End-stage Mandated Wholesale

When I moved to BC in 2018, I decided I wouldn’t go back to an incumbent ISP. I signed up with an “independent” ISP (or IISP) with a local presence, and even though it took ten days for me to get connected (because independent ISPs still depend on incumbent technicians to set up their subscribers) I was very happy with my choice. Then a couple years later my ISP was purchased by the incumbent telco, and I had to go looking for another option. More recently on the other side of the country, Fenwick McKelvey had signed up with EBOX, and when they were bought by Bell (in Feb. 2022), he switched to Distributel. Well, the news from earlier in the month is that Bell is now also buying Distributel. It turns out you can run from the incumbents in Canada, but they will catch up with you eventually.

The IISPs that developed under the mandated wholesale regime have been getting rolled up in the West and East, with VMedia acquired by Québecor over the summer, and Bell buying EBOX and Distributel. Is this wave of consolidation a “death blow” for IISPs? I suppose we can hold the funeral if TekSavvy finally gets swallowed by the incumbents it’s been fighting all these years, but no matter what, it is clear there has been a big market shift. Whether or not the Rogers-Shaw merger is completed, the mandated wholesale regime has turned out to be a policy failure. It used to be possible for regulators to maintain the status quo, preserving the existence of IISPs as a source of competitive tension, even if these smaller operators were never going to truly compete with the incumbents in terms of scale. This is no longer an option. With each acquisition there is less for regulators to preserve. It becomes impossible to pretend the policy is working, unless we want to pretend that the goal of telecom liberalization was always to end up with a telco/cableco duopoly.

No, the half-baked neoliberal dream of the 1990s is finally dead. The idea that the CRTC’s role in competition policy was just part of the “transition to competitive markets” is ridiculous now. People stopped writing such things years ago. We never arrived at this promised land of “competitive markets”, but policymakers seem to have been of the opinion that where things ended up was good enough. Now, consolidation (or reconsolidation) has gone so far that it puts government in a difficult position. Is this still a ‘good enough’ outcome of liberalization? We’ve gone from most Canadians having a monopoly telco and a monopoly cableco provider in the 1990s, to the descendants of these two companies being the choice that Canadians still have in the 2020s. So thirty years after this bold shift in telecom policy that put an end to the monopoly era, after all of the fights over mandated wholesale at the CRTC, we’re in some ways back to where we started, with two big companies, each controlling one wired network going into your house (unless you live somewhere less fortunate, in which case it might be monopoly for you). The big difference brought about by liberalization and the shift to data networks is that these two former monopolies can provide competing services over those wires, and ideally this means government doesn’t have to regulate prices the way it did in the monopoly era.

None of this was inevitable – it was up to the CRTC to decide how viable mandated wholesale would be for IISPs, but Distributel was never going to neutralize the advantage of the incumbents by spending billions ‘overbuilding’ their infrastructure. The vague policy fantasy that such a thing might happen was sometimes useful for the incumbents, in that they could point to the existence of all of these apparent competitors, but incumbents fought against mandated wholesale at ever turn, and it must bring them some satisfaction to see it crumble. However, this does potentially put the spotlight squarely on the telecom giants, complicating any further attempts for them to gobble one another up.

In my book I wrote about three possibilities for the future of competition policy: something radical (like structural separation), the status quo, or to embrace incumbent dominance. Well the status quo was largely a duopoly anyway, but it came with the notion (hanging on from the 1990s) that things might yet become more competitive. That’s gone now, so government inaction would mean accepting that the terminal stage of liberalization is incumbent duopoly.

For many in Canada, there are still options besides the incumbents – non-incumbent ISPs are still managing to exist, or succeeding by doing important work in regions that incumbents have historically neglected. This is not a call to throw in the towel on mandated wholesale. There can and should be a variety of ISPs serving local needs across Canada, and it needs to be possible for alternative providers of connectivity to exist. But we also need to confront the failure of imagination that led us here, and to learn from it by actually trying to imagine the future that our competition policy is set to deliver.

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