Market Study Notice: Competition in Broadband Services

Some of the content in this notice has been updated. See the Broadband Market Study Update for additional detail regarding the timing and scope of the Study.

Notice of study

  1. The Competition Bureau (Bureau) is commencing a market study to better understand the competitive dynamics of Canada’s broadband internet services industry (Study).Footnote 1, Footnote 2
  2. Broadband is the high speed, high capacity internet access that fuels the digital economy. Canadians use broadband services to find and share information, purchase products and services, and increase their productivity at work. Accordingly, high prices in the broadband sector can have negative spill-over effects into a wide range of economic activity.
  3. Promoting healthy competition can help to ensure that all Canadians prosper in a competitive and innovative marketplace.

Purpose of the study

  1. Most Canadian homes are served by two networks capable of providing broadband internet services: one owned by the local telephone company, and the other owned by the local cable company. This limited choice leads to obvious questions about competition; when consumers have only two options, can we be sure that market forces will deliver the low prices and high levels of innovation that are characteristic of competitive markets?
  2. The Canadian Radio-television and Telecommunications Commission (CRTC) has historically taken action to increase the level of competition in Canadian broadband markets by allowing independent resellers to use existing telephone and cable networks to provide internet services to Canadians.Footnote 3 Presently, more than 550 companies have been established to act as a competitive alternative to traditional telephone and cable companies.Footnote 4
  3. Yet, questions arise as to the impacts that these independent service providers, or "resellers", have had on competition. The latest CRTC Communications Monitoring Report notes that, as of 2016, 87% of retail internet subscriptions in Canada were purchased from a traditional telephone or cable company.Footnote 5 This comes against the backdrop of resellers offering seemingly comparable services at prices that can be as much as 30% lower than those advertised by telephone and cable companies, as measured in a 2015 report by Wall Communications.Footnote 6
  4. The purpose of this Study is to better understand these market outcomes and the competitive dynamics of Canadian broadband markets more generally. Are resellers fulfilling their role in placing increased competitive discipline on traditional telephone and cable companies? Or are these figures a symptom of a marketplace that could function better?

Scope of the study

  1. The Bureau plans to examine four broad questions, each of which contains a number of specific issues:
    1. Have resellers been able to deploy competitively effective service offers?
      1. What competitive influence have resellers had, to date, on traditional phone and cable network owners? How could this competitive influence change in the future?
      2. Are there differences between the services offered by traditional phone and cable network owners and those provided by resellers that could explain the observed consumption patterns? What are the value points that matter the most to consumers?
    2. How have consumers reacted to new competitive alternatives?
      1. How aware are Canadian consumers of their options for broadband services? Are there factors that may drive consumer inertia in this industry and, if so, are there ways to overcome these factors?
      2. How does the fact that resellers do not typically provide other telecommunications services (e.g., television or phone service) affect the competitive attractiveness of resellers?
      3. How do industry contractual practices affect consumer behaviour? How are contract lengths and bundling discounts structured? How aware are consumers of their contractual obligations and rights?
    3. How does regulation in this industry affect the economic behaviour of broadband suppliers?
      1. How does the Canadian reseller regime affect the incentives that network owners have to expand or upgrade their networks? Have network investment levels changed following the establishment of resellers?
      2. What investments must resellers make in order to provide services to consumers? Are there features of the marketplace that impede the expansion of resellers?
      3. Have network owners used the reseller regime to expand their reach outside of their incumbency area? Why or why not?
    4. How do other countries manage and regulate broadband competition?
      1. Do Canadian regulations diverge in any meaningful way from those employed by other countries? Are there significant differences between Canada and other jurisdictions that explain any divergence?
      2. Are there lessons to be learned from how other jurisdictions regulate broadband?
  2. In conducting the Study, the Bureau does not intend to evaluate:
    1. The billing, sales, or customer service practices of broadband providers, other than those that may inhibit consumer switching; or
    2. Allegations of unfair or coordinated conduct among broadband providers.Footnote 7
  3. As the Study progresses, the topics within the scope of the Study may change (including adding, substituting, or removing topics). In the event that the scope is changed materially, the Bureau will update this notice and advise stakeholders of the changes.

Outcomes of the study

  1. The Bureau expects to publish the results of the Study in a public report, which may include recommendations to relevant government authorities, as appropriate.
  2. The Study will enable the Bureau to, among other things:
    1. Make informed regulatory interventions regarding steps that regulators or policymakers could take to further support competition in the broadband industry; and
    2. Increase its knowledge and understanding of the competitive dynamics of the broadband industry, and telecommunications industry more generally, to inform the Bureau’s future work.

Timeline

  1. The Bureau intends to conduct the Study according to the following timeline:
    1. May 2018: Study commencement
    2. August 31, 2018: Deadline for initial submissions and/or requests for interviews
    3. Summer and Fall 2018: Stakeholder engagement and research
    4. Winter 2018-2019: Information analysis and continued stakeholder engagement
    5. Spring 2019: Publish draft report; hold public consultation; and publish final report
  2. The Bureau will modify this schedule at its discretion if necessary. Should there be any material change to this schedule, the Bureau will update this notice and advise stakeholders of the changes.

Getting involved

  1. Those with an interest in the Canadian broadband industry are invited to provide written or oral submissions on specific issues relevant to the Study. Please provide written submissions by mail, fax, or email to the officer identified below. If you would prefer that the Bureau contact you for an oral interview, please provide your contact information. The Bureau would appreciate receiving submissions and/or indications of willingness to participate in an oral interview before August 31, 2018, in order to provide adequate time to review and conduct follow-up interviews as necessary.
  2. The main contact for the Study is:

    Greg Lang
    Major Case Director and Strategic Policy Advisor
    Competition Promotion Branch

    Email: ic.cbmarketstudies-etudesdemarchebc.ic@canada.ca
    Fax: (819) 953-6400

    Competition Bureau
    Place du Portage Phase I
    50 rue Victoria Gatineau, QC
    K1A 0C9

Role of the Competition Bureau

  1. The Bureau enforces and administers the Competition Act (Act). As part of its mandate, the Bureau participates in a range of activities to promote and advocate for the benefits of a competitive marketplace. More competition can lead to lower prices for consumers, as well as increased choice and innovation.
  2. Among the tools the Bureau uses to advocate for competition are market studies. Market studies allow the Bureau to study an industry in depth and understand the competitive dynamics in that industry. Market studies can be effective tools to help regulators and policymakers understand the competitive dynamics of an industry and the potential impacts that regulation can have on competition.
  3. Through market studies, the Bureau can identify competition issues and suggest potential solutions. Alternatively, market studies can confirm that competition in the marketplace is functioning effectively.

Premise of the study

  1. The Bureau operates on the assumption that competition is good for both businesses and consumers. Competitive markets deliver significant benefits to the economy. Competition makes the economy more efficient; gives small and medium businesses an equitable chance to participate in the economy; provides consumers with competitive prices, product choice and the information needed to take decisions; and drives innovation.
  2. While regulation can be necessary to ensure that legitimate policy objectives are met, the Bureau’s perspective is that such regulation should be undertaken in a manner that allows competitive forces to dictate marketplace outcomes to the maximum extent possible.

Information gathering

  1. Over the course of the Study, the Bureau will gather and analyze information from various sources. The Bureau will consult experts, market participants, and other stakeholders, and will review academic literature and the experience of other jurisdictions.
  2. The Bureau may also, as appropriate, examine information collected in respect of its past advocacy or enforcement files, in order to inform its views during the Study.

Confidentiality

  1. The Bureau conducts its advocacy and enforcement activities under the authority of the Act. Section 29 of the Act protects information obtained by or provided to the Bureau, including the identities of the persons who provided the information, and any information that could reveal their identities. However, when information has been made public or where persons providing information authorize its communication to other parties, subsection 29(2) permits the disclosure of such information. Additionally, subsection 29(1) provides exceptions for the communication of information to a Canadian law enforcement agency or for the purposes of the administration or enforcement of the Act. The Bureau’s Information Bulletin on the Communication of Confidential Information under the Competition ActFootnote 8 is available on its website, and stakeholders are encouraged to consult that Information Bulletin, or direct specific questions to the officer identified above.
  2. Should the Bureau publish a report in relation to the Study, the analysis therein may be based on confidential or commercially sensitive information. We encourage stakeholders to identify any confidential or commercially sensitive information in their submissions. The Bureau will anonymize the information to the best of its ability.
  3. The Bureau will conduct its analysis in confidence. To help ensure that no confidential or commercially sensitive information is publically disclosed, the Bureau will provide affected stakeholders, as appropriate, with an advance copy of any report forty-eight (48) hours prior to its intended publication for the sole purpose of allowing them to identify whether any confidential or commercially sensitive information has been included.
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