By Ahmad Hathout
GATINEAU – Like deja vu, the immediate impact of a major decision by the CRTC has unfurled in the days immediately following — but the reactions are the reverse of what happened in August 2019.
When the CRTC that summer decided to slash the bulk internet rates smaller providers pay for large network access – and make the rates retroactive so some serious back pay was supposed to go to those independents – the large telecoms announced cuts to investments, including in rural areas. Smaller providers, rejoicing, immediately slashed retail internet prices.
Following Thursday’s decision to go back on that commitment to cut the wholesale rates, however, TekSavvy — which carries weight as the largest independent ISP — appealed the decision to Cabinet on Friday, said it was pulling out of the 3.5 GHz wireless spectrum auction this month, and dropping its mobile wireless plans.
Meanwhile, Bell announced Monday that it is plowing an additional $500 million over two years in its accelerated capital investment plan — on top of the $1 billion it already allocated earlier this year — citing “greater regulatory certainty.” (In its fall 2018 economic statement, the federal government incentivized infrastructure builds, like fibre investments, by allowing companies to claim in their tax forms more of those costs in the first year.)
In its petition, TekSavvy asked the Governor-in-council to remove CRTC chairman Ian Scott due to an alleged “clear bias” stemming partly from comments he made in May in which he said he had a “personal” preference for facilities-based builds. It also asks Cabinet to bring back the August 2019 rates, force the incumbents to repay the difference between the 2016 interim rates and the August 2019 rates, and direct the competition commissioner to “address the incumbents’ anticompetitive activity.” TekSavvy filed a complaint in February 2020 with the Competition Bureau, but it has heard nothing back. “They’re just sitting on it,” said Andy Kaplan-Myrth, the company’s vice-president of regulatory and carrier affairs told Cartt.ca in an email.
The Chatham-based company said it also invests in its own infrastructure — alluding to the argument made ad nauseum by the incumbents that they are only resellers — and that it has faced difficulties contending with the current wholesale rate as it was in the midst of plowing money into a wireless business, with the help of a contract from Southwestern Integrated Fibre Technology. In total, TekSavvy says its $250 million in investments in wireless and wireline are in jeopardy because of last week’s decision.
By the end of the work day Monday, in the space of two business days, there have been three calls from wholesalers — TekSavvy, VMedia, EBox — for CRTC chairman Scott to resign or be removed (they point to his past life as an executive and lobbyist for Telus). VMedia said in a statement that it would “pursue every legal means to reinstate the 2019 decision to ensure Canadians eventually get the benefit of fair internet pricing.”
In an interview, VMedia co-founder George Burger said the company cannot continue to maintain its rate structure with the wholesale rate regime not being amended.
In response to a question about the decision, Francois-Philippe Champagne said during question period on Monday that his government has been “relentless in promoting competition to lower prices while working to improve the quality and increase the coverage of telecom service in Canada.
“We are ensuring… that Canadians pay affordable prices for reliable internet services regardless of where they live in our nation. We’ll keep on working with service providers and industry partners to drive investment and make telecommunications services more affordable and accessible for all Canadians.”
Cartt reached out to both Rogers and Telus for comment on Thursday and Monday, but did not receive responses to questions or requests for statements. Bell responded in this story, saying it was satisfied.
Independent ISPs are arguing that the interim wholesale rate — which has been in place since March 2016 and has outlived the 2019 rates through appeals — was and is unsustainable. In fact, following the prolonged, tripartite, appeal process, which slithered through the CRTC, the federal government and the courts, many of the major independent ISPs which originally dropped their retail prices after the 2019 decision eventually increased them as the case dragged on.
Another point of contention is that some independents have complained about wholesale price increases in last week’s decision. For example, for just two of Rogers’ wholesale packages in the tiers of 150 Mbps download and 15 Mbps upload and 250 Mbps download and 10 Mbps upload, the wholesale prices have gone up by $15 for new customers only, they told Cartt.ca.
Under the previous interim regime, the cost for those two specific packages were in a lower-cost bracket ($34.57) and the 250/20 and above speeds were in the highest-cost bracket ($49.06). Last week’s decision merged the 150/15 and 250/10 speeds of Rogers’ with the highest-cost bracket. (Wholesale customers who were already paying the lower rate will continue to pay the lower rate; only new customers will pay the higher rate.)
The problem with that, the independents argue, is the 150 Mbps package represents a popular choice for many Canadians, but it also adds to a growing list of grievances with the decision.
TekSavvy’s petition includes an urging to use Phase II costing principles, which anticipates future revenues and costs of services to come to an access rate.
It’s worth noting the wholesale rate review process was initiated by then-CRTC chairman Jean-Pierre Blais, who was known as a consumer-first commissioner.
He told Cartt.ca on Monday in his current capacity as the assistant deputy minister of the Receiver General and Pension for Canada, he cannot comment on the matter.
However, “competitors that provide retail Internet services to Canadians using wholesale high-speed services must have access to these services at just and reasonable prices,” Blais said in rates a decision in 2016, in which he denied the large ISPs access rate proposals because they did not use the CRTC’s costing manuals.
“The fact that these large companies did not respect accepted costing principles and methodologies is very disturbing. What’s even more concerning is the fact that Canadians’ access to a choice of broadband Internet services would have been at stake had we not revised these rates.”
