CRTC flip-flop on wholesale internet rates could mean higher prices for consumers: critics
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A decision by the Canadian Radio-television and Telecommunications Commission not to lower wholesale internet rates despite saying it would two years ago is a loss for Canadian consumers who will see their internet service prices go up, critics say.
On Thursday, the regulator said it would not implement the lower wholesale internet rates – the rates smaller internet service providers (ISPs) pay big telecoms for network access — after all.
Matt Stein, chair of the Competitive Network Operators of Canada, which represents smaller providers, said the decision came as a shock.
“It is boggling to think the CRTC chose to reverse the decision that they spent three years making,” he said.
Thursday’s reversal will lead “the rates that Canadians pay for internet to go up, in part because competitors in most cases have already forward priced in belief that there will be a substantial decline in rates,” Stein said. That will now have to change, and those increases will lead to rises in internet prices across the board, he predicted.
The decision caps off a two-year battle between large telecom companies and smaller internet service providers whose businesses rely on wholesale access to the networks of the big telecoms. It means the smaller, wholesale-based companies like TekSavvy and Distributel will have to keep paying essentially the same higher rates that preceded the 2019 decision to lower them.
It’s a big win for large telecoms like Bell, Rogers, Shaw, Quebecor and Cogeco who fought the new rates through every avenue available to them, arguing lower rates would harm network investment, including in rural areas, where telecom infrastructure is often dated and inadequate. They filed court appeals, petitioned federal cabinet to overturn the decision and asked the CRTC itself to review the decision.
Last year, the Federal Court said the CRTC’s rates stand and though the big telecoms appealed at the Supreme Court, that court declined to hear the case. The Liberal government also declined to overturn or alter the decision.
That left the ball in the CRTC’s court, leaving it up to the regulator to decide whether to uphold the lower rates it established in August 2019. On Thursday, it said it would not, determining there was “substantial doubt as to the correctness” of the 2019 rates.
It said starting another process to review them would take too long, cause too much market uncertainty, and take too many resources away from establishing a new, “disaggregated” wholesale regime.
CRTC chairman Ian Scott said in an interview that the decision won’t lead prices to go up because the lower rates were never implemented, calling that a “false narrative.”
“Why would it go up?” he said. “I’m not buying this – not as a result of the establishment of these rates.” He added that the small telecoms that lowered their prices in anticipation knew the rates weren’t final, and that some of the companies have also raised them back up in the meantime.
“It is up to them to choose their pricing,” he said. “Presumably they all make contingency plans.”
That “disaggregated” regime the CRTC wants to move towards has been plagued by problems and seen no take-up from companies since it was introduced in 2015. Small ISPs said the regime had turned out to be “unworkable,” and the CRTC is currently in the process of reviewing it.
Scott said he couldn’t state when the disaggregated regime would be put in place, but indicated that the delay could be because smaller providers “prefer to have aggregated forever.”
Laura Tribe, executive director of advocacy group OpenMedia, said in an interview the decision’s focus on the disaggregated model is “really concerning,” given that the CTRC first started consulting on it in 2013, issued a decision in 2015 and “six years later we get to see a single wholesale connection over disaggregated wholesale rates.”
While Thursday’s decision is the final step in the appeal processes launched by the big telecoms in 2019, it doesn’t necessarily mean the fight over wholesale rates is over. Parties who are unhappy with the CRTC’s ruling have the option of filing another appeal in Federal Court, or turning to the federal government again.
How the Liberal government might respond is unclear, given that when cabinet declined to overturn the 2019 decision, then-innovation minister Navdeep Bains issued a statement sympathetic to the big telecoms’ arguments about investment that said the rates were too low.
But the Liberals also campaigned on internet service affordability in the 2019 election, Tribe pointed out. She said the decision “actively undermines” that.
A statement from current Innovation Minister François-Philippe Champagne said he “will be reviewing the decision and its implications to ensure they align with our policy priorities of affordability, competition and innovation in the sector.”