TPIA providers say they’ve had to make tough financial decisions to stem the bleeding
By Ahmad Hathout
OTTAWA – Canada’s large telecommunications companies are claiming third party internet service providers have never had it better with the interim bulk internet purchase rates the CRTC made permanent in May.
The telecoms were responding to petitions to the federal government to overturn the May decision filed by large independent internet service provider TekSavvy, ISP National Capital FreeNet, and the Competitive Network Operators of Canada (CNOC), an organization representing smaller telecoms who lease network space from the larger carriers. In the decision, the regulator said it made a mistake when in 2019, it significantly revised down the 2016 interim wholesale Internet rates the smaller companies use to buy capacity from the big ones.
This month, Innovation Canada released comments responding to the petition. (Cartt.ca obtained copies of several of the comments before Innovation Canada released them, which you can read about here.)
In the comments, large carriers including Bell, which filed solo, and Rogers, Shaw, Videotron, Eastlink, and Cogeco, who filed jointly, said cabinet should not do anything to reverse the regulator’s decision.
They argued that, for one, cabinet already determined – in response to a large carrier appeal – the rates set by the CRTC in 2019 that were never implemented, “in some instances undermine investments in high-quality networks,” which it determined runs counter to the requirement of the policy directive to the CRTC. For another, the telecoms argued the CRTC already determined it made significant errors in the 2019 decision it could not uphold.
The large telecoms also argued the independents, including the ones who filed the petition, have never had it better, saying they raised their share of the market during the time between the 2016 interim and May 2021 decisions. Bell used data from 2019, the latest from the CRTC, to suggest these entities together claimed nearly 20% of the net customer additions and roughly 10% market share nationally.
The Association of Manitoba Municipalities said it was informed by industry stakeholders about the petition to cabinet and takes the position of those stakeholders that the May ruling should be upheld. It reasoned that going back to the lower 2019 wholesale rates would “adversely impact the expansion of broadband Internet to rural, remote and northern communities.”
The Canadian Chamber of Commerce, which represents thousands of Canadian businesses, said the CRTC made the right decision in May and that the “resellers, such as the petitioners, have enjoyed significant, risk-free growth under the previous rate regime.” The May decision, it argued, balances investment and competition, which it said is crucial for next-generation technologies.
In the wake of the regulator’s decision, some TPIA providers asked for CRTC chairman Ian Scott to be removed or recused from wholesale-based decisions, due to what they felt was an expectation that the rates would, at the very least, land somewhere between the 2016 and 2019 decisions. (TekSavvy also pointed to comments Scott made at an event in which he said he had a preference for facilities-based competition.)
Distributel, for example, purchased Primus at the start of the year in anticipation the regulator would find that middle ground in the rates. TekSavvy said it dropped out of the auction for 3.5 GHz spectrum, which is said to be critical for 5G wireless networks, because of the decision.
Making a business decision on the expectation of lower rates was also a theme for Coextro. The Ontario-based ISP said in a submission to cabinet it “was forced to operate based on the new rates, as every reasonable person, including our customers, expected the original decision to remain largely un-changed.
“We have recently entered the final phase of bringing high speed services to the Chippewas of Georgina Island, with plans to bring services to more underserved areas of Ontario that the Incumbents have ignored,” Coextro added.
“These plans have now been cancelled due to the reversal of the 2019-288 rate decision. Plans for additional local hiring have been cancelled. New investments in network expansion have also been cancelled. Price increases to both existing and new customers have been implemented and continue to be implemented, ranging between 10%-30%.”
This decision was in part driven by the fact that cabinet did not ask the CRTC to revisit its May decision (because it was already reviewing it on appeal), and that the Supreme Court of Canada refused to hear the decision on appeal from the Federal Court of Appeal, which denied the legal arguments of the large telecoms.
The petitioners received additional support from other telecoms and public interest groups, who also filed their own submissions to cabinet. EBOX said the May decision forced it to take drastic action to cut its losses, including removing the option for customers to pay by credit card, which comes with additional fees born by the retailer.
“To put it bluntly our measures will not be enough for the long run,” EBOX added in its submission. “Therefore we are in the process of analyzing rate increases in the retail market as we have exhausted all our options.”
In a separate submission, CIK Telecom, a member of CNOC, said the May decision “completely hurt our investment plan in our network [expansion],” adding it had to suspend its east coast expansion and downsize its initial investment plan to spend $300 million to build fibre-to-the-home to cover all of Markham.
VMedia, which has been outspoken from the start about how bad the decision is for TPIA providers, said in another submission the decision is catastrophic for competition. Public interest groups Open Media and the Public Interest Advocacy Centre also came out in support of the petition for the sake of competition and lower prices.
