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Telecom Decision CRTC 2023-23

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Reference: Part 1 application posted on 25 October 2021, 2023-23-1

Ottawa, 3 February 2023

Public record: 8662-C182-202107185

Competitive Network Operators of Canada – Application to review and vary Telecom Regulatory Policy 2021-239

Summary

The Commission denies the Competitive Network Operators of Canada’s application to review and vary Telecom Regulatory Policy 2021-239. In particular, the Commission finds that it did not demonstrate that there is substantial doubt as to the correctness of the original decision.

Application

  1. On 25 October 2021, the Competitive Network Operators of Canada (CNOC) filed an application requesting that the Commission review and vary certain aspects of Telecom Regulatory Policy 2021-239. CNOC submitted that the Commission made errors of fact and law in that decision that raised substantial doubt as to its correctness.
  2. In its application, CNOC argued that the Commission erred in its determination that fibre in-building wire (IBW) is not an essential facility and in its corresponding forbearance determination. CNOC subsequently requested that the Commission mandate wholesale access to fibre IBW for any entity to which the multi-dwelling unit (MDU) access condition applies. CNOC also requested that this mandated wholesale access be provided pursuant to a single, nationwide wholesale rate, to be determined in a follow-up proceeding.
  3. The Commission received interventions from Beanfield Technologies Inc. (Beanfield); Bell Canada; Bragg Communications Incorporated, carrying on business as Eastlink (Eastlink); Cloudwifi Inc. (Cloudwifi); the Public Interest Advocacy Centre (PIAC); Quebecor Media Inc., on behalf of Videotron Ltd. (Videotron); Rogers Communications Canada Inc. (RCCI); Saskatchewan Telecommunications (SaskTel); TekSavvy Solutions Inc. (TekSavvy); and TELUS Communications Inc. (TCI).

Background

  1. In Telecom Decision 97-8, the Commission set out its framework for competition in the local exchange (i.e., voice) service market and established a number of important policies aimed at facilitating the entry of competitive local exchange carriers (CLECs) into that market. For instance, in that decision, the Commission established a definition of essential facilities that would generally be made available to competitors on a wholesale basis.
  2. While that decision did not directly address the essentiality of IBW (i.e., the wire between competing providers’ point of connection and the end-user’s dwelling in a MDU), the Commission indicated that it was in the public interest that end-users have the right and the means to have access to the local exchange carrier (LEC) of their choice in all situations.
  3. In Telecom Decision 99-10, the Commission stated that the ability of CLECs to have access to IBW was central to the implementation of its policy of end-user choice.
  4. In Telecom Decision 2003-45, the Commission established conditions and principles for the provision of telecommunications services to customers located in MDUs. That decision included the following MDU access condition: in order to provide telecommunications service in an MDU, a LEC must ensure that all LECs wishing to serve end-users in that MDU are able to access those end-users in a timely manner, through resale, leased facilities, or their own facilities, at their choice, under reasonable terms and conditions. 
  5. In Telecom and Broadcasting Decision 2019-218, the Commission noted that telecommunications services had evolved significantly since the early 2000s, including a migration towards fixed and mobile wireless broadband Internet access services and away from legacy services, such as landline voice service. Thus, the Commission considered that requiring carrier Internet service providers (ISPs) that do not intend to provide local exchange service to become registered CLECs to connect with LEC facilities in MDUs created an unnecessary regulatory burden on those ISPs and on other LECs.
  6. On 16 December 2019, the Commission issued Telecom Notice of Consultation 2019-420 in order to consider changes to the framework for access to IBW in MDUs, as well as appropriate rates, terms, and conditions for fibre IBW connections.
  7. In Telecom Regulatory Policy 2021-239, the Commission extended the MDU access condition and associated obligations to all carrier ISPs such that all carrier ISPs would have access to copper IBW on the same basis as LECs. At the same time, the Commission found that access to fibre IBW was not an essential service, would not be mandated, and forbore from regulating access to fibre IBW in all MDUs across Canada. As a result, a competitor’s choice to access end-users by means of reselling or leasing fibre IBW would not be mandated, but subject to commercial agreement and without a tariff being required.

The Essentiality Test

  1. In Telecom Regulatory Policy 2015-326, the Commission revised its test for determining whether to mandate access to a wholesale service. This Essentiality Test is intended to determine whether a given service or facilityFootnote 1 is essential to competition in a given market.
  2. The first step in applying the Essentiality Test is to define the relevant markets for the wholesale service, which include product and geographic components.
  3. Once the product markets and geographic markets are defined, the Commission assesses the wholesale service in question against the three economic components of its Essentiality Test:
    • Input component: whether the facility associated with the wholesale service is required as an input by another firm to provide downstream retail service(s);
    • Competition component: (i) the upstream market conditions, specifically whether a firm or group of firms have market power; and (ii) the impact that any upstream market power might have on competition levels in the associated downstream market(s);
    • Duplicability component: whether it is practical or feasible for competitors to duplicate the functionality of a facility, through either self-supply or third-party supply.
  4. For a wholesale service to meet the Essentiality Test, all three components must be satisfied.
  5. After examining the economic considerations of the Essentiality Test, the Commission will then examine a set of three policy considerations for further insight into the appropriateness of mandating a wholesale service. The policy considerations, as set out in Telecom Regulatory Policy 2015-326, are as follows:
    • Public good: whether there is a need to mandate the service for reasons of social or consumer welfare, public safety, or public convenience;
    • Interconnection: whether the service would promote the efficient deployment of networks and facilitate network interconnection arrangements;
    • Innovation and investment: whether mandating or not mandating the facility or wholesale service could materially (i) affect the level of innovation/investment in advanced or emerging networks or services for incumbents, competitors, or both; or (ii) affect the associated level of adoption of advanced or emerging services by users of telecommunications services.
  6. In Telecom Regulatory Policy 2021-239, the Commission assessed for the first time the essentiality of access to fibre IBW in MDUs. The Commission found that none of the three economic components of the Essentiality Test were satisfied. Among other things, the Commission found that
    • the input component findings were inconclusiveon account of insufficient data;
    • access to fibre IBW did not meet the competition component; and
    • access to fibre IBW did not meet the duplicability component of the Essentiality Test.Footnote 2
  7. The Commission subsequently determined that
    • the public good consideration does not apply because fibre IBW access does not have a strong connection to social or consumer welfare, public safety, or public convenience;
    • the interconnection consideration does not apply to access to fibre IBW because it does not involve the transfer of traffic from one party’s network to another party’s network; and
    • the innovation and investment consideration would not materially impact the decision to mandate (or not) access to fibre IBW since investment is likely to continue even if the service is not mandated and there is insufficient evidence to conclude that mandating the service would affect the adoption of advanced or emerging services by end-users to a substantial degree.
  8. Accordingly, the Commission determined that access to fibre IBW is not an essential service and that it should not be mandated. The Commission then went on to forbear from regulating access to fibre IBW in MDUs.

Review and vary criteria

  1. Section 62 of the Telecommunications Act (the Act) gives the Commission the discretionary power to review its decisions and rescind or vary them.
  2. As explained in Telecom Information Bulletin 2011-214, the onus is on the applicant requesting that the Commission exercise this discretion to create substantial doubt that the original decision is correct. An applicant can do this in a number of ways, such as by establishing that the Commission committed an error of law or fact.

Issues

  1. The Commission has identified the following issues to be addressed in this decision:
    • Should the Commission summarily dismiss CNOC’s application?
    • Did the Commission commit error of fact or law in its analysis of the public good policy consideration?
    • Did the Commission commit error of fact or law in analysis of the innovation and investment policy consideration?
    • Did the Commission commit error of fact or law in its analysis of the 2006 Policy Direction and 2019 Policy Direction?

Should the Commission summarily dismiss CNOC’s application?

Positions of parties
  1. RCCI argued that CNOC’s application should be summarily rejected as an abuse of process. CNOC should have participated in the proceeding if it wished to argue that wholesale access to fibre IBW should be mandated. CNOC should not now be permitted to argue these issues, for the first time, in a review and vary application. RCCI cited Telecom Decision 2010-587 as an example of the Commission summarily rejecting a review and vary application.
  2. CNOC replied that there is no requirement in the Commission’s processes for a review and vary applicant to have participated in the initial proceeding and cited Telecom Decision 2010-262 as an example of a review and vary proceeding that was considered on its merits despite being filed by an applicant that had not been a party to the initial proceeding. 
Commission’s analysis
  1. The Commission considers that CNOC’s application should not be summarily dismissed as an abuse of process.
  2. The Commission may take action, when warranted, to prevent its processes and resources from being misused – but this is not such a case. In the case of review and vary applications, there is no general requirement that an applicant must have participated in the original proceeding.
  3. Further, this case can be distinguished from the one cited by RCCI (Telecom Decision 2010-587). In that case, an applicant attempted to file multiple review and vary applications on the same subject matter, unlike in this case.
  4. In light of the above, CNOC’s application will be considered on its merits. 

Did the Commission commit error of fact or law in its analysis of the public good policy consideration?

Positions of parties
  1. CNOC submitted that the Commission erred in its analysis of public convenience and that mandated access would avoid the inconvenience caused by multiple fibre IBW installations in MDUs. Further, it argued that the Commission did not sufficiently explain why fibre IBW access is dissimilar to pole access, which is mandated.
  2. CNOC further submitted that the Commission erred when it concluded that competition and consumer choice do not qualify as public good policy considerations. It argued that mandated access would serve these policy goals by increasing competition and choice, lowering prices, and furthering economic welfare.
  3. Finally, CNOC submitted that the Commission contradicted itself in its analysis of the competition component of the Essentiality Test. In particular, it argued that the Commission stated that there are unique characteristics to fibre IBW that distinguish it from other forms of IBW from an end-user perspective, but then went on to consider product substitutes, such as mobile wireless, copper IBW, coaxial cable IBW, and aggregated high-speed access service available to end-users in MDUs.
  4. TekSavvy supported CNOC’s position and argued that the Commission erred in determining that the public good policy consideration does not apply to access to fibre IBW.
  5. Videotron also argued in support of CNOC’s application and, in particular, that consumer choice is an important consideration with respect to access to fibre IBW.
  6. Beanfield opposed CNOC’s application and submitted that deploying in-building fibre does not result in inconvenience to MDU occupants. In Beanfield’s view, the true barrier to further fibre IBW deployment is not the Commission’s original decision; rather, it is conflict between building developers, condominium corporations, and certain carriers against those seeking access to buildings to further deploy fibre IBW.
  7. Bell Canada submitted that the Commission reasonably found that the installation of multiple fibre IBW networks in an MDU, even post-construction, is not an inconvenience because it can be done practically, efficiently, and reasonably. It added that the Commission’s duplicability analysis, even where riser space is constrained, provides a reasonable basis to distinguish support structure service from fibre IBW access service in MDUs.
  8. Eastlink, RCCI, and SaskTel also opposed the application. Eastlink and RCCI argued that the Commission’s conclusion with respect to the public good was justified, intelligible, and transparent based on the record of the proceeding and the lack of compelling evidence that the public good policy consideration would justify mandating the access.
Commission’s analysis
  1. The primary basis for a decision to mandate a wholesale service is generally the economic components of the Essentiality Test, which determine whether a service is essential to competition. While the Commission has also set out relevant policy considerations to apply alongside the Essentiality Test, it is rare for these considerations to completely override the economic principles and result in a mandate for a service that is not strictly necessary for competition.
  2. One such policy consideration is “public good.” In this context, the term is used in a specific, technical sense to refer to considerations of social welfare, public safety, and public convenience. It does not refer to the broader public interest, which the Commission evaluates holistically. Nor is it intended to include matters relating to competition, given that those types of economic considerations are already well covered under the Essentiality Test, specifically under the competition component.
  3. Historically, only three services of exceptional importance have been classified as public goods within the specific meaning of the Commission’s framework: emergency services (e.g., 9-1-1), message relay services for people with disabilities, and support structure services (e.g., poles, conduit, etc.).
  4. CNOC did not show that the Commission’s reasons were legally deficient. Reasons must be read contextually and holistically. Context includes the record and related Commission decisions. In this light, it becomes clear that fibre IBW is not comparable to other public good services. Further, this was not, as argued by the parties, a central issue to the original proceeding.
  5. Moreover, the Commission did consider competition, and by extension, consumer choice. Indeed, an analysis of competition is an economic component of the Essentiality Test. The Commission evaluated this and found that competition would not be materially impacted if fibre IBW were not mandated. The Commission also turned its mind to the issue of convenience, in particular, when assessing the input and duplicability components of the Essentiality Test. The Commission found that a majority of parties to the original proceeding preferred to use their own fibre IBW in MDUs, and that different companies have been successful in installing their own fibre IBW in MDUs during the construction phase or post-construction.
  6. CNOC has not argued that the Commission identified or selected improper considerations or applied the wrong test. The Commission identified and applied the Essentiality Test and corresponding policy considerations set out in Telecom Regulatory Policy 2015-326 to the facts before it. In essence, CNOC takes issue with how the Commission has exercised its discretion in applying these policy considerations.
  7. However, if the public good consideration were applied in the manner advocated by CNOC, it would risk making the Essentiality Test irrelevant, as all wholesale services ultimately serve to bolster competition and improve consumer choice, even if only marginally or disproportionally to the regulatory effort and burden, leading to mandating services that are inessential to competition.
  8. With respect to CNOC’s argument that the Commission contradicted itself in concluding that the competition component was not met, the Commission notes that CNOC characterized this argument as relating to the public good policy consideration. In the Commission’s view, the argument, properly construed, relates to the economic essentiality analysis, as it alleges a discrepancy between how fibre IBW is treated in the market definition and the competition component. At any rate, the Commission considers that CNOC did not establish the error in question.
  9. In its assessment of the relevant product market, the Commission determined that the primary characteristics of fibre IBW that distinguishes it from other technologies are high, symmetrical download and upload speeds.
  10. In its assessment of the competition component, the Commission considered a variety of technologies and services available to consumers in MDUs. While some of these technologies or services may not be perfect substitutes for fibre IBW– depending on individual needs, there is sufficient overlap in the associated product markets to support a certain degree of substitution and choice. Moreover, the Commission considered the fact that users might have a range of service providers to choose from, on account of multiple fibre IBW installations.
  11. The Commission considers that this assessment is consistent with Telecom Regulatory Policy 2015-326, which allows the Commission to take into account different downstream retail markets in its assessment of the competition component.
  12. Further, the Commission considers that even if it did err in its analysis of the competition component, it would not necessarily alter the correctness of the decision, given that the economic components of the Essentiality Test are cumulative, and that fibre IBW also failed the duplicability component – a determination that was not challenged. 
  13. In light of the above, the Commission did not commit errors of fact or law in its public good policy consideration.

Did the Commission commit error of fact or law in its analysis of the innovation and investment policy consideration?

Positions of parties
  1. CNOC submitted that the Commission erred in not concluding that mandated access would result in greater overall investment by lowering costs for competitors that could be reallocated to further network deployment. It argued that the Commission placed an unreasonable burden on parties seeking mandated access to fibre IBW by requiring them to demonstrate the benefits of a hypothetical situation.
  2. Cloudwifi supported CNOC’s position, submitting that its ability to deliver services to MDUs served by only fibre IBW has been seriously cut short by Telecom Regulatory Policy 2021-239. In its view, forbearance from regulating fibre IBW will mean that Canadians in MDUs wait years or even decades longer to gain relief from high prices. It argued that granting the relief requested by CNOC would benefit Canadian consumers without reducing investment in fibre IBW.
  3. PIAC argued that it did not have proper notice that the Commission would consider the Essentiality Test or forbearance in the original proceeding.
  4. Beanfield argued that mandated access to fibre IBW would not lower competitors’ cost to deploy fibre in MDUs or have a positive effect on the level of investment in fibre IBW. It emphasized that the MDU access condition was more important than mandated access to fibre IBW.
  5. Bell Canada submitted that in considering the investment impacts of mandating versus not mandating fibre IBW access on investment and innovation, the Commission appropriately weighed the probative value of the evidence versus the uncertain future investment and preferred the former over the latter.
  6. RCCI submitted that it was clearly well within the Commission’s discretion to determine that the evidence before it did not establish that mandated access would materially increase the adoption of advanced services. Further, it argued that CNOC failed to raise any substantial doubt as to the correctness of the Commission’s determination that investment and innovation in advanced and emerging networks or services do not support mandated wholesale access to fibre IBW.
  7. SaskTel argued that mandating access to fibre IBW at an artificially low price would inhibit investment and innovation.
Commission’s analysis
  1. Consistent with Telecom Regulatory Policy 2015-326, in analyzing this consideration, the Commission examined how to encourage (i) innovation and investment in emerging networks or services; and (ii) the level of adoption of emerging services by end-users. Ultimately, the Commission concluded that this policy consideration did not materially impact the decision to mandate fibre IBW or not: investment was likely to continue even in the absence of a mandate.
  2. CNOC’s assertions about the potentially positive effects of a mandate on investment were vague and unsupported and significantly similar to arguments made by parties to the original proceeding. It did not explain why or how these assertions should displace the Commission’s conclusions. Reversing a mandating decision based on an essentiality finding through the innovation and investment policy consideration would require substantive evidence to support such a reversal, which CNOC did not provide.
  3. CNOC also took issue with the Commission’s statement that there was insufficient evidence to conclude that a mandate would have any substantial impact on adoption of new technologies. In its view, this showed that the Commission was seeking evidence of what would happen in a hypothetical situation, which imposed an unreasonable burden. However, there were competing claims on the record about the adoption of new technologies. All parties were in the same situation of being asked to predict what might happen in the future should a particular policy framework be put in place. Parties to proceedings are often asked to do this, and the Commission does not consider it to be unreasonable to have to support one’s views with evidence, reasoned explanations, or educated assumptions. Moreover, the Commission notes that there was evidence provided during the proceeding of the investments made by competitive fibre IBW providers and that this was expected to continue.
  4. Regarding PIAC’s claim that the Commission gave insufficient notice that it would be considering the Essentiality Test or forbearance in the original proceeding, the Commission provided notice in a request for information during that proceeding. The information that was then provided helped to inform the Commission’s final determinations on these matters in Telecom Regulatory Policy 2021-239.
  5. In light of the above, the Commission considers that CNOC failed to demonstrate that the Commission committed errors of fact or law in its innovation and investment policy consideration.

Did the Commission commit error of fact or law in its analysis of the 2006 Policy Direction and 2019 Policy Direction?

Positions of parties
  1. CNOC argued that the Commission’s analysis of the 2006 Policy DirectionFootnote 3 and the 2019 Policy DirectionFootnote 4 (collectively, the Policy Directions) is based on unsupported findings and logical errors. Among other things, the Commission did not justify its differing treatment for access to copper IBW and fibre IBW and did not explain how this will advance the policy objectives set out in section 7 of the Act.
  2. Beanfield submitted that Telecom Regulatory Policy 2021-239 correctly safeguarded continued access to MDUs for the purpose of building fibre, correctly extended this right to carrier ISPs that are not CLECs, and correctly provided for the possibility of individual MDU exceptions where installing fibre is not otherwise possible.
  3. Bell Canada argued that CNOC ignored the multiple instances where the Commission considered all the relevant public policy considerations and instead fixated upon the Commission’s policy statements in relation to the essential facility policy considerations in isolation from the Commission’s decision as a whole.
  4. RCCI submitted that CNOC failed to identify any absence of clarity in the Commission’s discussion of the impact of its determinations in Telecom Regulatory Policy 2021-239 on the implementation of the Canadian telecommunications policy objectives in accordance with the Policy Directions.
  5. TCI submitted that the Commission arrived at the right conclusion in Telecom Regulatory Policy 2021-239. Fibre IBW is not essential and choosing not to mandate access to these facilities will lead to the best results for Canadians. The Commission’s decision is consistent with the policy objectives, and the Policy Directions.
Commission’s analysis
  1. The Commission notes that in May 2022, the Minister of Innovation, Science and Economic Development Canada proposed a new Policy Direction, though it is not yet in force. The proposed Policy Direction would retain from the 2019 Policy Direction the key objectives of promoting competition, affordability, consumer interests, and innovation. It would also result in the repeal of the 2006 and 2019 Policy Directions. However, those two Policy Directions remain in force for the time being, as they were when the original decision was made, as well as when CNOC filed its application.
  2. In deciding a review and vary application, the Commission must determine whether it committed any errors at the time it made its original decision. The Commission considers that it did not commit errors of fact or law in its analysis of the Policy Directions in Telecom Regulatory Policy 2021-239.
  3. To reiterate, the decision must be read holistically and contextually. CNOC’s argument artificially focused on a specific section of that decision while ignoring the broader analysis. In the policy objective and Policy Directions section at the conclusion of its decision, the Commission did not purport to make new factual determinations. Rather, the Commission recapitulated its findings, explaining how the new regulatory regime was intended to function in practice and indicating how this related to the policy objectives of the Act and the Policy Directions. This analysis was intended to be theoretical and forward-looking and to communicate the Commission’s expectations.
  4. In Telecom Regulatory Policy 2021-239, the Commission determined that it would be appropriate to apply different rules to copper IBW versus fibre IBW, given the important technological and competitive differences between the two, but expanded the MDU access condition to place all carrier ISPs on an equivalent footing when it came to access rights. The Commission concluded that these changes were consistent with the Policy Directions and would continue to promote technological innovation, investment, and competition. They would reduce access delays, serve end-users in MDUs more quickly, and support ongoing investment in new fibre IBW in MDUs.
  5. CNOC has not established that the Commission erred in reaching these conclusions.

Conclusion

  1. In light of all of the above, the Commission finds that CNOC failed to demonstrate that there is substantial doubt as to the correctness of Telecom Regulatory Policy 2021-239. Accordingly, the Commission denies CNOC’s application to review and vary Telecom Regulatory Policy 2021-239. The Commission also considers that
    • CNOC’s application should not be summarily dismissed as an abuse of process;
    • it did not commit errors of fact or law in its consideration of public good;
    • it did not commit errors of fact or law in its consideration of innovation and investment; and
    • it did not commit errors of fact or law in its analysis of the Policy Directions in Telecom Regulatory Policy 2021-239.

Policy Directions 

  1. The Commission is required, in exercising its powers and performing its duties under the Act, to implement the policy objectives set out in section 7 of the Act, in accordance with Policy Directions currently in force. As of writing, those are the 2006 Policy Direction and the 2019 Policy Direction.
  2. The Commission considers that the present decision is in accordance with these Policy Directions.
  3. In a review and vary application, the Commission is focused only on whether a previous decision contained errors. Rejecting the application means that the Commission’s original decision will stand. Telecom Regulatory Policy 2021-239 and its determinations to forbear from the regulation of access to fibre IBW in MDUs, to expand the MDU access condition to all carrier ISPs, and to grant them access to copper IBW on the same basis as LECs will remain in effect. Given that the original decision will not be varied, the Commission also considers that the Policy Directions considerations set out in the decision remain valid.
  4. The Commission’s decision remains consistent with subparagraphs 1(a)(i), (v), (vi), and (vii) of the 2019 Policy Direction by supporting and encouraging ongoing investments and the deployment of fibre IBW in MDUs across the country. For instance, it would help to reduce barriers to market entry and competition for carrier ISPs that are new, regional, or smaller than the incumbent national service providers.
  5. It would also remain consistent with subparagraph 1(a)(i), as well as 1(b)(ii) and (iv), of the 2006 Policy Direction by, for instance, relying on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives.
  6. The Commission has a duty to facilitate the orderly development of the Canadian telecommunications systems, which includes supporting ongoing investments in growth technologies, such as fibre IBW, and maximizing competition through the use of various IBW technologies in MDUs. The measures introduced in Telecom Regulatory Policy 2021-239 will help to improve consumer choice in MDUs, while encouraging facilities-based competition.
  7. When the record of the current proceeding closed, the new Policy Direction had yet to be proposed. Accordingly, no party commented on the proposed Policy Direction on the record of this proceeding.

Secretary General

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