Canada's telecom regulator has ruled that the country's large Internet providers must open up access to their latest-generation fibre-based services to independent players.
Smaller Internet service providers (ISPs) were pleased with Wednesday's decision from the Canadian Radio-television and Telecommunications Commission (CRTC), although they noted that they will not be able to sell consumers the highest-speed services until some time next year.
"The commission took a great step today in favour of competition. In giving us access to fibre to the premise, they have ensured that as speeds and demands increase, we're going to continue to be able to provide service that customers want," Matt Stein, CEO of Distributel Communications Ltd., said in an interview.
"It's definitely going to be some time before these products make it to market," Mr. Stein added. "There's going to be the costing and the implementation, and reasonably it could be a year or even longer before the products are actually out the door. But the heavy lifting? Today that was done."
Bram Abramson, chief legal and regulatory officer for TekSavvy Solutions Inc., similarly praised the decision and said it recognizes "the value of enabling independents to take things to the next level."
However, he also cautioned, "The devil really is in the details on this. That's why I say we like the direction, because there are a million ways in which this could become unworkable if implemented wrong. For example, what rates are we going to pay? We won't know until those tariffs are done and settled."
Wednesday's ruling comes more than half a year after the CRTC heard submissions from industry players, academics, consumer advocates and municipal groups over the course of a nine-day public hearing in late November and early December.
Incumbent telephone and cable companies have traditionally dominated the market for Internet services, but in the 1990s the commission began mandating wholesale access by independent players to certain parts of the incumbents' networks. The system was meant to increase competition at the retail level by allowing independent ISPs to lease access to facilities they could not practically build themselves and market new Internet services to the public.
There are now more than 500 alternative ISPs in Canada – including players like TekSavvy, Distributel and Primus – but the incumbents still dominate the market, with independent providers accounting for just 8 per cent of revenue from residential customers in 2013, according to the CRTC's most recent published numbers.
The five largest providers – BCE Inc., Rogers Communications Inc., Quebecor Inc., Shaw Communications Inc. and Telus Corp. – together controlled 75 per cent of revenue in 2013. (BCE owns 15 per cent of The Globe and Mail.)
The CRTC last reviewed the wholesale regime in 2008 and since then, the facilities-based players have been investing in upgrades to their legacy systems and in some cases bringing fibre-optic technology – which allows for greater speeds and capacity – right to customers' doors.
Major Internet providers warned the commission during the hearing that mandating access to fibre services would create a disincentive to them investing in such infrastructure in the first place.
CRTC Chairman Jean-Pierre Blais said in an interview Wednesday that the incumbents need to invest to remain competitive with each other, particularly in the case of the telephone companies. That's because cable operators can achieve higher speeds over their traditional coaxial cables using DOCSIS (data over cable service interface specification) technology, compared to the speeds the telcos can deliver over their original copper wires.
"Our view is the incumbent telcos have a market reason to invest in improving their plant through the investment in fibre," Mr. Blais said. "That's what Canadians expect and because of market conditions they have to do that investment. So we're quite confident that's going to happen."
The ruling also stated that access to "aggregated" services – which bundles access to the "last mile" along with transport of data to and from the broader Internet – will no longer be mandated. The CRTC said it will take a period of three years to phase out aggregated access and the transition will begin in Ontario and Quebec, which is where many of the country's independent ISPs operate.
Mr. Stein said disaggregation will require independent players to invest more in their own core networks, but added, "Ultimately it allows us to get much closer to the customer and deliver more value."
The commission will set the costs for access to fibre services as part of a follow-up proceeding after the approach to disaggregation is determined.
The CRTC declined to mandate access to Internet backhaul services, known as "ethernet."
Bill Sandiford, the president of the Canadian Network Operators Consortium (CNOC), which represents many independent ISPs, said in a press release the ruling will give Canadian consumers more choice in terms of price and quality, stating, "The decision will have a profoundly positive impact on Canadian consumers, competition, and competitors."
Consumer advocate group OpenMedia.ca also praised the ruling, calling it the "first step towards ensuring small independent ISPs are able to sell fibre Internet in Canada, which should expand access and affordability for users."
Representatives for BCE, Rogers and Quebecor declined to comment on the ruling Wednesday, while Telus and Shaw were not immediately available for comment.