Telecom reaction to CRTC wholesale decision was expected: analyst


Originally published by The Wire Report

Analyst notes published this week confirm much of what was already known about the impact of new CRTC wholesale broadband rates on incumbent carriers.

Namely, the new wholesale rates will hit the large telecom companies for one-time retroactive charges to resellers, small hits to telecom bottom lines going forward, and reduced spending in rural markets as a result.

Referring to the new rates announced by the CRTC August 15, National Bank analyst Adam Shine writes that the reaction of the telecom companies was at least somewhat expected.

“Needless to say, industry players didn’t welcome this news and, over the past 10 days, have expressed their disappointment with the logic behind the decision, the magnitude of the reductions, and the retroactive hit as insult to injury,” Shine wrote in the note released Monday evening.

Shine wrote that he anticipates “an aggressive appeal” will be launched by the companies “in due course.”

Shine also appeared to question the wisdom of CRTC’s decision on wholesale rates, in light of upcoming planned investments on 5G infrastructure and spending on spectrum. “It’s interesting to observe the regulator looking to aggressively reduce wholesale Internet rates at a time when significant wireline spending is still occurring and another meaningful cycle of wireless spend is just ahead,” Shine wrote.

In a new note published Monday, Desjardins analyst Maher Yaghi maintained his initial August 16 reaction to the new rate regime, saying that Desjardins doesn’t “believe that the reduction of tariffs will significantly change the industry’s competitive profile.”

Yaghi did, however, echo some of the reaction from incumbent telecom providers in the wake of the announcement, who pointed to an early August report from the Competition Bureau as evidence of robust competition.

“We also believe the amount of reduction in tariffs was somewhat surprising,” Yaghi wrote, adding that the CRTC’s 2018 monitoring report — which reported a decrease in broadband prices — “suggest[ed] that market pricing is under control.”

Shine’s note also said that he found the percentage of the market the Competition Bureau suggested in its August 7 market study was held by broadband resellers — about 20 per cent — to be “a little high,” and said that he thought it closer to about 10 per cent.

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