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Wireline Services and Associated Policies

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Wireline Services and Associated Policies Telecom Regulatory Policy CRTC 2015-326 PDF version Route references: 2013-551 and 2013-551-1 Ottawa, 22 July 2015 File number: 8663-C12-201313601 Review of wholesale wireline services and associated policies The telecommunications industry in Canada is supported by a wholesale services framework that sets out the rates, terms, and conditions under which incumbent telecommunications service providers are required to make available parts of their respective networks to competitors. These leased parts are referred to as wholesale services, and are used by competitors to provide services, such as local phone, television, and Internet access services, to their retail end- customers. The Commission’s determinations in this decision are the result of a public proceeding to review wholesale wireline services and associated policies, including an oral hearing held in Gatineau, Quebec. As part of this proceeding, the Commission reviewed the existing wholesale services framework, various wholesale wireline services, and the approach it uses to set the rates for wholesale services to determine whether changes to the existing regulatory landscape are appropriate. The Commission has made its determinations set out in this decision with a view to achieving various objectives, notably to provide Canadians with more choice for high-speed connectivity, thereby enabling them to fully leverage the benefits of the broadband home or business. Increased choice is expected to drive competition, resulting in further investment in high-quality telecommunications networks, innovative service offerings, and reasonable prices for consumers. The Commission has adjusted its mandating criteria for wholesale services, and sets out the reasoning behind its determinations to mandate – or not – the provision of particular wholesale services. Pursuant to its mandating criteria, the Commission has made the following determinations regarding the regulatory status of the following wholesale services: • Wholesale high-speed access services, which are used to support retail competition for services, such as local phone, television, and Internet access services, will continue to be mandated; however, the provision of aggregated services will no longer be mandated and will be phased out in conjunction with the implementation of a disaggregated service. Incumbent carriers are directed to begin implementing disaggregated wholesale high-speed access services, in phases; • The requirement to implement disaggregated wholesale high-speed access services will include making them available over fibre-access facilities; • Unbundled local loops, a legacy service used primarily to support retail competition for local phone services and lower-speed Internet access, will no longer be mandated and will be phased out; and • Ethernet and high-speed competitor digital network services, which are primarily used to support retail competition in the business data services market, will remain forborne and not mandated. In addition, the Commission has rendered determinations on issues such as the costing methodology to be applied to wholesale services and the request to implement an equivalence of inputs wholesale regime. The wholesale services framework established in this decision will remain in place for a minimum of five years. The dissenting opinion of Commissioner Shoan is attached. Introduction 1. Wholesale telecommunications services (hereafter referred to as wholesale services) are the services that telecommunications companies provide to each other, and are integral to the overall development of the Canadian communications system. 2. The provision of wholesale services primarily supports competition in various retail service markets, such as local phone, television, and Internet access service markets, by enabling competitors to access certain telecommunications facilities and network components from incumbent carriers, such as incumbent local exchange carriers (ILECs) and cable companies, so that competitors can extend their networks where necessary to provide their own services to consumers. Wholesale services also play a supporting role in the overall telecommunications system – for example, by ensuring the efficient interconnection of competing networks, by ensuring public safety through the provision of emergency services, and by optimizing the use of support structures such as poles and conduits. 3. Over the years, the Commission has established various policies, rules, and regulations to govern the provision of wholesale services. These regulatory measures are necessary because incumbent carriers have had considerable advantages over competitors. Without wholesale regulation, fewer competitive service options would be available to Canadians. 4. Throughout the 1990s and early 2000s, the Commission focused its wholesale service regulation on improving competition in the long distance and local voice telephony markets. Over the past decade or so, the Commission has gradually shifted its focus away from legacy voice services and towards improving competition for broadband services. 5. The Commission’s general approach towards wholesale service regulation has been to promote facilities-based competition wherever possible. Facilities-based competition, in which competitors primarily use their own telecommunications facilities and networks to compete instead of leasing from other carriers, is typically regarded as the ideal and most sustainable form of competition. Examples of telecommunications facilities include the copper, coaxial, and fibre connections that connect households and businesses, fibre-optic cables connecting communities, and the various routers, switches, and interfaces located within incumbent carrier data centres. 6. Conceptually, facilities-based competition is best achieved by requiring incumbent carriers to make available facilities that are “essential” for competition. These facilities, sometimes referred to as bottleneck facilities, are, generally speaking, network components that cannot be readily duplicated and that are controlled by incumbent carriers, which gives them the market power to substantially prevent or lessen retail competition if they were to deny competitors access to those facilities. To determine whether to mandate facilities, the Commission has applied a specific set of criteria, set out in paragraph 15 of this decision. 7. If the Commission finds that a facility should be made available to competitors, the next question it assesses is how the facility should be configured and what rates, terms, and conditions should apply. The degree to which incumbent carriers’ networks are made available to competitors depends on a variety of factors, including the policy objectives set out in section 7 of the Telecommunications Act (the Act), technical issues, operational requirements, and the Commission’s regulatory policies. The desired outcome is that once competitors are given access to certain facilities (for example, access facilities), they are incented to enter the market and invest in other parts of the network, eventually leading to lower prices, innovative service offerings, and greater choice for consumers. 8. Regarding the provision of broadband services, the Commission has, in recent years, and for a variety of reasons, opted to allow competitors access to a wholesale service that did not require material investment in facilities, by mandating the provision of a comprehensive wholesale service from incumbent carriers, known as aggregated wholesale high-speed access (HSA) service. This service has enabled competitors to lease a package of both the access facilities they need to connect to customer locations, and transport facilities, through which large amounts of traffic can be sent and received, without requiring them to invest substantially in their networks. 9. A central debate in this proceeding is whether this type of “aggregated” approach continues to be the appropriate means to foster retail competition for broadband services now and into the future. Another issue is whether the fibre-access facilities being deployed by incumbent carriers ought to be included in any wholesale HSA service that is made available to their competitors.1 Telecom Notice of Consultation 2013-551 10. On 6 December 2013, in Telecom Notice of Consultation 2013-551, the Commission initiated a proceeding to review issues related to wholesale services and their associated 2 policies. Specifically, the Commission stated that it intended to examine (i) the 1 In Telecom Regulatory Policy 2010-632, the Commission determined that the obligation to provide wholesale HSA services would apply to existing technologies, including hybrid copper-fibre facilities and hybrid fibre-coaxial cable facilities, but did not extend the obligations to fully fibre-based network solutions. 2 As a separate matter, the Commission later initiated Telecom Notice of Consultation 2014-76 to consider whether the wholesale wireless service market is sufficiently competitive and, if not, what regulatory measures are required. appropriateness of the previously established wholesale service categories and of mandating any new or forborne wholesale services; (ii) whether its existing wholesale service policies appropriately balance incentives for innovation and investment in the construction of telecommunications network facilities, resulting in more sustainable competition and the provision of high-quality retail telecommunications services; (iii) the product and geographic markets for
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