRTC”) for reconsideration. 2. The Cable Carriers provide high-speed internet access services to more than 6.9 million Canadian households and businesses across the country, including in rural, remote and Indigenous communities.1 They do so using physical networks that they have built, maintained and upgraded over many years, at a cost of tens of billions of dollars, as a competitive alternative to services offered by incumbent local exchange carriers (“Telephone Companies”). Because of the Cable Carriers’ investments in this infrastructure and owing to vigorous competition among various facilities-based providers (principally, the Cable Carriers and Telephone Companies), consumers in Canada enjoy reliable and high-quality broadband access. 3. The Government of Canada has made it a priority to expand broadband infrastructure across Canada,
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