BCE Inc., Canada’s largest telecommunications company, said it will chop capital spending by $1 billion after a regulator ordered the country’s major phone providers to open up their broadband networks to smaller rivals at prescribed rates.

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The decision by Canada’s telecom regulator applies to Ontario and Quebec, the two provinces where more than 60 per cent of the population lives, and is intended to bring more competition to home internet services and reduce costs for consumers.

Vicky Eatrides, the chair and chief executive of the Canadian Radio-television and Telecommunications Commission, said the ruling was a response to years of declining competition from independent internet sellers, a number of which have been acquired by the major telecom firms.

The regulator will set interim rates at which BCE and other large phone companies must sell wholesale access to their high-speed “fibre to the home” networks, and will hold more public hearings on the issue starting in February, Eatrides said in a speech Nov. 6.

For BCE, the ruling is set to curb growth in one its most important lines of business. The company has invested heavily in laying fiberoptic networks in Canadian cities and towns to sell higher-quality internet and television services, aiming to grab market share from Rogers Communications Inc. and other rivals. Ontario and Quebec are BCE’s most critical markets.

“A legal challenge from BCE would not surprise us,” BMO Capital Markets analyst Tim Casey said in a note to investors. While the regulator’s decision is a “notional negative” for the company, it isn’t likely to make a big difference in the market share held by wholesale internet sellers, he added.

BCE, which said it has spent more than $18 billion on its networks since 2020, will now slow the pace at which it builds. The Montreal-based company said it expects to reach 700,000 fewer locations by the end of 2025. “Rolling back fibre network expansion is a direct result of the CRTC’s decision,” it said in a statement late Monday.

The company spent $3.5 billion in capital expenditures in the first nine months of this year, according to its most recent financial statements.

During that same period, BCE reported $6.1 billion in wireline data revenue, which includes high-speed home internet services — more than the $5.3 billion it got from its wireless service unit.

RBC Capital Markets analyst Drew McReynolds called the CRTC’s decision to apply the new rules to two provinces and not to other regions “simply perplexing.”

“While we assume finalization of the broader review will ultimately level the playing field in this respect, we view the capex response by BCE in the context of this imbalance as undoubtedly a logical one,” McReynolds wrote in a note late Monday.

Bloomberg.com