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Broadcasting Public Notice CRTC 2006-68
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Ottawa, 29 May 2006
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Competitive access to inside wire in commercial and institutional
properties
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In Call for comments on possible regulatory
amendments that would expand competitive access to inside wire,
Broadcasting Public Notice CRTC 2005-83,
15 August 2005, the Commission requested comments on proposed amendments
to the Broadcasting Distribution Regulations that would expand
the application of the rules regarding competitive access to inside
wire by subscribers and by competing broadcasting distribution undertakings
(BDUs) to include wiring owned by licensees in commercial and institutional
properties. |
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Having considered the record of the
proceeding, the Commission has determined that mandating access to such
wiring in these properties by subscribers and by competing BDUs would
not contribute significantly to the competitive health of the
broadcasting distribution market or significantly advance end-user
choice. For these reasons, the Commission concludes that its
intervention to regulate competitive access to wiring in commercial and
institutional properties is not warranted at this time. |
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Background
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1. |
In February 2005, Bell ExpressVu1
requested the expedited resolution of a dispute regarding
access to the coaxial wiring owned by Rogers Cable Communications Inc.
(Rogers) in properties that house transient residents, such as hotels,
hospitals, nursing homes and other commercial and institutional
premises. Bell ExpressVu’s complaint rested on section 10 of the
Broadcasting Distribution Regulations (the Regulations), which
requires licensed broadcasting distribution undertakings (BDUs) that own
inside wire to permit use of the inside wire by a subscriber or by
another BDU. |
2. |
In Call for comments on possible regulatory
amendments that would expand competitive access to inside wire,
Broadcasting Public Notice CRTC 2005-83,
15 August 2005 (Public Notice 2005-83),
the Commission found that section 10 of the Regulations applied to
single and multiple unit dwellings (MUDs) that generally serve as
permanent accommodation, but did not apply to the commercial and institutional
properties at issue in the Bell ExpressVu complaint, or to certain
other properties identified by the Commission, such as office buildings
and retail stores (collectively, commercial and institutional properties).
The Commission further noted that the inapplicability of the section
10 requirement to these commercial and institutional properties may
be inconsistent with its policy objective of providing for end-user
choice and fostering competition among BDUs. |
3. |
Accordingly, the Commission requested that
interested parties submit comments, by 26 September 2005, on the merits
of expanding the application of section 10 of the Regulations to include
residential and non-residential commercial and institutional properties.
It also requested responses to the following questions: |
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- What amendments to the Regulations would be necessary or
appropriate, should the Commission decide to broaden access to inside
wire owned by a broadcasting distribution undertaking licensee?
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- What is the size and significance of the potential market for
broadcasting distribution services that would be created under such
amendments?
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- What demarcation points, or mechanisms for setting such points,
would be most appropriate, given the various types of properties that
exist?
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4. |
The Commission stated that replies to the
comments and proposals filed regarding the above matters were to be
submitted on or before 11 October 2005. |
5. |
In response to Public Notice 2005-83,
Bell ExpressVu and Bell Canada (collectively, Bell Canada) filed a
joint submission, which contained a study of the size of the competitive
market in residential commercial and institutional properties. Bell
Canada requested that the Commission hold this study in confidence.
The Commission determined that, while the detailed results of the
study should be held in confidence, information about the methodology
and sources used for the study and its general conclusions should
be placed on the public record. Bell Canada then submitted a revised
version of its submission containing the particular information that
the Commission considered should be placed on the public file. In
Call for comments on possible regulatory amendments that would
expand the competitive access to inside wire – Request for confidentiality,
Broadcasting Public Notice CRTC 2005-83-1,
19 October 2005, the Commission provided interested parties until
2 November 2005 to submit comments on the revised version of
Bell Canada’s study. |
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Parties to the proceeding
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6. |
Eight parties submitted comments in this
proceeding. In general, those representing the interests of incumbent
BDUs, including the Canadian Cable Telecommunications Association (CCTA),
Quebecor Media Inc. (QMI), and Whistler Cable Television Ltd.
(Whistler), were opposed to expanding regulated access to include the
wiring in commercial and institutional properties. Bell Canada, MTS
Allstream Inc. (MTS), Saskatchewan Telecommunications (SaskTel), and
TELUS Communications Inc. (TELUS), each of whom compete as new entrants
against incumbent BDUs, supported such an expansion of regulated access.
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7. |
One other party, Robinson Electronics and
Music (Robinson), did not expressly identify itself as being opposed to
or in support of expanding access to include the wiring in commercial
and institutional properties. Rather, it described problems that, in its
view, are a consequence of the Commission’s current regulatory regime
concerning access to cable in MUDs. These are matters that, in the
Commission’s view, fall outside of the scope of the current proceeding. |
8. |
The salient issues surrounding competitive
access to wiring in commercial and institutional properties, the
positions of the interested parties with respect to each, and the
Commission’s analysis and determinations, are set out below. |
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Size and significance of the potential market
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Positions of parties
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9. |
Parties, both those who supported amending
the Regulations to mandate access to wiring in commercial and
institutional properties and those who did not, focused many of their
comments on the size of the market that such properties represent for
the distribution of broadcasting services. |
10. |
Based on the study submitted with its
comments, Bell Canada estimated that the potential market for BDU
services in residential commercial and institutional properties
(including hotels, hospitals, penitentiaries and student housing) was
approximately 700,000 units, and represented approximately $90 million
in potential annual revenues. It was Bell Canada’s view that this would
constitute a significant market for competing BDUs, and that regulated
access to wiring in commercial and institutional properties is necessary
to the health and competitiveness of the BDU market. |
11. |
MTS, SaskTel and TELUS also argued that the
potential market for BDU services in commercial and institutional
properties is significant, and that the Commission should intervene to
require competitive access to the wiring in such properties. MTS, in
particular, indicated that the current need to install duplicate wiring
in commercial and institutional properties is a significant impediment
to competition. |
12. |
In contrast, parties opposed to regulated
access to wiring in commercial and institutional properties generally
argued that the residential and non-residential commercial market for
BDU services is too small to justify the time, effort and expense that
would be necessary to implement such regulation. For instance, the CCTA
indicated in its reply comments that the commercial and institutional
properties served by its members across Canada would represent
approximately 548,000 units, which it estimated to represent only 2% of
their cable television revenues (that is, excluding Internet and
telephony revenues). According to the CCTA, before the Commission could
expand the current regulatory regime to include access to wiring in
commercial and institutional properties, an extensive process would have
to be undertaken to establish the amount of unrecovered costs of
installing wiring in these properties, as the basis for setting an
appropriate access fee. |
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Commission’s analysis and determinations
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13. |
Having considered the information filed and
the comments received as to the size of the potential market, the
Commission is of the view that the estimates of the number of "units" in
commercial and institutional properties provided by the parties to this
proceeding likely overstate the size of the market for BDU services. For
instance, many of these units, such as the individual rooms in a
university dormitory or a hospital, are of a type that may not have
wiring, or may house residents who would not be likely to subscribe to a
BDU’s television services. In some such commercial and institutional
properties, television service may be shared by the residents of a
number of units through the use of "common rooms." Consequently, the
number of potential revenue-generating units in commercial and
institutional properties may actually be considerably less than the
estimated total number of units in these properties. |
14. |
However, the Commission considers that,
even at 700,000 units (the number estimated in Bell Canada’s study), the
market for the delivery of broadcasting services in commercial and
institutional properties represents a relatively small segment of the
overall BDU market, and one that is broadly dispersed across the
country. While this market segment is not insignificant, the Commission
finds that it is not of great enough size nor is it sufficiently
concentrated to substantially affect the health of the competitive
market for BDU services. |
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End-user choice and BDU competition
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Positions of parties
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15. |
Parties opposed to expansion of competitive
access to wiring contended that, in many commercial and institutional
properties, such as those identified in the complaint by Bell ExpressVu,
the end-user of broadcasting services is a temporary or short-term
resident, e.g., a patient in a hospital or a guest in a hotel. In their
view, regulating access to wiring in these properties would not further
the Commission’s policy objective of providing for end-user choice
because it is impractical to make provision for a temporary resident to
select which BDU will provide his or her service. |
16. |
The CCTA argued that the Commission
deliberately excluded these properties in developing its inside wire
policy. According to the CCTA, mandated access would not, in fact,
contribute to attaining the goal of end-user choice, since compelling a
BDU to turn over its facilities to a competitor would merely entail a
switch from one exclusive supplier to another. QMI agreed with the CCTA
that commercial and institutional properties were intentionally excluded
from the Commission’s inside wire regime. It argued that commercial and
institutional properties have been excluded from the Commission’s
framework for BDU competition since its report of 19 May 1995 entitled
Competition and Culture on Canada’s Information Highway: Managing the
Realities of Transition. According to QMI, BDUs should install
duplicate wiring if they wish to serve these premises. |
17. |
QMI also stated that, historically, cable
companies had an obligation to serve only those residences that were
supplied by municipal water or sewer services and were situated within
150 feet of their networks in areas zoned residential. QMI noted that
cable BDUs had thus installed wiring in many of the properties at issue
in the absence of any obligation to do so, on their own initiative and
at their own expense. |
18. |
In reply to these arguments, parties in
support of mandated access to wiring in commercial and institutional
properties acknowledged that end-users in these properties cannot
reasonably expect or be expected to exercise choice with respect to the
BDU from which they receive service. In their view, however, the
subscriber, i.e., the owner or operator of the building, should be able
to make such choices. These parties noted various disincentives (e.g.,
customer disruption) for existing commercial and institutional
properties to permit rewiring or duplication of wiring, and argued that,
in the absence of regulated access to wiring, incumbents will be
permitted to maintain a near perpetual monopoly in most of these
properties. |
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Commission’s analysis and determinations
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19. |
In Public Notice 2005-83,
the Commission noted that the inapplicability of section 10 of the
Regulations to commercial and institutional properties could be inconsistent
with its longstanding policy objectives of providing for end-user
choice and fostering competition among BDUs. |
20. |
The record of this proceeding indicates
that commercial and institutional properties are widely varied in terms
of the manner in which BDU services are received and viewed by
end-users. Consequently, the concept of end-user choice and the policy
rationale, if any, for mandating access may apply differently in
different types of commercial and institutional properties. In this
regard, the Commission considers that the most appropriate distinction
is between commercial and institutional properties that are used for
residential purposes, such as hotels or hospitals, and those that are
used for non-residential purposes, such as multi-tenant office buildings
or retail stores. |
21. |
With respect to the former group, the
Commission considers that, in many of these properties, end-users are
only short-term residents, e.g., a guest in a hotel. The Commission
agrees with parties opposed to mandated access to wiring that it would
be impractical, in such circumstances, for end-users to make choices as
to which BDU(s) will provide broadcasting services in a particular
property. Choices as to the BDU that will provide service are more
reasonably made by the owner or operator of the property, e.g., the
owner of a hotel. However, since end-users cannot practically be
expected to make such choices themselves, the policy objective of
providing for end-user choice would not, in the Commission’s view, be
advanced by mandating access to wiring in such properties. |
22. |
With respect to the latter group, the
Commission considers that the primary use of wiring in many
non-residential properties is likely to be to receive telecommunications
services, such as Voice Over IP telephony or high speed Internet
services, rather than broadcasting services. Thus, issues related to
access to the facilities necessary to provide such services are better
considered under the Telecommunications Act. Moreover, the
Commission notes that the viewing of television services in
non-residential properties is largely a secondary opportunity for users
to view programming services, i.e., in addition to access at their
permanent residences. Accordingly, mandating access to wiring in these
properties would be of small benefit, if any, in terms of furthering
end-user choice. |
23. |
In addition to the above, the Commission
considers that, in both residential and non-residential commercial and
institutional properties, a significant measure of competition in the
provision of distribution services is possible without mandated access
to wiring. In this regard, the Commission notes that a number of
commercial and institutional properties are already served by competing
BDUs. |
24. |
Broadcasting services, like other services,
are generally provided to commercial and institutional properties
pursuant to a contract between the property owner/operator and a BDU.
Once such a contract expires or is terminated, it lies at the discretion
of the property owner/operator to negotiate a new contract with the
incumbent or with a different BDU(s). Where the owner/operator wishes to
contract with a different BDU, either party may negotiate the purchase
or lease of wire from the incumbent or may install new wire. In the
Commission’s view, these types of contractual negotiations already offer
an adequate means to provide for competition in commercial and
institutional properties. The Commission, however, considers that, in
circumstances where contracts related to commercial and institutional
properties would appear likely to exclude or significantly diminish the
potential for competition (a contract that was unreasonably long, for
example), a finding of undue preference pursuant to section 9 of the
Regulations might be made. |
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Conclusion
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25. |
In summary, the Commission finds that
mandated access to wiring in commercial and institutional properties
would not significantly advance the Commission’s policy of providing for
end-user choice. Further, given the relatively small size of the market
for BDU services in these properties and their widespread distribution
across the country, the Commission is not persuaded that access to
wiring in these properties would contribute significantly to the health
of the competitive market for these services. |
26. |
Accordingly, the Commission will not make
any amendments to the Regulations so as to expand competitive access to
wire in commercial and institutional properties at this time. |
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Other matters
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Harmonizing of the broadcasting and telecommunications rules
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27. |
Certain comments filed in this proceeding
raised the distinctions that exist between the Commission’s rules on the
broadcasting side concerning access by competing BDUs to inside wire,
and the rules established under the Telecommunications Act
related to the use of copper "in-building" wire by telecommunications
carriers. Specifically, SaskTel and MTS recommended that the Commission
harmonize the two sets of rules. |
28. |
The circumstances related to inside wire
and in-building wire differ in a number of ways, including the much
greater size of the commercial telecommunications market, possible
differences in the degree to which costs have been recovered,
differences in the incentives to rewire or duplicate wire, and the use
of "series-looped" inside wire for the provision of broadcasting
services in commercial and institutional properties. |
29. |
Based on the combination of factors
discussed above, the Commission concludes that it would be inappropriate
to harmonize the broadcasting and telecommunications regimes with
respect to inside and in-building wire. The Commission notes, however,
that, given the increasing use of telecommunications facilities to
deliver broadcasting services, and of broadcasting distribution
facilities to deliver telecommunications services, it may be
necessary, at some point in the future, for the Commission to consider
the various circumstances under which one regime or the other might
apply to particular facilities, and to ensure that differences in the
two regimes remain reasonable and appropriate. |
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Secretary General |
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This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
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Footnote: |
Date Modified: 2006-05-29 |