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Telecom Order CRTC 2022-96

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Reference: 8740-S9-202007609

Ottawa, 5 April 2022

Public record: Tariff Notice 36

Shaw Cablesystems G.P. – Introduction of Internet 1500 wholesale high-speed access service

The Commission approves with changes, on an interim basis, the application from Shaw Cablesystems G.P. (Shaw) to introduce Internet 1500 wholesale high-speed access service, which falls within the new Speed Band 10. Specifically, the Commission approves on an interim basis a monthly access rate of $50.84, and directs Shaw to file a cost study in support of Speed Band 9 (granted interim approval in Telecom Order 2021-57) and to file a cost study in support of Speed Band 10.

The Commission denies the three conditions proposed by Shaw, as well as Shaw’s request to have Tariff Notice 36 considered concurrently with Shaw’s application for relief from the speed-matching requirement. The Commission also denies the request by TekSavvy Solutions Inc. to impose an administrative monetary penalty on Shaw.

Background

  1. On 27 May 2020, the Commission received an application (the Relief Application) from Shaw Cablesystems G.P. (Shaw), in which the company requested relief from the speed-matching requirement as it applies to Shaw’s next-generation broadband speed tiers at and above 1000 megabits per second (Mbps) pending the following:
    • completion of the Commission’s review of the rate-setting methodology for wholesale telecommunications services; and
    • elimination of asymmetrical wholesale high-speed access (HSA) obligations between Shaw and the incumbent local exchange carriers (ILECs) in the serving areas in which Shaw operates.
  2. In the Relief Application, Shaw submitted that five years have passed since the Commission issued Telecom Regulatory Policy 2015-326, which mandated competitor access to the ILECs’ fibre-to-the-premises (FTTP) services.Footnote 1 However, Shaw noted that due to the lack of a final decision on wholesale FTTP access nationally, ILECs continue to enjoy a “regulatory holiday” from mandated wholesale HSA requirements for FTTP access and its associated high speed service, while Shaw and other cable carriers have to contend with regulatory asymmetry with respect to all required service speed offerings in the wholesale HSA market. Due to the speed-matching requirement, cable carriers must continue to offer the wholesale market residential speed tiers of up to 750 Mbps or beyond, while ILECs are only required to offer their wholesale customers residential service speeds up to those speeds deliverable over copper or fibre-to-the-node (FTTN) facilities.Footnote 2
  3. Accordingly, Shaw submitted that its requested relief was urgently required to address the lack of competitive and technological neutrality pursuant to the Commission’s wholesale HSA regime.

Application

  1. The Commission received an application from Shaw (Tariff Notice [TN] 36), dated 5 November 2020, in which the company proposed introducing Internet 1500 wholesale HSA service (hereafter, 1.5 Gig service), which falls within the new Speed Band 10 (1001 Mbps to 1500 Mbps downstream and up to 100 Mbps upstream). The 1.5 Gig service offers speeds of up to 1500 Mbps downstream and 100 Mbps upstream.
  2. Shaw proposed minimum and maximum interim monthly access rates of $101.69 and $127.10, respectively. These rates were calculated by taking two of its proposed interim rates and pro-rating them to reflect the higher speed being offered (a process referred to as interpolation).
  3. Shaw submitted that TN 36 should only be considered in the event that the Relief Application is denied.
  4. Shaw argued that the approval of the Relief Application would, among other concerns: (i) address harms to consumer choice in the market for gigabit speeds stemming from ongoing regulatory uncertainty and asymmetry; (ii) provide a workable measure to establish regulatory symmetry and competitive and technological neutrality in the wholesale obligations applicable to Shaw and its ILEC competitors in the residential market for Shaw’s next-generation broadband speed tiers at and above 1000 Mbps; (iii) address the challenges associated with establishing a just and reasonable rate while the proceeding initiated by Telecom Notice of Consultation 2020-131 is under review; and, (iv) provide regulatory certainty and stability while the Commission’s wholesale wireline framework review (as part of Telecom Regulatory Policy 2015-326) is underway.
  5. Shaw further submitted that approval of the Relief Application would place consumers at the forefront of the wholesale access framework by promoting facilities-based investment, lead to dynamic competition, and promote consumer choice in the market for gigabit speeds. Furthermore, the requested relief would advance the policy objectives of the Telecommunications Act (the Act) and satisfy the requirements of the 2019 Policy DirectionFootnote 3by promoting Canadians’ access to affordable, high-quality telecommunications services in both urban and rural areas, fostering increased reliance on market forces, and ensuring the encouragement of all forms of competition and investment.   
  6. With respect to the proposed rates, Shaw submitted that it is currently not reasonable or feasible to file a cost study for the newly introduced Speed Band 10 while the wholesale rate setting review (as part of Telecom Notice of Consultation 2020-131) is underway.
  7. In addition, Shaw submitted that the Commission’s usual practice of approving the nearest lower-speed tier rate on an interim basis is inappropriate for Speed Band 10 because the nearest lower speed tier with approved final rates through a cost study is Speed Band 7 (251 Mbps to 500 Mbps downstream). Approving this speed tier rate would force Shaw to offer its new service at rates below cost, at least until the wholesale rate-setting review is completed.
  8. Shaw further requested that any tariff applicable to its new 1.5 Gig service also include certain terms and conditions, which are discussed in detail below.
  9. The Commission received interventions from the Competitive Network Operators of Canada (CNOC) and TekSavvy Solutions Inc. (TekSavvy).

Issues

  1. The Commission has identified the following issues to be addressed in this order:
    • Should the Commission consider TN 36 and the Relief Application concurrently?
    • What would be the appropriate interim rate for Shaw’s 1.5 Gig service and Speed Band 10?
    • Are Shaw’s proposed conditions for offering its 1.5 Gig service reasonable?
    • Should the Commission consider the imposition of administrative monetary penalties (AMPs)?

Should the Commission consider TN 36 and the Relief Application concurrently?

Positions of parties

  1. Shaw submitted that it is seeking approval of TN 36 only if the Relief Application is denied. If the Relief Application is denied, according to Shaw, approval of TN 36 would retain some measure of fairness for Shaw through interim rates and conditions that will allow it to continue to offer its 1.5 Gig service to its own retail customers.
  2. Shaw therefore submitted that it is not possible to consider TN 36 independently from the Relief Application.
  3. Shaw stated that if the Commission denies the Relief Application, then the only way to ensure some limited measure of regulatory fairness and compliance with the 2019 Policy Direction and the policy objectives of the Act would be to mandate access based on rates and terms that ensure Shaw’s continued ability to offer its 1.5 Gig service. In this situation, Shaw contended that approval of TN 36 would protect the public interest, but to a lesser extent than the approval of the Relief Application.
  4. In their interventions, CNOC and TekSavvy submitted that TN 36 is an attempt by Shaw to circumvent the Commission’s longstanding and principled approach to wholesale rate-setting. They added that the interim rates for Speed Band 8 and Speed Band 10 should automatically be adjusted in light of the final rates that will apply to the nearest lower rate proxies upon completion of the review and vary of Telecom Order 2019-288.
  5. In response to CNOC, Shaw argued that the Relief Application and the conditions proposed therein are necessary to address the lack of competitive and technological neutrality pursuant to the Commission’s wholesale HSA regime.

Commission’s analysis and determinations

  1. Shaw has raised important issues related to the current wholesale HSA regulatory framework, notably with regard to its competitive effects. Shaw argued that due to the speed-matching requirement, it must offer its 1.5 Gig service on the wholesale market as it offers the same speed for its own retail customers. As Shaw has pointed out, this is a competitive and financial constraint that ILEC competitors are not subject to for comparable speeds.
  2. Disposing of the Relief Application raises broader issues and policy considerations central to the wholesale HSA framework and specifically to the transition from aggregated to disaggregated HSA. These issues are beyond the scope of a tariff application related to the introduction of a new service speed band.
  3. TN 36 should be reviewed independently of the Relief Application in order to make the new service available to the wholesale market as soon as possible. Until a change in policy is decided, the existing policy applies, including with regard to the speed matching requirement. Delaying the introduction of Shaw’s 1.5 Gig service any further would be harmful to consumers and wholesale customers.
  4. Shaw should remain in compliance with the current speed-matching requirements as set out in Telecom Regulatory Policy 2010-632, which require an incumbent to provide wholesale services at the same speeds as those being offered to its retail end-users.
  5. In light of the above, the Commission denies Shaw’s request that TN 36 be evaluated concurrently with the Relief Application. This determination is consistent with Telecom Order 2021-57, in which the Commission denied Shaw’s request to have its Internet 1000 wholesale HSA service (hereafter, 1 Gig service), which falls within Speed Band 9, evaluated concurrently with the Relief Application.

What would be the appropriate interim rate for Shaw’s 1.5 Gig service and Speed Band 10?

Positions of parties

  1. Shaw objected to the requirement to file a tariff for its 1.5 Gig service. Shaw submitted that it is unable to file a cost study to establish just and reasonable rates for this new service while the Commission’s review of the wholesale rate-setting methodology is underway, pursuant to Telecom Notice of Consultation 2020-131.
  2. Shaw further argued that when cost studies cannot be produced at the launch of a new service speed, the Commission’s usual practice has been to approve the rate applicable to the nearest lower-speed tier on an interim basis, pending a review of a supporting cost study. However, in this case, Shaw argued that this approach is unsuitable and will not meet the requirement for just and reasonable rates (or an approximation thereof), for two key reasons:
    • The next-lowest speed band with interim rates approved is Speed Band 7 (251 to 500 Mbps downstream), which is significantly lower than the proposed 1.5 Gig service speed. Using the Speed Band 7 interim rates would force Shaw to offer its 1.5 Gig service at rates below cost, at least until the wholesale rate-setting review is completed.
    • The interim rate for Shaw’s 1.5 Gig service is likely to be in place for a long time, given the anticipated timeline of the wholesale rate-setting methodology review. Furthermore, the potential retroactive adjustments and uncertainty associated with Telecom Order 2019-288 and related legal challenges present an inherent risk to Shaw’s ability to recover its investments into new high-speed access services above 1000 Mbps. 
  3. Shaw proposed the use of interpolation to develop a range for the interim rate of Speed Band 10, saying that this method would be a more reasonable proxy than the Commission’s usual approach, and would be consistent with the approach proposed in TN 34. Shaw interpolated from the proposed TN 34 interim access rates by multiplying both the minimum and the maximum rates by 1.5, which represents the proportional difference between the maximum download speeds offered by Shaw for its 1 Gig service and its 1.5 Gig service.
  4. Shaw submitted that, in light of the above-mentioned reasons, in accordance with subsection 25(1) of the Act and consistent with its submission, rates for the 1.5 Gig service should be subject to commercial negotiation at this time. The appropriate interim access rates for the 1.5 Gig service should be within a rate range with a minimum rate of $101.69 and a maximum rate of $127.10 per end-user per month.
  5. CNOC’s resubmission of its TN 34 intervention as part of its intervention relating to TN 36 urged the Commission to deny all of Shaw’s proposals and instead establish an interim rate for Shaw’s 1.5 Gig service based on the interim rate for the nearest lower-speed tier for Speed Band 8 ($50.84), as established in Telecom Order 2019-52.
  6. CNOC added that when all appeals of Telecom Order 2019-288 are disposed of and all stays are lifted, the interim rates for Speed Band 8, Speed Band 9, and Speed Band 10 should be automatically adjusted in light of the final rates that apply to the nearest lower rate proxies for those services. At that time, Shaw should also be required to promptly file cost studies that comply with all Commission rules and prior costing determinations for its 1.5 Gig service and all of its other wholesale HSA services introduced without cost studies.
  7. Conversely, in its intervention, TekSavvy submitted that the Commission must set cost-based interim rates for Shaw’s new service in TN 36 using the approved just and reasonable access rate of $11.47 as a reasonable proxy following the decision in Telecom Order 2019-288.

Commission’s analysis and determinations

  1. In Telecom Decision 2021-181, following the review and vary of Telecom Order 2019-288, the Commission approved, on a final basis, the rates for Shaw’s aggregated wholesale HSA services between Speed Bands 1 and 7.
  2. Shaw did not submit a cost study for the 1.5 Gig service (Speed Band 10) with TN 36. In addition, the Commission notes that the new 1.5 Gig service does not fall within any of Shaw’s existing speed bands and their associated rates approved on a final basis in Telecom Decision 2021-181.
  3. In the absence of an economic cost model to support a new proposed wholesale HSA service rate, the Commission has generally used a proxy approach to setting interim rates. This approach sets the interim rate for a new speed band equal to the approved rate associated with the next lowest existing speed band.
  4. Shaw is proposing an interim rate based on minimum and maximum rates calculated from proposed interim rates for its 1 Gig service. The Commission notes that these proposed interim rates were denied for Shaw’s 1 Gig service in Telecom Order 2021-57.
  5. In the proceeding leading to Telecom Order 2012-706, Rogers Communications Canada Inc. (RCCI) proposed interim rates for its new wholesale HSA services that were not based on cost studies, but rather on the interpolation approach. The Commission denied RCCI’s proposed interpolation approach to calculate interim wholesale HSA access rates as it deviated from past practice and RCCI had not filed cost-based rates.
  6. In Telecom Decision 2016-117, Shaw also proposed an approach in which approved cost-based wholesale HSA service rates could be used to generate new rates through interpolation. The Commission rejected this approach in that decision, stating that interpolation has the effect of treating all costs as if they vary by speed, including speed-independent costs, which are fixed. Accordingly, the Commission rejected the use of interpolation as a means of setting rates.
  7. In Telecom Order 2021-57, the Commission noted that Shaw’s proposed minimum and maximum rates were interpolated from the interim rates for wholesale Internet 600 and Internet 750 services. The Commission indicated that, in the absence of a cost study, it has historically used a proxy approach to set interim rates for new speed bands, setting them equal to the lower rate associated with the next lowest existing speed band. As such, for the same reason cited in Telecom Decision 2016-117, the Commission did not consider it appropriate to use the interpolation approach to determine the rate for Shaw’s 1 Gig service. The Commission therefore found that an appropriate interim monthly access rate for this service would be equal to the interim access rate for the next lowest speed band.
  8. For this same reason, the Commission does not consider it appropriate to use the interpolation approach in this case to determine the rate for Shaw’s 1.5 Gig service.
  9. In light of the above, the Commission approves, on an interim basis, effective on the date of this order, a rate equal to the next lowest approved speed band ($50.84), for Shaw’s 1.5 Gig service in Speed Band 10.
  10. The Commission directs Shaw to file the cost study in support of Speed Band 9 and the cost study in support of Speed Band 10 within 60 days of this order. Speed Band 9 (granted interim approval in Telecom Order 2021-57) and Speed Band 10 were not covered by the proceeding that set final rates for the aggregated wholesale HSA service in Telecom Decision 2021-181 following the review and vary of Telecom Order 2019-288. The Commission directs Shaw to continue using Phase IIFootnote 4 in its cost studies until the review of the wholesale rate-setting methodology in Telecom Notice of Consultation 2020-131 is complete.
  11. The Commission directs Shaw to issue, within 10 days of the date of this order, revised tariff pages that reflect the approved interim rates for its 1.5 Gig service.

Are Shaw’s proposed conditions for offering its 1.5 Gig service reasonable?

Positions of parties

  1. Shaw submitted that TN 36 should only be considered in the event that the Commission declines to grant the relief requested in the Relief Application.
  2. Shaw further requested that the Commission approve the availability of the 1.5 Gig service with the following conditions:
    • Condition 1: Interim rates will remain in place until the Commission has completed its review of the wholesale rate-setting methodology initiated in the Telecom Notice of Consultation 2020-131 proceeding, at which time a just and reasonable monthly access rate will be determined based on the results of the review. Shaw proposed that this condition include the option to revise the speed range for Speed Band 10 based on the new costing methodology.
    • Condition 2: Interim rates will not be subject to any retroactive adjustments in connection with the final rates established for Speed Band 7.
    • Condition 3: Shaw will have the ability to immediately destandardize the 1.5 Gig wholesale Internet access service following the removal of its 1.5 Gig service offer from the retail market. The company requested that the Commission confirm that it will waive the requirement set out in paragraph 37 of Telecom Information Bulletin 2010-455-1, which creates a 60-day period in which a wholesale HSA service provider is obligated to continue to provide to wholesale customers a speed tier that is not available to wholesale HSA service providers’ retail customers following destandardization and/or withdrawal of the retail service.
  3. In its intervention, CNOC submitted that the Commission should deny all conditions proposed by Shaw, arguing that the conditions proposed in TN 36 are an attempt by Shaw to circumvent the Commission’s longstanding and principled approach to wholesale rate-setting, and to impose grossly inflated interim rates.
  4. In its intervention, TekSavvy also took exception to Shaw’s proposed conditions, arguing that they represent a change to the regulatory framework and are inappropriate for consideration in a tariff proceeding.
  5. In response to CNOC and TekSavvy, Shaw submitted that that the conditions of TN 36 have been carefully designed to permit Shaw to launch its 1.5 Gig service and to ensure an orderly transition following any changes to the wholesale HSA framework, including its rates and rate-setting methodology.

Commission’s analysis and determinations

Condition 1
  1. Telecom Notice of Consultation 2020-131 has a significant and complex record that will take time to fully analyze. The Commission is of the view that it is not appropriate to deprive consumers of the benefits of new services and speeds pending an outcome to the proceeding initiated by Telecom Notice of Consultation 2020-131, which is a forward-looking policy and methodology review.
  2. In Telecom Order 2000-789, the Commission determined that the rates for large cable carriers’ access services should be calculated using the appropriate Phase II rate setting methodology. Accordingly, the Commission is of the view that until final determinations are rendered with regard to the proceeding initiated by Telecom Notice of Consultation 2020-131, rates associated with new wholesale HSA services must be developed using the current approved Phase II rate setting methodology. Therefore, the Commission denies Shaw’s first proposed condition.
Condition 2
  1. The Commission notes that its practice is to consider determinations concerning retroactivity in light of the submissions of parties when establishing the final rate. The Commission follows this practice to ensure that it is maintaining just and reasonable rates and is furthering the policy objectives based on sound costing inputs and methodologies. The Commission is not persuaded that it should depart from this practice in this case.
  2. Accordingly, the Commission denies Shaw’s second proposed condition.
Condition 3
  1. In Telecom Decision 2016-65, the Commission proposed to align the intervention and reply periods for different types of applications as much as possible to provide greater consistency and to remove uncertainty. Specifically, as it pertains to the timeline to destandardize or withdraw a wholesale service, the Commission approved a requirement for applications to be filed at least 60 calendar days before the proposed effective date (the 60-day filing requirement).
  2. In TN 34, Shaw requested that the Commission waive the same requirement, which is set out in paragraph 37 of Telecom Information Bulletin 2010-455-1 and which states that applications to destandardize and/or withdraw a service must be filed with the Commission at least 60 calendar days before the proposed effective date. The Commission subsequently denied Shaw’s proposal in Telecom Order 2021-57 with the determination that a tariff application is not the appropriate mechanism to remove the 60-day filing requirement.
  3. The 60-day filing requirement continues to be critical to allow the Commission and other parties to evaluate destandardization/withdrawal applications to ensure that they comply with all applicable requirements. The 60-day filing requirement further ensures that competitors have sufficient notice to plan and prepare for the destandardization/withdrawal of a wholesale HSA service. Additionally, the 60-day filing requirement is an important safeguard for consumers to ensure that they will not suddenly lose their service option.
  4. A tariff application is not the appropriate mechanism to remove the 60-day filing requirement for destandardization/withdrawal applications. The Commission is of the view that there would not be so much uncertainty surrounding the 1.5 Gig service that it would require unique treatment with respect to the 60-day filing requirement.
  5. Therefore, the Commission denies Shaw’s third condition, specifically as it pertains to the timeline to destandardize or withdraw a wholesale service, noting that a tariff application is not the appropriate mechanism to remove the 60-day filing requirement.

Conclusion

  1. The Commission notes that in its application for TN 34, Shaw proposed similar conditions as those proposed in TN 36 with respect to the introduction of its 1 Gig service, as part of Speed Band 9. Determinations on these conditions were issued in Telecom Order 2021-57,Footnote 5 whereby the Commission denied the set of four conditions proposed by Shaw.
  2. The Commission therefore denies all three conditions proposed by Shaw in TN 36 in relation to the offering of its 1.5 Gig service.

Should the Commission consider the imposition of AMPs?

Positions of parties

  1. In its intervention, TekSavvy submitted that the Commission should impose AMPs to address Shaw’s continual violation of its obligations concerning competitor tariff applications, primarily (i) failure to file a competitor tariff application the same day it launches its service; (ii) failure to make its service available on the wholesale market on the same day it launches its service; and (iii) deviation from the established rate-setting methodology.
  2. In response, Shaw submitted that TekSavvy’s suggestion for the imposition of AMPs is without merit and entirely inconsistent with the Commission’s guidelines regarding AMPs. Shaw further submitted that it has been transparent with the Commission, complying with all procedural requests in its application. 

Commission’s analysis and determinations

  1. AMPs constitute a tool available to the Commission for promoting compliance with the Act, regulations, or Commission decisions. In the context of the present proceeding, the Commission considers that Shaw’s application is not in and of itself a violation of the current third party Internet access tariff or a violation of the Act, regulations, or Commission decisions.
  2. The Commission therefore denies the request by TekSavvy to impose an AMP on Shaw for its TN 36 application.

Conclusion

  1. The Commission denies Shaw’s request to have TN 36 considered concurrently with the Relief Application. The Commission approves on an interim basis a monthly access rate of $50.84 for Shaw’s 1.5 Gig service, which falls within the new Speed Band 10.  The Commission further directs Shaw to file a cost study in support of Speed Band 9 and a separate cost study in support of Speed Band 10 within 60 days of this order. The Commission directs Shaw to issue, within 10 days of the date of this order, revised tariff pages reflecting the Commission’s determinations set out above.Footnote 6 In addition, the Commission denies the three conditions proposed by Shaw, as well as TekSavvy’s request to impose an AMP on Shaw.

Policy Directions

  1. The 2019 Policy Direction states that the Commission should consider how its decisions can promote competition, affordability, consumer interests, and innovation.
  2. The Commission has reviewed Shaw’s application in light of the 2019 Policy Direction and has considered its aspects to the extent necessary, using measures that are efficient and proportionate to their purpose. The Commission considers that approval of Shaw’s 1.5 Gig service in a timely fashion is compliant with the 2019 Policy Direction, as it will positively impact competition and end-users since wholesale HSA service customers will have access to wholesale 1.5 Gig service and be able to offer retail services to their own customers.
  3. Further, in compliance with subparagraph 1(b)(i) of the 2006 Policy Direction,Footnote 7 approval of this application advances paragraph 7(f) of the Act.Footnote 8 To ensure regulation is efficient and effective, the Commission considers that the issues raised by Shaw, notably regulatory asymmetry, speed matching, and the use of interpolation as a costing methodology, should be predominantly considered in policy proceedings rather than in TNs. This is to ensure that all interested parties have the opportunity to participate and to ensure that the Commission expeditiously disposes of TNs, thereby limiting regulatory delay in services being introduced in the market.

Secretary General

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