Chris Seidl to the 2015 Canadian ISP Summit

Speech

Toronto, Ontario
November 11, 2015

Chris Seidl, Executive Director, Telecommunications
Canadian Radio-television and Telecommunications Commission

Check against delivery

Good afternoon and thank you for inviting me to speak with you today. It’s my distinct pleasure to address this forum.

I doubt most people outside this room are aware, but this summit takes on ever-greater importance in the lives of Canadians with each passing year.

That’s because the role played by the Internet in our daily lives becomes more significant with each passing year. The Internet brings entertainment; information and business tools directly to Canadians’ fingertips—anywhere they live, work or play.

It also connects people with essential services: those that allow them to participate in democracy, connect with health and government services, and transact in the digital economy.

The importance of the work being done by the companies you all represent cannot be overstated. You bring the digital economy directly into the homes and businesses of the people who use it most. This summit is just one of many forums you use to discuss how to better deliver such valuable services.

I would be remiss if I did not also mention the work we regulators do. The CRTC plays a role in fostering greater competition and choice for Canadians in the market for Internet services.

We are particularly focused on providing the right regulatory frameworks by which advanced services —including wired and wireless broadband— can be promoted as the means for Canadians everywhere to connect with the digital economy.

Now more so than ever, people across the country are moving away from legacy circuit switched services over copper loops and toward applications over fixed and mobile broadband as the medium of choice to meet their daily needs.

Indeed, nearly two in three adult Canadians own a smartphone and more than 96 percent have access to download speeds of at least 5 megabits per second (Mbps).

The steps we have taken recently concerning telecommunications — and here I’m referring to our decisions on wholesale wireline and wireless services as well as the launch of our proceeding on basic telecommunications services—all lead to the goal of granting greater access to these broadband services.

Our aim is to enable a wide range of choice and ubiquitous availability in this market space so that Canadians can connect with the high-quality, innovative and affordable advanced services they need.

Let me begin by bringing you up to date on our transformative decision on wholesale wireline services.

Wholesale wireline decision

In October 2013, we launched a public proceeding to review the framework under which the country’s large telephone and cable companies provide wholesale wireline services—access to parts of their networks, in other words—to their competitors.

This framework describes the approach we use to determine which services must be offered, the way in which rates are determined, and the specific terms and conditions under which these services are to be provided.

Ideally, we prefer not to regulate such matters. Our preference is to let market forces set the terms of competitive arrangements among companies.

Yet in some cases—such as with those wholesale services that enable service offerings to Canadians and which are prohibitively expensive for competitors to establish and maintain—we must intervene. Absent a clear set of regulations enforced by an impartial arbiter, smaller competitors in particular would face significant barriers to delivering services.

We also want to foster further investment in innovative services and networks by both incumbents and competitors.

The aim of our wholesale wireline proceeding was to determine whether the framework we had in place since 2008 needed to be updated to foster competition in the residential and business marketplaces.

We considered whether existing regulated wholesale services should continue to be mandated, whether certain deregulated services should be re-regulated and whether competitors should have access to newer facilities, such as fibre optic connections to homes and businesses.

Our study began, as most do, with a detailed consultation with Canadians. In addition, at our hearing in November 2014, many interested parties came forward with submissions.

Among them were large and small carriers, academics, consumer groups and municipal government officials.

It’s imperative for us at the CRTC to gather a large volume of facts and opinions from such a diversity of groups and individuals. It helps us build as complete a public record of information as possible. It also tells us that Canadians understand the importance, and care about the outcomes, of the decisions we take.

We issued our wholesale wireline decision in July. I won’t spend too much time on giving you a broad-strokes overview of the decision right now, since I’m sure most of you have had time to consider it in detail. But I will say that in many regards, this is a highly principled decision.

It only mandates those services that are truly essential – that is needed and not duplicable by competitors - and does not mandate those that are not.

As mentioned earlier, Canadians are transitioning away from legacy services and toward advanced services such as broadband. As they do, there is less and less need for CRTC intervention in these traditional fields and more focus needed in emergent ones.

That idea is very much in keeping with the CRTC’s desire to put in place regulatory frameworks that promote such advanced services and to only intervene in the most important market areas where it is necessary to do so. As I said before, our preference is to rely on market forces.

Let me highlight three aspects of the decision.

First, it adjusts the criteria by which the Commission will determine whether a wholesale service should be mandated or not and maintains the costing framework that was already in place—namely a cost-based approach to rate setting.

The cost-based approach can be daunting for many of us, but it is the best approach to determining just and reasonable rates. The processes we have to set rates are sometimes lengthy given the complexity of the services and costing models.

We heard in the proceeding the desire to further develop the industry knowledge in costing. Our plan is to hold a forum in the spring of 2016 to explain the mechanics of the costing approach. Your participation in this forum and these processes are more than welcomed. More details to come.

In addition, we made a concerted effort in the decision to establish clear and transparent rules for the provision of wholesale services. We understand how important regulatory certainty is in decision-making processes for incumbents and competitors alike.

Second, the decision removes copper loops from the list of services that must be offered. Such facilities are in decline and have limits on what services can be offered.

Given the installed base of customers, there is a distinct phase-out period, after which their availability will be determined exclusively by market forces.

Third, it directs the large incumbent carriers to make their wholesale high-speed access services available to competitors.

A framework for delivery of wholesale services is particularly important in areas in which incumbent companies hold market power and in which the services they are capable of delivering are of utmost importance to Canadians.

In this case, we have decided to mandate the portion of the network where the incumbents clearly possess market power: namely the access facilities that allow Canadians to connect to information, entertainment, businesses and health services and brings them closer to their democratic institutions.

I know that the requirement to make its access facilities available to competitors is opposed by at least one major incumbent, but access to these fibre facilities is critical for the delivery of higher bandwidth applications and services and the competitive landscape.


Canadians need choice among providers of these services to participate fully in the digital economy at reasonable rates.

In the broadband home and business of the future, everything and everyone will be connected. Our decision will help pave the way to making this a reality in the interest of all Canadians.

Disaggregated wholesale high speed access services

One of the more important aspects of the decision that bears discussion is the move to disaggregated wholesale high-speed access services. Let me explain what that means and why it will be important.

Under the current aggregated service-delivery model, competitors follow paths to their customers’ doors by largely relying upon the incumbent carrier’s network.

This path includes an access component, a transport component and an interface component, and generally requires competitors to make very little investments in their own facilities to connect with incumbents.

Typically only one interface per province is required. Facility investments are made by competitors to connect these interfaces to the broader Internet.

A disaggregated service model changes the equation. Incumbents will provide competitors with access to end-users’ premises through local interfaces. The paths followed to the end-user’s home or business will also vary.

They will include only the access and interface components. The transport component used in the aggregated model is essentially removed from the equation.

This change is significant. Generally speaking, the transport component is viewed as available or buildable. Under an aggregated mode, competitors serve clients without making significant investments in their transmission facilities.

They must therefore rely on whatever margins they can earn between the costs they pay to incumbents to use wholesale services (which are set by the CRTC) and the retail rates they charge to consumers.

Under the disaggregated model, competitors will be required to invest in transmission facilities to the incumbent’s local interface, or obtain such facilities from another service provider.

This disaggregated approach will encourage competitors to innovate by giving them greater control over the costs they pay and the services they deliver. It should therefore make their profitability less dependent on the rates set by the CRTC.

We also expect that it will encourage competitors to invest further in alternate transport facilities and eventually access facilities, which in turn will strengthen Canada’s telecommunications system as a whole.

Ultimately, the move to this model will create stronger competition and increase facilities-based competition. It should help to create competitors that are national, regional or local in scope and some that supply transport services to others. 

Next steps and implementation

This brings me nicely to my next point: when and how will this change be rolled out.

Our implementation plan begins here in Ontario and in Quebec where competitor demand for the wholesale high speed access service is greatest. We have tasked the large incumbent carriers in these provinces to file proposed configurations for their disaggregated service models.

Bell, Cogeco, Rogers and Vidéotron have already done so. We are carefully considering those proposals now. There are several issues that need to be sorted out.

As always, it’s vital that we get the details of those solutions absolutely correct in order to achieve the best outcomes for all.

Once we approve those configuration models, we will proceed to the tariffing stage by which the rates, terms and conditions, and implementation timeframes will be established.

We expect that the disaggregated high-speed access service model will encourage more competition than there is to date and will be introduced in the other regions of Canada as well.

Even though the aggregated service configuration is no longer mandated, it will remain in place until such time as each local incumbent service provider puts a disaggregated solution in service in its operating territory. 

The ultimate goal is to have a smooth transition spurred by competitor adoption of the disaggregated service with a corresponding reduction in the aggregated service.

It is difficult to predict the timing of this transition but we can expect many business and regulatory steps along the way. The final rate setting process will take us well into next year.

Wholesale High-speed Access Working Group

A competitive wholesale market helps ensure that Canadians have access to quality Internet services at reasonable prices at the retail level.

In particular, the efficient delivery of wholesale high-speed access services is essential to a competitive broadband market.

The Canadian Network Operators Consortium (CNOC) filed an application with the CRTC that identified a number of issues relating to the delivery of cable carriers’ wholesale high-speed access services. To their credit, the cable carriers agreed with a number of points raised in that application.

A Wholesale High-speed Access Working Group was created and it was decided that it was necessary to conduct a comprehensive review of cable carriers’ services in order to determine how they can be streamlined and optimized.

The working group expects to complete its work in the second quarter of 2016.

The CRTC encourages and expects industry stakeholders to work together to resolve concerns such as these.

In this case in particular, optimizing the delivery of cable carriers’ wholesale high-speed services will help improve the competitiveness of the retail Internet services market and ultimately lead to better choices for Canadians.

Optimizing competitor access is important. So too is ensuring a sufficiently high quality of service from incumbents to competitors.

As captured in our three-year plan, in 2016 we plan to launch a review of the current competitor quality of service regime which has been in place for a decade. 

The purpose of the regime, including the rate rebate plan for competitors, was to ensure that competitors receive service from the incumbents at a sufficiently high level to enable them to compete with the incumbents.

Through the upcoming proceeding, the CRTC intends to review the competitor quality of service regime taking into account the new wholesale services framework.

Other files of importance

Before I finish, I’d like to leave you with a few thoughts on two other CRTC proceedings that are surely of interest. The first is our review of the basic telecommunications services offered across the country.

As you no doubt know by now, we are looking into the question of which telecommunications services Canadians need to participate fully in the digital economy. When we say Canadians we mean as residential consumers, businesses, creators and citizens.

Four years ago, we established target broadband speeds of 5 Mbps download and 1 Mbps upload, which we expected should be available to all Canadians, through a variety of technologies, by the end of 2015. Although that target has been exceeded in most markets, some more rural and remote areas of the country still lag behind.

Much has changed in the landscape for broadband services since we completed our last review. Available speeds are increasing at tremendous rates, and Canadians are consuming bandwidth in ever-greater quantities.

Clearly it’s time we reviewed our basic telecom services framework and broadband targets.

If you haven’t already done so, I urge you to participate in this proceeding. Tens of thousands of Canadians already have, and we want to hear from more.

The more input we gather from individual consumers, businesses, service providers and anchor institutions such as local governments, hospitals and schools, the more complete the public record that is available to render the decision.

Finally, this month is the deadline we have set for parties to file their proposed wireless roaming tariffs. Recall that we announced last spring that we would regulate the wireless roaming rates charged by incumbents to competitors.

Our follow-up proceeding to set those final rates will begin once we have those proposed tariffs in hand.

Conclusion

As you can see, on the Telecom front, a lot has been happening at the CRTC in recent months. The wholesale wireline decision is particularly transformative.

It opens the door for competitors that choose to invest to grow and thrive in the marketplace in the delivery of advanced communications services, and transitions the industry away from old, legacy technologies.

Just as importantly, it strikes the right balance to foster continued investment in the infrastructure that delivers these important services into the homes and businesses of Canadians.

Viewed in conjunction with the proceeding on basic telecommunications services, such change throws open the doors for Canadians to obtain the wired and wireless broadband services they need.

The CRTC’s aim is nothing less than to have a world class communications system that is built on investment and a wide range of choice and availability.

This system will enable Canadians to connect with high-quality, innovative and affordable broadband services and maximize their ability to participate in the digital economy.

Thank you.

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