Telecom - Commission Letter addressed to Distribution List

Ottawa, 5 December 2022

Our reference: 8662-C17-202203230

BY EMAIL

Distribution List

Subject: City Wide Communications Inc. – Application to review and vary Telecom Order CRTC 2022-79. - City Wide Communications Inc. – Application to order Bragg Communications Incorporated, carrying on business as Eastlink, to relocate its third-party Internet access point of interconnection

The Commission is in receipt of an applicationFootnote1 filed on 23 June 2022Footnote2 by City Wide Communications Inc. (City Wide) seeking to review and vary Telecom Order CRTC 2022-79, City Wide Communications Inc. – Application to order Bragg Communications Incorporated, carrying on business as Eastlink, to relocate its third-party Internet access point of interconnection, and directed to Bragg Communications Inc. carrying on business as Eastlink.

In its application, City Wide submitted that there is substantial doubt as to the correctness of the Commission’s finding in Telecom Order 2022-79, in which the Commission denied City Wide’s application to Eastlink, to move its Nova Scotia third-party Internet access (TPIA) point of interconnection (POI) from Pennant Point to a location in the core of Halifax. City Wide added that the correctness of the decision is impugned by fatal errors of mixed fact and law and a fundamental change in circumstances since the decision.

Consequently, City Wide requested that the Commission correct Telecom Order 2022-79 by granting the following relief:

  1. An order from the Commission directing Eastlink to: (1) re-locate its TPIA POI to the New SiteFootnote3 within six months of the Commission’s decision; and (2) refrain from charging wholesale customers any fees or charges associated with their migration to the new POI;
  2. Alternatively, if the Commission does not agree that the New Site is a suitable TPIA POI, an order: (1) regulating Eastlink’s transport services to the Pennant Point TPIA POI in a manner proposed by City Wide to ensure that these services are subject to just and reasonable terms and conditions, including rates; and (2) approving final rates for those transport services that are effective retroactive to 25 March 2022, being the date that the Commission issued Telecom Order 2022-79.

City Wide submitted that its reduced subscriber growth confirms that the excessive transport costs imposed by Eastlink constitute a significant barrier to competition. City Wide contends that its reduced growth since 2018, when Eastlink transitioned to TPIA service, can only be explained by the high transport costs at Pennant Point, thereby confirming the “significant” nature of this barrier to competition.

City Wide added that economic analysisFootnote4 confirms that the cost of transport and transit services at the Pennant Point TPIA POI constitutes a significant barrier to competition and the delivery of competitive Internet access services to consumers. City Wide additionally stated Eastlink’s pricing for transport and transit services (respectively priced 159% and 486% higher than equivalent services from alternative suppliers in central Halifax) and prolonged service ordering and processing delays have the exclusionary and anticompetitive effect of raising the costs of Eastlink’s rivals. City Wide further stated that Eastlink’s inflated pricing of its monopoly transport services to the Pennant Point TPIA POI has increased City Wide’s costs by approximately 12%.

Moreover, City Wide, in their submission, stated that the availability of new information regarding alternate transport supply and opportunities for self-supply of transport functionality at the New Site casted doubt as to the correctness of the Commission’s decision and, as such, this new information constituted a material change in circumstances.

City Wide also submitted that it was denied procedural fairness when Eastlink refused to respond to the Commission staff issued request for information associated with the New Site, a third candidate location for Eastlink’s TPIA POI, which was revealed through disclosure of information that Eastlink previously filed in confidence.

Finally, City Wide submitted that the Commission did not give adequate consideration to the New Site and omitted it from its comparative analysis of the suitability of candidate locations for Eastlink’s TPIA POI and that all the relevant considerations for assessing the appropriateness of a TPIA POI location militate heavily on favour of the New Site.

The Commission received interventions regarding the above-mentioned application from Eastlink, Competitive Network Operators of Canada (CNOC), and The Public Interest Advocacy Centre (PIAC).

Interventions and reply to interventions

CNOC and PIAC supported City Wide’s application. Specifically, PIAC submitted that there was a breach of procedural fairness as City Wide was not given an adequate opportunity to provide its comments regarding Eastlink’s New Site. PIAC also supported City Wide’s argument that the Commission has erred in law by failing to establish a process to develop a complete public record relating to the New Site.

CNOC requested that the Commission reconsider its determinations in Telecom Order 2022-79 and grant the relief requested by City Wide, not only on its compelling merits but also to establish a strong precedent that will deter other incumbents from engaging in the kind of abusive conduct exhibited by Eastlink.

CNOC also added that the transport issues that are demonstrated in City Wide’s application are far from exclusive to Nova Scotia. It added that CNOC members have experienced similar barriers to competition in retail markets that can be traced back to a lack of competitive (and regulated) transport services. CNOC therefore strongly supported City Wide’s call for a proceeding to consider broader issues of regulation of transport.

In its comments, Eastlink opposed the application and stated that there was nothing in City Wide’s application that raised substantial doubt as to the correctness of the Commission’s findings in Telecom Order 2022-79. The company added that the application appears to be a restatement of the same arguments made by City Wide which the Commission correctly denied.

Eastlink added that City Wide and the Chen Report compare City Wide’s costs to provide service in 2017 (prior to Eastlink’s implementation of TPIA) to their costs now to suggest that Eastlink’s transport costs have “increased”. Also, both City Wide and the Chen Report fail to consider a key factor when analysing City Wide’s subscriber growth: the existence of other competitors and new entrants in the TPIA market.

Eastlink stated that its transport rates are based on a variety of factors that reflect its costs of providing the service, and the company has no insight into the terms of the quotes City Wide cited from other providers. 

In its reply to interventions, dated 8 August 2022, City Wide stated that Eastlink’s answers lacked any credible evidence or rationale, and they failed to rebut the grounds that City Wide had identified as justification for a review and variance of Telecom Order 2022-79 due to offering no compelling rebuttal to the urgent need for the relief requested.

City Wide added that the fact that transport rates are based on a “variety of factors” did not account for the extreme pricing levels at Pennant Point, and Eastlink’s exercise of market power over those rates was the sole explanation for the pricing of transport services at this location.

City Wide reiterated that the company was denied procedural fairness, the Commission did not give adequate consideration to the New Site, and that new information regarding transport conditions surrounding the New Site consisted of a fundamental change in circumstances that raises substantial doubt as to the correctness of Telecom Order 2022-79.

City Wide also added that, regardless of the Commission’s choice of relief to vary Telecom Order 2022-79, the Commission should take urgent action and initiate a proceeding to consider the regulatory status of transport services more broadly throughout Canada.

Review and vary criteria

In Telecom Information Bulletin 2011-214, the Commission outlined the criteria it would use to assess review and vary applications filed pursuant to section 62 of the Telecommunications Act (Act). Specifically, the Commission stated that applicants must demonstrate that there is substantial doubt as to the correctness of the original decision, for example due to (i) an error in law or in fact, (ii) a fundamental change in circumstances or facts since the decision, (iii) a failure to consider a basic principle which had been raised in the original proceeding, or (iv) a new principle which has arisen as a result of the decision.

Has City Wide demonstrated that there is substantial doubt as to the correctness of Telecom Order 2022-79?

In the applicationFootnote5 that led to Telecom Order 2022-79, City Wide requested that the Commission order Eastlink to move its TPIA POI from Pennant Point to the core of Halifax, identifying two existing Eastlink locations where a POI could be established. City Wide submitted that Eastlink was using its choice of POI location to drive its transport revenues, for which it was charging more than would be the case were a competitive transport option available in the marketplace. As a result, Eastlink was subjecting City Wide to an undue or unreasonable disadvantage.

At issue was whether the continued operation of Eastlink’s TPIA POI out of its Pennant Point data centre would be in contravention of subsection 27(2) of the Act. In Telecom Order 2022-79, the Commission found that, while Eastlink was subjecting City Wide to a disadvantage and providing itself with a corresponding advantage by means of its POI location, such disadvantage or preference was not undue or unjust. As a result, the Commission denied City Wide’s application to move Eastlink’s Nova Scotia TPIA POI from Pennant Point to a location in the Halifax core.

In its decision, the Commission considered the attributes of Eastlink’s Pennant Point data centre and the company’s other facilities, which supported the conclusion that there were no facilities in the core of Halifax that would suitably serve as a TPIA POI at that time.

The commission notes that, on the record of the proceeding, Eastlink identified that a new site was in the process of being constructed. Following the disclosure of information in some of Eastlink’s responses to the Commission’s requests for information, City Wide submitted that it would need adequate competitive transport to a POI location to make the new Eastlink data centre (also referred to as the New Site), which was under construction within the Halifax Regional Municipality, feasible, and indicated that the company was not aware if there were any competitive transport options serving this new data centre.

Eastlink submitted that it has reduced its reliance on one of the facilities identified by City Wide and was in the process of reducing its reliance on the second of its facilities located in the core of downtown Halifax. The company was instead concentrating its Internet equipment at both its Pennant Point data centre and at the aforementioned New Site, which is a new data centre also located outside the core of Halifax.

Accordingly, and contrary to City Wide’s argument that the Commission did not consider the New Site, the Commission is of the view that it carefully assessed a number of parameters and attributesFootnote6 associated with fully operational facilities existing at that time. The New Site was an in-progress facility and was not operative at the time.

In addition, the Commission is also of the view that parties provided comments and responses based on the information and insights about the New Site as they were available at the time of the original application and contrary to City Wide’s argument, it was not deprived of an opportunity to review whether the New Site could be long-term and viable option as a TPIA POI.

With respect to City Wide discovering since the time the Commission issued Telecom Order 2022-79 that alternative transport options exist in proximity to the New Site, the Commission is of the view that such information does not constitute a material change in circumstances. While City Wide may not have been aware of alternative transport options prior to Telecom Order 2022-79, they have not made clear that these transport options did not exist prior to Telecom Order 2022-79 - only that they just recently found out about them. Knowledge of this availability does not constitute any actual change in circumstances after Telecom Order 2022-79 was rendered. Further, availability of a single possible alternative would not constitute a material change even if that option did not exist at the time Telecom Order 2022-79 was published. Regardless of, in City Wide’s view, the Commission’s reliance on Eastlink’s claims of limited availability of transport options, the availability of suitable and economically feasible transport options is only one consideration that should determine the location of whether a TPIA POI is appropriate.

With respect to the argument as to whether there was a breach of procedural fairness, Commission notes in commentsFootnote7 dated 28 July 2021 following a Commission staff letter, City Wide urged the Commission to close the proceeding and to issue its determinations as quickly as possible. Also, in its reply to comments dated 4 August 2021, City Wide did not raise the need for an additional process.

Furthermore, the Commission considers that the fact that the New Site is now operational does not amount to City Wide having been subjected to undue or unjust discrimination. The New Site was, at the time, projected as a future evolution of the carrier network as a part of long-term planning. Declining to consider an option cannot constitute discrimination if, for all intents and purposes, the option does not exist at the time the issue is being considered. The Commission also considers that City Wide did not provide any evidence to change the Commission’s assessment reflected in Telecom Order 2022-79, nor to conclude that Eastlink was subjecting City Wide to an undue or unreasonable disadvantage.

In light of the above, the Commission finds that City Wide has not demonstrated that there is substantial doubt as to the correctness of the Commission’s finding in Telecom Order 2022-79 due to an error in fact and law. As such, The Commission denies City Wide’s application to review and vary Telecom Order 2022-79.

However, the Commission notes that City Wide’s application to review and vary Telecom Order 2022-79 includes a new detailed economic analysis, which showed that there may be indications that the existing transport rates between City Wide and Eastlink are an issue and present a competitive challenge. Also, interventions and comments submitted suggest that there may be a larger problem in the transport market, including in areas outside of the Halifax area.

The Commission considers that parties should undertake good-faith negotiations to resolve matters such as these on their own and to avail themselves of staff-assisted mediation if they cannot come to an agreement. Depending on the results of bilateral negotiations and staff-assisted mediation, City Wide could file a new application with the Commission.

Furthermore, the Commission directs City Wide and Eastlink to file with the Commission, within 120 days of the date of this letter, a joint report on the result of their negotiations. 

Policy Directions

The 2006 Policy Direction requires, among other things, that the Commission rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives set out in the Act. It also requires the Commission to regulate, where there is a need to do so, in a manner that interferes with market forces to the minimum extent necessary to meet the policy objectives. Commission staff is of the view that the recommendation to deny City Wide’s review and vary application is consistent with the 2006 Policy Direction given that it maintains Eastlink TPIA POI at the current location (Pennant Point) and does not introduce any new regulatory measures.

The 2019 Policy Direction Footnote8 provides that the Commission should consider how its decisions can promote competition, affordability, consumer interests, and innovation when exercising its powers and performing its duties under the Act. Moreover, in its decisions the Commission should demonstrate its compliance with the 2019 Policy Direction and specify how those decisions can, as applicable, promote competition, affordability, consumer interests, and innovation.

The Commission considers that not requiring Eastlink to move its TPIA POI from its current location at Pennant Point is, in the circumstances, consistent with promoting competition, affordability in all regions including rural areas, and promoting overall consumer interests, given that competitors will continue to be able to provide affordable services to Canadians. Moreover, while there may be additional costs associated with securing transport to Pennant Point as opposed to the New Site, there would also be costs to moving the location, which would ultimately be borne by the end customers.

In light of the above, the Commission is of the view that City Wide failed to demonstrate that there is substantial doubt as to the correctness of Telecom Order 2022-79 because it is inconsistent with the 2006 Policy Direction. Further, the Commission is of the view that the original determination was consistent with both the 2006 Policy Direction and the 2019 Policy Direction.

Yours sincerely,

Original signed by

Claude Doucet
Secretary General

c.c.:  Fiona Gilfillan, CRTC fiona.gilfillan@crtc.gc.ca
Chris Noonan, CRTC chris.noonan@crtc.gc.ca
Crystal Hulley-Craig, CRTC crystal.hulley-craig@crtc.gc.ca

Distribution List

David Pothier, david@yourcitywide.com
Marielle Wilson, regulatory.matters@corp.eastlink.ca
Howard Slawner, regulatory@rci.rogers.com
Jeff Brownlee, regulatory@cnoc.ca
Andy Kaplan-Myrth, regulatory@teksavvy.ca
John Lawford, jlawford@piac.ca

2022-11-18
Date modified: