Denis Marquis President, Bell Pensioners' Group 1914, rue Cugnet Saint-Bruno de Montarville QC J3V 5H6 Tel.: 450 441-0111 Email: [email protected] January 22, 2020 Director General, Telecommunications and Internet Policy Branch, Innovation, Science and Economic Development Canada, 235 Queen Street, 10th Floor, Ottawa, Ontario K1A 0H5 Sent via e-mail to: [email protected] Subject: Canada Gazette, Part I, December 14, 2019, Volume 153, Number 10, Notice No. TIPB-002-2019 — Petitions to the Governor in Council concerning Telecom Order CRTC 2019-288 Dear Madam: Attached please find a submission by the Bell Pensioners’ Group (BPG) concerning the above- noted matter. Yours truly, Denis Marquis President, Bell Pensioners’ Group www.bellpensionersgroup.ca Attachment c.c: Hon. Navdeep Bains, P.C., M.P., Minister of Innovation, Science and Industry [email protected] Hon. Deb Schulte, P.C., M.P., Minister of Seniors [email protected] Attachment Canada Gazette, Part I, December 14, 2019, Volume 153, Number 10, Notice No. TIPB-002-2019 — Petitions to the Governor in Council concerning Telecom Order CRTC 2019-288 Comments of the Bell Pensioners’ Group In accordance with Gazette Notice No. TIPB-002-2019, the Bell Pensioners’ Group (BPG) is pleased to provide this submission in support of a petition to the Governor in Council by Bell Canada seeking a variation of a decision issued by the Canadian Radio-television and Tele- communications Commission (CRTC) concerning final rates for aggregated wholesale high- speed internet access services. This CRTC decision requires that facilities-based competitors like Bell Canada (Bell) allow use of their state-of-the-art communications networks by resale- based competitors at substantially reduced prices that are, in the case of Bell, below its costs incurred to build those networks. BPG is an association of pensioners from Bell and its affiliates whose primary objective is to protect the Bell Canada defined benefit (DB) pension plan and benefits of its members. It is a not-for-profit organization incorporated in 1995 that advocates on behalf of the more than 40,000 DB plan retirees of Bell and their beneficiaries. Its activities are enabled by member vol- unteer work and membership dues. BPG is also a founding member of the Canadian Federation of Pensioners, a growing network of pensioner groups that together represent 250,000 retired individuals across Canada. We strongly support Bell Canada’s petition and the changes it seeks to the CRTC’s decision. That decision appears destined to undermine Canada’s international leadership in the provision of ubiquitous next generation internet networks at a time when massive capital investment will be needed to invest in even newer and better technology going forward. BPG rarely gets involved in matters of telecom policy. Rather, our core mission is to advocate for policies and regulations that protect our earned pensions, matters upon which we and our partners regularly interact with both the federal and provincial governments who are responsible for the regulatory frameworks applicable to both private and public pensions. However, this is not the forum for a discussion about Canada’s pension framework. BPG has chosen to intervene in this telecom policy matter because we understand that the best safeguard for our pensions is a financially strong plan sponsor whose continued success we can rely on to fund our pensions. And while we recognize that a plan sponsor’s financial perfor- mance should be a result of the success or failure of its own business decisions rather than a concern or objective of government, we also believe that business success or failure should be 1 Attachment determined by the marketplace and not by artificial regulatory obstacles. We are concerned that the CRTC decision in question creates precisely such a regulatory obstacle…one that will affect the performance of industry players by interfering with market forces to artificially favour one type of industry player at the expense of another. Moreover, such a policy, however well inten- tioned, is bound to be counter-productive and harmful to the government’s own objectives relat- ed to innovation, investment and job creation. Unless corrected, it will have the perverse effect of discouraging investment in modern broadband networks contrary to the interests of busi- nesses, consumers and the economy generally. Canada is among the world leaders today in the quality, speed and breadth of its broadband networks. This is all the more remarkable considering the vast geography of our country with its relatively sparse population, factors that present unique challenges not faced by many of our international counterparts. At the same time, our broadband marketplace is characterized by multiple providers: with telcos, cablecos, wireless providers and resale-based players all com- peting to offer Canadians choice and high quality service. And while our submission is understandably focussed on Bell’s petition, it is significant to note that other major facilities-based players, including Telus and all five major cable companies, have filed similar petitions challenging the CRTC’s decision. Underlying all of these petitions is the negative effect on investment that the CRTC’s decision will inevitably have if left to stand. Most of our pensioners are obviously also consumers of network-based services; they reside throughout the country, including in rural areas, and will no doubt be negatively affected by this curtailed investment. Bell’s petition rests on a number of straightforward facts and propositions: • the CRTC order reduces wholesale rates (with retroactive effect to 2016) of facilities-based network providers substantially (up to 82%); in the case of Bell, the order results in rates that are below Bell’s costs • with the wholesale prices in effect prior to the CRTC’s order, resellers had been able to thrive: • having achieved market share of 20% in the areas in which they focus their efforts, • having accounted for 41% of all net subscriber additions between 2013 and 2017, • having achieved financial success with gross margins of 44% • all of this while offering consumers rates that are 15-35% lower than those of the facili- ties-based carriers • Canada’s marketplace is highly competitive by any objective measure: • this is confirmed by findings of the Competition Bureau and international publications and Canadian investment reports cited in Bell’s petition 2 Attachment • Facilities-based competition is the most robust, effective and beneficial type of competition. It is beyond serious debate that wholesale rates affect investment decisions and wholesale rates that are too low will curtail network investment: • this is not a hollow threat but rather a real world reality, examples of which have al- ready been experienced in the Canadian marketplace, as detailed in Bell’s petition and in a report of the Competition Bureau. • various prominent industry commentators have condemned the decision’s inevitable negative effect on investment and competition, with TD Securities Equity Research estimating that investment in telecom infrastructure will decline by $1.68B in 2021 and beyond and predicting that the reduced investment could render Canadian telecoms and the digital economy generally uncompetitive internationally • rural communities will suffer the greatest from this reduced investment • with access to networks at “bargain basement” wholesale prices, resellers will have no incentive to invest in network facilities There is a lot of detailed information and numbers in Bell’s petition. However, the fundamental premise underlying the petition seems rather straightforward to us. If network owners are re- quired to provide their networks to resellers at wholesale prices that are unrealistically low and, in some cases, below cost, they will invest less in those networks, especially in rural territories. This is not a philosophical choice but rather a simple economic reality. As a result, in our view, it is in Canada’s interest to overturn the CRTC order as requested by Bell and revert to the pre- existing wholesale rates. This is the best path forward to ensure ongoing investment, ensure that next generation networks continue to be built and expanded, and ensure that robust com- petition continues to be fostered to the benefit of consumers, businesses and the economy gen- erally. As a result, we urge the Governor in Council to grant the requests in Bell’s petition. 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