Bell cuts rural broadband investment in response to new wholesale rates

Originally published by The Wire Report

BCE Inc. has responded to lower wholesale rates for internet service announced by the CRTC last week by reducing its fixed wireless rollout in rural areas by 20 per cent.

The company said in a press release on Monday that decision to lower the rates wholesale-based internet service providers pay to access larger telecoms’ networks will cost Bell $100 million, “most of it in the form of retroactive payments to resellers.”

The reduced cost to rent network space for wholesale providers is retroactive to 2016, when the CRTC previously lowered those internet access rates. Back then, analysts speculated that those rate cuts would also decrease infrastructure investment, but no specific reduction in investment was announced as a result of the 2016 decision.

Bell said last week’s decision will lead to a reduction in “the scope of Bell’s broadband Internet buildout for smaller towns and rural communities by 20%, or approximately 200,000 households.”

That $100 million figure is somewhat higher than the $45 million to $90 million hit estimated by Desjardins analyst Maher Yaghi last week, who said the new rates would have a marginal effect on big telecom bottom lines.

Bell initially announced a year ago it would move to target more rural markets by growing its fixed wireless service, dubbed “wireless to the home.” In February, it said it would increase that program to 1.2 million homes, following a tax deduction program from the federal government’s Accelerated Investment Incentive, announced in the fall fiscal update.

National Bank analyst Adam Shine said in 2018 that the program could benefit Bell to the tune of $100 million this year.

The investment cut comes after the Competition Bureau earlier this month acknowledged in a report that wholesale access to networks can discourage investment by facilities-based carriers.

The report, which came at the end of a year-long review on broadband competition and which was intended to help the CRTC with these decisions, said the CRTC should set wholesale access rates at the “correct level,” so as to maintain investment levels while also allowing wholesale competitors to continue to offer competition in the space.

Read the original article at (Subscription required. Ask about the special rate for STAC members.)