Canada Unbundles Fiber Networks

In an interesting move, the CRTC (Canadian Radio-television and Telecommunications Commission) is forcing large telephone company fiber networks to open their fiber networks to competition. The press release from the CRTC says that change is being made to increase choice and affordability for high-speed Internet service.

The proceeding that led to this decision began in March as the CRTC investigated if it makes sense to allow smaller ISPs to use the big company networks on an interim basis. This was a major proceeding at the CRTC, with over 300 parties filing comments.

The change was prompted by a significant decline in competition across the country. In Ontario and Quebec, ISPs other than the telephone companies lost 47% of their customers over the last two years. That decline is not due entirely to customers changing to the big telco fiber networks but also comes as the big companies have been buying smaller competitors. The big concern of the CRTC is that this drop means that customers are quickly losing choice when looking for an ISP and that the big telcos are increasingly gaining monopoly power.

The big telephone companies have built most of the fiber in the country and provide fiber technology to 60% of Canadian homes and businesses. Other fiber providers cover only 5% of the households and businesses in the country.

The big telcos have been given six months to implement the order and to allow competitors to gain access to their networks. The order creates what we refer to in the U.S. as open-access networks. The big telcos will have to figure out how to allow access to competitors and how to bill for the new services.

This is an extraordinary ruling in that it forces networks that the telcos have privately funded to be opened to competition. The big telcos have all said that they will probably not build new fiber after this ruling, and they probably shouldn’t.

The U.S. tried this with the Telecommunications Act of 1996, which forced the big telcos here to unbundle their copper networks and allow competitors to buy copper loops. But that decision was different because the copper networks were already old and largely depreciated. The telephone companies had already recovered the cost of the copper networks several times over.

Even so, Congress completely missed the boat with the 1996 Act. The purpose of the Act was to promote telephone competition. As the Act was being drafted in 1995, there was not much of a broadband industry other than T1s on copper and a few folks using dial-up to reach the brand-new Internet. Little did Congress realize that soon after the Act was passed the broadband industry would explode due to AOL finding a way to make dial-up usable for the average person. This was quickly followed by the introduction of DSL on copper and early cable modems that created the broadband industry we know today. The Act would have been written very differently had Congress understood it was standing on the threshold of broadband.

The Canadian decision really bothers me. Canada is forcing the telcos that have invested billions to build new fiber networks to share them with the competition. There is no way that the telcos could have planned for this, and this has to destroy their business plans.

I’m a big fan of open-access when somebody builds a network to intentionally be open. But forcing this on existing networks feels like confiscation. The telcos have done the right thing and invested in fiber and are being punished for doing too well. It’s hard to think that this won’t slow or stop anybody else from building fiber, which is bad news for the 40% of Canadians who don’t have it. I’ll be the first to admit that I don’t understand the nuances of the Canadian broadband market, but I’ve read summaries of all of the comments in this proceeding, and I have a hard time seeing the justification for the decision.

One thought on “Canada Unbundles Fiber Networks

  1. This supports government or consumer cooperative owned fiber to the premises (FTTP) distribution infrastructure to expand access since as stated here, the business case for investor owned capital investment turns on a vertically integrated model deriving profitable revenues from both access charges and proprietary services delivered over the FTTP.

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