The CRTC is undermining telecom investment in Canada

At a time when Canada is suffering from low productivity growth that most observers attribute at least in part to lagging business investment, it is strange to see a federal agency double-down on regulatory rules that seem certain to reduce such investment. Yet that’s what the Canadian Radio-television and Telecommunications Commission (CRTC) did last month in confirming that major telecommunications companies must open their fibre-optic networks to competitors at regulated rates. After a long regulatory trek, what began as a policy confined to Ontario and Quebec in 2023 has now been cemented in place nationwide, unless the federal cabinet decides otherwise.

The policy just confirmed requires investors to take on all the risk of financing and building their own infrastructure in full knowledge they will have to share it with their competitors, who will pay nothing except a service fee someone else sets. The CRTC made its decision despite repeated warnings from people familiar with the industry about the likely negative effect on investment.

Following the 2024 expansion of mandatory access rules, Bell Canada cut more than $1 billion in planned investments, including a $700-million reduction in 2024–25 alone. This investment was slated for the deployment of high-quality internet service for Canadians. Between 2019 and 2023, investment in Canada’s telecommunications infrastructure was already down $600 million after adjusting for inflation.

If companies invest less in maintaining existing cable and fibre-optic networks or in developing networks with new technologies, the quality of telecom service will stagnate or even deteriorate. Less access to the ultra-modern networks of tomorrow could mean slower internet, more frequent outages and greater and greater technological lag.

The message compulsory sharing sends is clear: you don’t have to invest in your own network in order to provide quality service to your customers. So why invest millions, even billions, of dollars to develop your own telecommunications network when instead you can just use your competitors’?

Forcing companies to share infrastructure they’ve built at rates someone else sets will discourage investment and reduce productivity.

It’s the classic “free-rider” problem from economic theory: some players use the goods of a competitor without paying their true costs — in this case, the large capital investments required to build a telecommunications network. Compulsory sharing also increases the risk of developing a new network, since your competitors will quickly have access to it in order to offer their own services to the market. That’s no longer just a fear: the CRTC has enshrined it into law.

The situation is even worse when the companies that benefit from new infrastructure they didn’t build are themselves among the Big Three players in the sector — Telus, Bell and Rogers. These companies are, even the CRTC concedes, the pillars of telecom infrastructure development in Canada. Yet some may begin free-riding by using the infrastructure of smaller companies without paying enough to cover costs — to the detriment of the development of their own networks.

In parts of the country where Bell, Rogers or Telus have not invested in fibre-optic networks, smaller regional providers like SaskTel, Quebecor or Cogeco would be forced to sell them access to their infrastructure at less than market-rate.

If you’re the head of one of those large providers and you have to choose between investing billions to expand your network to a new market, all while taking on some risk, or choosing pay-as-you-go under an advantageous regulated rate, the choice is pretty clear. Unfortunately, it’s at the expense of the regional players who have taken that risk, invested in the infrastructure and are trying to grow their presence in the market.

As telecommunications tools occupy a larger and larger place in Canadians’ daily lives this problem becomes more and more worrisome. If the Carney government is truly committed to making sure our businesses have access to the high-quality infrastructure they need in order to succeed in an increasingly digital economy, the cabinet should reverse this short-sighted decision from Canada’s telecommunications regulator.

Renaud Brossard est vice-président, Communications à l’IEDM. Il signe ce texte à titre personnel.