By Ahmad Hathout
OTTAWA – There have been “dozens” of agreements since 2012 that deviated from the CRTC’s established rate regime for wholesale access to the networks of the larger telecommunications companies, and they are all in-line with the Telecommunications Act, Shaw argued in a submission to the CRTC on Tuesday.
Shaw was responding to a Part 1 application by independent internet service provider TekSavvy, which asked the CRTC last month to examine the legality of these off-tariff agreements (OTA) that provided a competitor with favourable wholesale access rates not available to other providers. TekSavvy alleged that Rogers is prepared to engage in it with Videotron as part of its effort to convince regulators that competition will be fine if it is allowed to buy Shaw, and alleged Bell is already doing it with its affiliate EBox on the last mile fibre portion of the network.
“In spite of the exponential increase in OTAs being entered into in the past decade, TekSavvy’s is the first Part 1 application alleging undue preference through an OTA, negating TekSavvy’s suggestion that OTAs are inherently problematic,” Shaw said in its submission. “In Shaw’s experience, OTAs have made a critical contribution to the competitiveness of the market, as imagined by the Commission in 2012.”
Shaw noted that it has “several” OTAs in place with wholesale customers and “several” other carriers are also in similar arrangements.
“In Shaw’s view, the prevalence of these agreements, paired with the lack of complaints about them, directly contradict any notion that OTAs are inherently problematic or symptomatic of deep-rooted problems in the market for wholesale HSA services,” Shaw said. “They are, in fact, evidence of a robust market for wholesale internet services, and there is no compelling reason based on the present Application for the Commission to take drastic action in respect of the forbearance regime applicable to OTAs”
Shaw also said TekSavvy’s request of the CRTC to either nix the agreements of Rogers and Bell or temporarily extend them to competitors until it reviews the matter should be dismissed on the basis that it does not meet the legal test to approve such an ask. That is, TekSavvy “fails to provide any evidence of irreparable harm or demonstrate that the balance of convenience” supports such a request, Shaw argued.
The cable company also said TekSavvy’s request for the CRTC to address high wholesale rates that created the environment for these OTAs should be dismissed because the request is “completely disproportionate to the conduct in question.” It argued any concern from the CRTC should be applied to the specific cases. Shaw added TekSavvy already tried appealing a 2021 CRTC decision that declined to apply lower wholesale rates proposed in 2019 and should not be allowed to use this application to revisit the issue.
Finally, Shaw said the OTAs fit into the new policy direction to the CRTC from Innovation Canada that came into force last week. That’s because, Shaw argues, the new direction mandates that the CRTC look at all forms of competition for service affordability.
“Granting the broad remedies proposed by TekSavvy would run afoul of the Policy Direction’s emphasis on predictability and coherence, as well as the requirement, in section 4, that Commission decisions be efficient and proportionate to their purpose,” Shaw argued.
Opposition to OTAs
But other submitters don’t agree with Shaw.
The Public Interest Advocacy Centre further backed TekSavvy’s application on Tuesday. The advocacy group argued the arrangement between Rogers and Videotron “will more likely weaken the competitive ability of any new or existing competitors seeking to gain market share post-transaction.
“Because of uniquely favourable rates and terms, Videotron will be able to price its retail services at rates that are unsustainable for competitors who very likely cannot secure similar OTAs, or certainly not within a reasonable timeframe, given the Commission’s decision to rely upon commercial negotiation with an arbitration backstop to establish such OTAs,” PIAC said.
PIAC added competitors will find it difficult to obtain market share in such an environment, “unless they are willing and able to enter into their own OTAs, or become affiliates of the large carriers.”
Globalive, the investment firm that has been interested in acquiring Shaw’s Freedom, said in its submission last week that OTAs – specifically the Rogers-Videotron deal – provide an undue preference to certain competitors.
The firm added that the commission does not know the exact nature of the OTA between Rogers and Videotron, which necessitates a process of discovery to figure the answers to those questions.
“Simply put, the CRTC does not know what preferential terms and conditions are contained within the Wholesale Arrangements,” Globalive said. “The CRTC needs to, at the very least, know if it is even in the realm of possibility that competitors could obtain similar terms from Rogers through arms-length negotiations.
“Until the CRTC is fully appraised of the details of the Wholesale Arrangements, and knowing that the final impediment to closing the proposed transaction could be removed at any time, the CRTC should immediately suspend the operation of the Wholesale Arrangements on an interim basis (as requested in the Application),” the firm added. “In particular, the CRTC must (i) open an investigation into Roger’s unlawful undue preferences, and (ii) issue interim relief in the form of prohibiting the unduly preferential OTAs.”
The firm also warned the CRTC that there is a “real risk” the innovation minister approves the transfer of Freedom to Videotron, which would trigger Rogers’s acquisition of Shaw, prior to the CRTC making a determination on the matter. “The CRTC must therefore move quickly to ensure that the evident violations of the Telecommunications Act are not allowed to be put into practice.”
TekSavvy’s application had previously been supported by the Competitive Network Operators of Canada, an industry group representing independent ISPs.
The deadline for submissions was Tuesday.
