By Ahmad Hathout
OTTAWA – Internet service provider TekSavvy is warning the CRTC that if it does not address unregulated wholesale access rates in the industry, “there may not be any independent wholesale competitors remaining.”
In January, the ISP filed a Part 1 application asking the CRTC to investigate the legality of the matter in light of Rogers’s proposed deal to provide Videotron access to its network at below CRTC regulated rates as a condition of its acquisition of Shaw. It also accused Bell of self-preferencing by providing its recently purchased affiliate Ebox with preferential rates for access to its network.
Both Rogers and Bell denied they are engaging in undue preference violations for different reasons. Rogers argued TekSavvy doesn’t know the terms of its unpublicized deal with Videotron, so it allegedly doesn’t have a leg to stand on, while Bell argued it cannot provide itself with an undue preference because it owns Ebox. The large players have argued that the CRTC hasn’t just facilitated off-tariff agreements (OTA) years ago, but the industry has engaged in many of them with no complaints.
But in a reply to the submissions published last week, TekSavvy doubled down and argued that it didn’t preclude in its arguments that there shouldn’t be any OTAs, but that enough time has lapsed for a review of the OTAs’ impact on the market and that the two specific cases it referenced (Bell and Rogers) are allegedly in violation of Section 27(2) of the Telecommunications Act. TekSavvy has pointed to Competition Tribunal references to Rogers’s agreement with Videotron as “very favourable” and that Bell’s EBox is allegedly operating as a separate telecommunications entity under Bell.
TekSavvy alleges that incumbent arguments that OTAs are pro-competitive masks the reality that those agreements – when competitors even get the opportunity – are designed to get the smaller players to sell the lowest speed tiers only or involve “material financial ramifications for not meeting set growth targets.
“Due to the inability to otherwise compete based on tariff rates (which has now borne out), competitors were essentially forced to accept these OTAs, including their conditions, to survive,” TekSavvy said. “This situation is not indicative of a “win-win” arrangement or one in which OTAs offered to independent competitors could in any way be likened to those obtained by Incumbents and negotiated on relatively even footing.”
TekSavvy itself entered into OTAs in previous years, it said, but as a “stopgap measure” as it “expected the Commission to finalize interim rates at just and reasonable, retroactive rates.” But the CRTC ended up scrapping the proposed lower rates in 2019.
TekSavvy added that, “should the Commission choose not to take meaningful interim action, with urgency, there may not be any independent wholesale competitors remaining. This would only reward Rogers, Videotron and Bell for their violations of section 27(2) of the Act.”
There have been several mergers and acquisitions in the industry recently. Bell closed its acquisition of large ISP Distributel last month, Videotron purchased VMedia, Start and Altima went to Telus, and Oxio’s internet business to Cogeco. Rogers CEO Tony Staffieri said earlier this month that acquisitions of smaller providers is an option to reach 100 per cent coverage of the market.
TekSavvy said this consolidation has been the case in part due to these OTAs “dangerously distorting the wholesale high-speed access” market and retail prices as a result, making it more difficult for competitors to compete.
Citing some of the other submissions to its application, TekSavvy said the CRTC should move to provide open an expedited investigation “to better understand the nature and impact of undue preferences created by the various wholesale arrangements” and to grant access to last mile fibre on an interim basis.
But the CRTC is likely to deny the latter request, as it has done with a similar relief ask from January 2021 application from the Competitive Network Operators of Canada when the commission launched its proceeding on wholesale access rates and an expedited consultation on providing mandatory access to the incumbent’s last mile fibre facilities last week. TekSavvy’s reply was published days before the launch of the proceeding.
“If interim relief is granted, more final remedies can be appropriately dealt with once the broader investigations of the impugned conduct are concluded, or indeed through the conclusion of other ongoing proceedings,” TekSavvy said. “At that point, the Commission will be in a better position to understand the full nature and effects of the preferential behaviour and ascertain the appropriate final remedy.”
In the proceeding document last week, the CRTC referenced an ISED June 2022 price report showing higher broadband prices in the mid- and top-range internet plans compared to its international peers and noted that competitors collectively lost nearly two per cent market share (10 per cent to just over 8 per cent) from 2019 to 2021.
A more recent ISED price report found fixed broadband prices either decreased or stayed constant.
