Submission by the Commissioner of Competition before the Canadian Radio-television and Telecommunications Commission—Telecom Notice of Consultation CRTC 2013-551 — Review of wholesale services and associated policies

January 31, 2014

I. Introduction

  1. On October 15, 2013, the Canadian Radio‑television and Telecommunications Commission ("CRTC") initiated a proceeding and invited interventions on the issues raised in Telecom Notice of Consultation CRTC 2013‑551 (the "Call for Comments").Footnote 1 Pursuant to section 125 of the Competition Act,Footnote 2 the Commissioner of Competition (the "Commissioner") wishes to intervene in this proceeding, and is pleased to provide this submission by the Competition Bureau ("Bureau") in response to the Call for Comments.
  2. The Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace. Headed by the Commissioner, the Bureau is responsible for administering and enforcing legislation, including the Competition Act and related statutes, throughout the Canadian economy. The purpose of the Competition Act is to maintain and encourage competition in Canada to, among other things, provide consumers with competitive prices and product choices.Footnote 3
  3. The purpose of the Call for Comments is to assist the CRTC in its review of the regulatory status of wholesale services and their associated policies, including the wholesale services framework, wholesale services pricing (the "wholesale access framework"), and the appropriateness of mandating new wholesale services, including fibre‑to‑the‑premises facilities.

II. Comments on questions for discussion in this proceeding

  1. The Bureau provides the following comments based on presently available information and without the benefit of the responses to questions 103, 104, 105 and 106 of the request for information issued to various telecommunications companies in connection with this proceeding (the "Designated Information"). The Commissioner has requested that the CRTC disclose the Designated Information to the Commissioner, or in the alternative to the public, on that basis that such disclosure is in the public interest. In the event that the CRTC concludes that disclosure of the Designated Information is in the public interest, the Commissioner requests that the CRTC provide him with an opportunity to comment further on the questions for discussion in this proceeding, which comments will take the Designated Information into account.

Question 1

  1. The Bureau submits that the CRTC should examine market power (both upstream and downstream) when assessing whether the market for a service is sufficiently competitive.Footnote 4 The Bureau’s Merger Enforcement GuidelinesFootnote 5 and The Abuse of Dominant Position Enforcement GuidelinesFootnote 6 set out the Bureau’s approach to market power, which is the appropriate approach for the CRTC to use in the current proceeding. The CRTC generally followed this approach in Telecom Decision CRTC 2008‑17.Footnote 7
  2. The Bureau agrees that the first step in assessing market power is to define relevant product and geographic markets. With respect to relevant geographic markets, the Bureau submits that markets need not be national in scope, and should be determined based on the specific factual circumstances.Footnote 8

Question 2

  1. The Bureau expresses no comment at this time on current market conditions, but would be in a position to comment if the CRTC discloses the Designated Information to the Commissioner. The Bureau may also be in a position to comment further on these issues should other additional information be disclosed to the Commissioner or the public in the course of these proceedings.

Question 3

  1. The Bureau submits that the CRTC should assess the existing wholesale access services framework by conducting an ex‑post assessment of its economic impact. Part III of this submission describes the ex‑post assessment in greater detail.

Question 4

  1. The Bureau submits that the CRTC should assess the seven aspects of the wholesale access framework by conducting an ex‑post assessment approach of its economic impact.
  2. The Bureau expresses no further comment at this time, but would be in a position to provide additional comments if the CRTC discloses the Designated Information to the Commissioner. The Bureau may also be in a position to comment further on these issues should other additional information be disclosed to the Commissioner or the public in the course of these proceedings.

Question 5

  1. To measure the performance of the wholesale access framework, the Bureau submits that the CRTC should conduct an ex‑post assessment of economic impact of the CRTC’s mandated access regime, especially in the five years following Telecom Decision 2008‑17. Additionally, the CRTC should continue to assess performance in future years using an ex‑post analysis.

Question 6

  1. The Bureau takes no position on this question.

Question 7

  1. The Bureau takes no position on this question.

III. The Bureau’s proposed ex post review methodology

  1. In order to assess the performance of the wholesale access framework, the Bureau recommends that the CRTC undertake an ex post review.Footnote 9 The experience over the past five years, since the CRTC set out its restructured wholesale access framework, provides a suitable "natural experiment" for assessing questions such as whether the CRTC should forbear from regulating any existing essential services, and whether new services should be added. It may also provide insight into the effectiveness of existing pricing practices and whether negotiated arrangements continue to be appropriate.
  2. The first step in such an analysis would be to identify how the wholesale access framework has changed in the past five years. This would include quantitative information on the total revenue and number of subscribers associated with wholesale services, collectively and individually, as well as quantitative information on increases or decreases in demand.Footnote 10 Qualitative information, for example, explanations of the reasons behind changes in demand, would also be important since it helps inform an interpretation of this quantitative information.
  3. The second step would be to obtain data on key variables relating to the effect of changes in the regulatory regime. These could include:
    1. the prices and quantities of services in the retail markets in which the wholesale services are used;
    2. investment spending in upstream wholesale markets; and
    3. the availability of new innovative services to consumers.
  4. The degree to which the ex post methodology recommended by the Bureau would employ quantitative and/or qualitative measures would depend on the availability of information.

IV. Procedural matters

  1. In accordance with section 125 of the Competition Act, the Commissioner requests that the CRTC permit the Commissioner or his designated representative to appear at the public hearing. Given the nature of the issues raised, the Commissioner’s written submissions are unlikely to address all issues that parties will address at the public hearing. The Commissioner’s presence at the public hearing will accordingly assist the CRTC in understanding the Commissioner’s submissions and the methodologies supporting them so that the CRTC can receive full benefit of the Commissioner’s specialized knowledge and expertise respecting competition.
  2. For the purposes of this proceeding, the designated representative of the Commissioner is:
    Martine Dagenais
    Deputy Commissioner, Economic Policy & Enforcement Branch
    Competition Bureau
    15th Floor, 50 Rue Victoria
    Gatineau, Quebec K1A 0C9
    Martine.Dagenais@canada.ca
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