Canada’s telecom regulator has set more interim rates at which phone companies must allow rivals to access their fiber networks, though some providers say the rates are still too high and will stifle competition.
The decision, announced Friday, largely reaffirmed previous rates for Ontario and Quebec, and introduced new rates outside those provinces. It sets the prices service providers will pay for access to the fiber optic networks owned by Bell Canada owner BCE Inc. BCE-T, Telus Corp. TT and SaskTel.
The Third-Party Internet Access Mandate (TPIA) allows smaller operators to access incumbents’ networks for seven years at prices set by the CRTC, allowing them to earn revenue and gain customers as they build their own networks.
The mandate has been heavily criticized by incumbents, who say mandated prices are too low to support extensive network construction and maintenance. Telecom companies have seen their stock prices come under pressure in recent months as competitive pressures have increased in the wireless sector, future immigration targets have moderated and Canadians continue to cut cords in favor of streaming services.
One of the companies poised to benefit from fiber access is Quebecor Inc. QBR-BT, which is set to expand its internet services alongside the rollout of its new wireless brand Freedom Mobile. Quebecor acquired Freedom Mobile in 2023 as part of Rogers Communications Inc.’s RCI-BT acquisition of Shaw Communications Inc. worth $20 billion.
In a post on Twitter, Pierre Karl Peladéau, CEO and president of Quebecor, called the CRTC’s decision “very disappointing” and said it would “prevent us from launching our services on these networks.”
“We had hoped for a decision that would reflect market realities and allow us to offer Freedom Mobile customers prices that would help reduce their telecom bills,” said Mr. Peladéau.
Meanwhile, Andy Kaplan-Myrth, vice president of regulatory and carrier affairs for independent services provider TekSavvy Solutions Inc., said in an email that the rates “remain significantly higher than what some major telecom companies regularly offer their customers at retail. ‘ and should be reduced in their final iteration to ‘realistically enable competition’.
Previously: TekSavvy ‘running on hope’ as it urges CRTC to allow wholesale access to fiber optic internet
The Canadian Radio-television and Telecommunications Commission is expected to finalize these rates in early 2025, but indicated in its Friday announcement that the interim rates are likely close to the final rates as they already provide “much of the underlying analysis needed to fix the rates’ has completed. on a definitive basis.”
Analysts describe the tariffs as generally favorable to incumbents, saying the rates would support competition but not cause undue harm to the telecom giants.
Bank of Nova Scotia analyst Maher Yaghi said BCE and Telus had “dodged a major bullet” and that the CRTC’s decision appeared to encourage network investment.
“We believe the established rates will allow challengers to be competitive if they can sell converged services in a combo. However, interest rates are not low enough to upend the market structure and continue to provide acceptable returns to network builders,” he told investors on Sunday evening, while simultaneously upgrading his rating for Telus to “sector outperform.” .
Also in a Sunday note to investors, RBC analyst Drew McReynolds mentioned Dominion Securities Inc. the updated interim interest rates “balanced and generally manageable for incumbent telecoms.”
According to BMO analyst Tim Casey, the average revenue per Internet user in Canada is about $71. This means that Bell and Telus could lose money in some places if they allowed access to a wholesale service provider.
In a Sunday note to investors, Mr. Casey said the wholesale access will add to “incremental competition” as companies are likely to push bundled services that include wireless, video, voice, streaming and security on top of Internet access.
BCE and Telus also have access to each other’s fiber networks, but only outside their existing footprint, meaning they may see opportunities to expand together with new entrants.
The CRTC first set interim fiber prices in November 2023 in Ontario and Quebec, where it said competition had fallen most significantly. Friday’s numbers for these two counties were largely unchanged, with rates ranging from $64-78 for Bell and $65-$76 for Bell. Telus.
It was announced Friday that ISP access to the Bell network outside these provinces will be about the same price, while the cost to access Telus’ networks in Alberta and British Columbia will be about $76-$80.
In August, Scotiabank’s Mr. Yaghi said the “pain threshold” for incumbents would be if rates were set below $60.
Any new fiber deployments are protected until 2029, which the CRTC says will give BCE, Telus and SaskTel the opportunity to recoup their investments.
The Bell and Telus fiber optic networks have been accessible to independent service providers since May. Access to other provinces’ networks at these mandatory rates will begin on February 13, 2025.
