Canada's big telecom companies will be required to open their highest-speed internet cables to smaller competitors who want to offer broadband services to consumers, according to a CRTC ruling released today.
That means that big telecom and cable providers, who are already required to share their copper and coaxial cables with smaller competitors such as Primus, Distributel or TekSavvy, will now have to do the same with their fibre optic cables.
The smaller competitor companies currently own about 10 per cent of the Canadian home internet market, with the other 90 per cent controlled by big phone and cable companies.
The CRTC decision is a major loss for big companies like Bell, which argue that it would have no incentive to invest in laying new fibre optic cables if forced to allow rival companies to profit from them.
But the ruling also contains some solace for the big providers. The CRTC said it will allow the big telecoms to charge fees for sharing their cables in order to make a profit on their investments. The pricing model will be worked out with each company on the basis of actual cost, plus a markup of about 30 per cent.
There are also some other changes in the new regime, designed to push the smaller competitors to invest in their own infrastructure, rather than just piggy-backing on the infrastructure already installed by the big companies.
As things stand, the smaller competitors use what is called the "aggregated" model of service. They tap into a single point of access, of which there is one per province, and all traffic from that node to the homes and businesses of the final internet consumer travels along cables that belong to the big companies.
Because there is only one interface per province, the distances can be long, and the smaller competitors are required to pay for the transport of their data at rates that increase with distance travelled.
Under the new rules, any smaller company that wants access to the high-speed fibre optic cables must agree to a "disaggregated" model of service, where they are required to plug in much closer to the final consumer, at a regional point of access. There are dozens of these regional interfaces in Ontario and Quebec. The smaller companies would then have to arrange transport of the signal from that regional interface to their own offices, either by installing their own fibre optic cable, or by leasing it from an existing company.
The CRTC said this is designed to discourage smaller competitors from acting as mere resellers of existing bandwidth, rather than contributing to expand the total amount of bandwidth available.
Many smaller competitors say they would prefer to move to a disaggregated model, because they are currently forced to pay heavy transport fees to move their data long distances to a single provincial point of access before it crosses over to their own networks. Under the disaggregated model, they can reduce those long-distance data freight fees by being physically closer to the customer. In addition, they can build their own fibre optic infrastructure to connect them directly to a regional interface.
The CRTC believes the change will open up new market space for internet providers who want to serve only a particular region, rather than an entire province.
Companies that prefer to continue to operate under the old aggregated model will have their internet speed capped at 100 megabits per second. While that is considered a fast internet connection today, the CRTC believes that any company that remains capped at 100 mbps will become increasingly unattractive to consumers as internet speeds increase across the board.
Bell, Bell Aliant, MTS, SaskTel and Telus, which today are the main installers of fibre optic cable in Canada, have argued that being forced to share the cables will eliminate their incentive for building them.
But the CRTC said big telephone companies in practice have no choice but to continue installing fibre optic infrastructure, or risk losing market share to big cable companies like Rogers and Shaw. That's because without fibre optics, the telephone companies are stuck using copper cables that can only offer a maximum of about 50 mbps. The coaxial cable used by Rogers and Shaw is already capable of carrying 100 mbps.
Ontario, Quebec 1st to change
The new regime will be phased in first in Ontario and Quebec, where most of Canada's smaller internet providers operate. For the time being, smaller companies are unlikely to offer rival high-speed internet packages in other parts of Canada. The CRTC said no companies outside of central Canada have expressed a willingness to shift to the disaggregated model of service, and they will therefore not be able to get access to fibre optic cables.
And so, in many parts of Canada, consumers who want fibre optics connections will still be stuck with the big providers for the time being.