Konrad von Finckenstein, chairman of the CRTCSean Kilpatrick
BCE Inc., not for the first time, has found itself the target of the country's telecommunications regulator.
The shots were such that Bell Canada was forced on Wednesday to revise its guidance to investors on 2010 free cash flow. Its stock price slid 1.6 per cent on the news.
On both Monday and Tuesday, the Canadian Radio-Television and Telecommunications Commission lobbed controversial decisions straight into Bell's strategic gears, ordering the company not only to share its advanced networks with smaller rivals, but dictating the type of technology by which Bell has to extend broadband Internet service into remote communities.
Large Internet providers, including Bell, were also ordered to provide resellers with the same network speeds as the providers' own customers enjoy. Resellers lease network space to offer telecom services, but were previously unable to offer the speeds enjoyed by the telcos' retail clients.
Canada's largest telecom company isn't taking the decisions lightly. With crucial regulatory hearings looming in October, Bell and other telcos are afraid the CRTC is becoming more assertive in areas that they feel the regulator should avoid. They worry that the regulator is fixating on phone providers and not applying equal pressure on cable companies.
For Mirko Bibic, Bell's senior vice-president of government and regulatory affairs, the fact the regulator is telling Bell to roll out broadband Internet with wired DSL (Digital Subscriber Line) technology, instead of the company's newer wireless network, is bad enough, because DSL technology is slower. He said Bell will appeal that aspect of the decision to cabinet, or pursue legal recourse. More importantly, he said, the CRTC should not be dealing with this subject at all.
"The CRTC should stay away from broadband deployment programs," Mr. Bibic said. "The CRTC is going to have to take a big step back here and come to the view that, although it's certainly a laudable social policy objective to ensure 100 per cent of Canada gets connected, they shouldn't be in the business of trying to make that happen."
Bell got hit this week much harder than Telus Corp., Bell Aliant Regional Communications Income Fund or MTS Allstream Inc., which were also ordered to rebate funds from the CRTC's deferral accounts - stored-up money collected by mandated overcharges to stimulate competition. The commission seemed more amenable to the other companies' rural broadband plans, but rejected Bell's main platform - completing the task with wireless.
In October, the commission will hold hearings into whether high-speed broadband Internet should be mandated as a "basic" or essential service on par with home phone and dial-up Internet. Telus has expressed concern that this is impossible to achieve without wireless Internet. On Wednesday, Mr. Bibic said he has "significant concerns" that "the CRTC can't seem to accept wireless as a substitute" for costlier wired networks.
Part of the telcos' anger has to do with the prominent spotlight on their role in the debate. "One of the things that the CRTC continues to do, which is a little dated, is assume that the telcos are the big guys and not the cablecos, which is factually incorrect in my opinion because the cablecos dominate the broadband market," said Dvai Ghose, a telecom analyst with Canaccord Genuity in Toronto.
Although many figured former Competition Bureau judge Konrad von Finckenstein's reign as CRTC chairman would be marked by a period of free market, hands-off leniency, it is clear that regulatory zeal still burns in the commission's Gatineau headquarters.
"Perhaps the lobbyists will start moving out of the cabinet office and back to Les Terrasses de la Chaudière, in Hull, where the commission's offices are," said Iain Grant of the SeaBoard Group telecom consulting firm. "We're all paying much more attention to the commission now."
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RULINGS THIS WEEK
On Monday, the CRTC ordered the country's largest telecom providers to share their advanced fibre-optic networks with resellers (companies that lease space on networks), and to provide to them the same Internet speeds the big telcos give to their own retail customers. Though allowed to charge more, big providers say this is a disincentive to investing in rural broadband expansion.
On Tuesday, the commission ordered a rebate of $311-million to consumers from a fund made up of overcharges, which had been designed to stimulate competition. It said the remaining $421-million in the fund would pay for telcos to expand broadband Internet into remote areas. The telcos wanted all the money to go to broadband deployment. Bell's request to do this with wireless was also rejected.
Iain Marlow
Techsavvy, on the other hand, offers two high speed Internet services, both of which limited to speeds of 5Mbps: 200 GB/month bandwidth for $31.99 a month and an unlimited plan for $39.99 a month.
Now imagine a 25Mbps service with unlimited bandwidth. Even if it's priced higher than existing telco plans, users might still see huge value in blazing speeds with no bandwidth cap.
You can see why Bell and Rogers might not want that.
As an added insult, the regulator ordered the telcos to share their new fibre optic networks with the resellers as well, despite the fact that telcos swore they wouldn't invest and expand networks into rural areas if the regulator ruled so - since sharing the networks reduces the returns on hefty network investments.
Then came Tuesday. The dust, of course, hadn't even settled from the ignominious day prior, when, Blam!, the CRTC ordered the telcos to rebate $311-million to consumers, something the telcos had resisted and consumer groups had pushed for (since the monies were coming from a fund made up of mandated overcharges to stimulate competition).
They also ruled that the telcos must spend the remaining money in the fund, $421-million, for expanding rural broadband. But, against Bell's demands, they said the company's HSPA+ wireless broadband network simply wouldn't do since it was not comparable to services the company offers in urban areas, and that it would have to be wired DSL (Digital Subscriber Line) Internet, which one guy from Bell told me was a decision rooted in 2005 thinking.
This morning, Bell sent out a fiery press release saying that the federal government was abandoning its rural citizens - which, if any didn't notice, were the ones who voted the Tories in (which is why the only two Conservative politicians in my Twitterfeed are constantly tweeting from corn roasts, I think).
"Considering the federal government's commitment to ensuring Canada's leadership in the digital economy and its strong support for intensified investment in the latest broadband technologies, this is quite frankly a shocking decision by the CRTC. It's a clear opportunity missed, and it perpetuates the digital divide between rural and urban Canada," Bell's CEO George Cope is quoted as saying in the release.
Of course, most of us are used to watching the CRTC - which, despite what some may say, is still a useful and necessary regulator - flail around as it deals with Ottawa's politicians. The CRTC had its Globalive/Wind Mobile decision tossed out by the government. It had the next-generation network sharing agreement (mentioned above) thrown back at it, too. And Industry Minister Tony Clement publicly contradicted CRTC chairman Konrad von Finckenstein on whether the liberalization of foreign ownership can be done without touching the broadcasting act.
"Recent history has shown that this government is prepared to overrule the CRTC," Dvai Ghose, an analyst at Toronto's Canaccord Genuity, told me back in May.
Mr. von Finckenstein's very appointment all these years ago was itself a sign the Prime Minister wanted a more free market-minded telecom regulator (which, essentially, means a more impotent one). Now, as one of my Globe colleagues has recently written, he might even be moved.
But now, lo and behold, the CRTC rises again! What this means before October hearings into whether high-speed broadband Internet should be considered a "basic service" like home phone and dial-up Internet is something some very important people are likely pondering.
Will wireless be sufficient or will Bell and Telus (or Rogers) be forced to string cables into remote communities, grumbling the whole time since there's no money to be made there? It will be interesting to find out.