Regulator forcing Northwestel to implement auto credits for outages
By Ahmad Hathout
The CRTC announced Thursday it is now collecting comments on how to implement a monthly internet subsidy for residents of Canada’s far north, the region with some of the most expensive high-speed internet services.
The regulator is contemplating providing the subsidy to internet service providers (ISPs) through the National Contribution Fund (NCF), which would then be delivered to eligible residents in all households of the region with sparse populations and difficult terrain. The NCF relies on ISP contributions and provides the funding for the CRTC’s flagship $750-million Broadband Fund.
The subsidy model would be a flat rate discount – instead of based on ISP costs – on internet bills to bring them in-line with rates elsewhere in the country. The total subsidy received by ISPs will be based on the number of customers they serve, calculated by multiplying the monthly discount amount by the number of customers served. The “uniform discount subsidy,” as the CRTC calls it, will ensure that ISPs don’t need to do burdensome costs models, it said.
The subsidy would be universal, meaning all ISPs operating in the far north, including foreign-owned ones and those that don’t contribute to the NCF, will be eligible to carry it, as the CRTC said the affordability issue is far-reaching.
The CRTC is asking the public to comment on subscriber eligibility and monthly amount and calculation method. While the consultation document discusses the federal objective speeds of 50 Mbps download and 10 Mbps upload, CRTC officials said in a technical briefing Thursday that the subsidy can be applied to any plans offered in the area.
The commission said it holds the preliminary view that small businesses should be eligible for the subsidy because of the “important role” they play in the region and the higher rates for internet they pay compared to its peers in the rest of the country. It is also consulting on whether community institutions, such as schools and non-profit organizations, should be eligible.
Those officials also said they are hoping to hear from industry about the sustainability of such a subsidy with the NCF’s other priorities. The CRTC said the NCF is currently the only established mechanism it has for the collection and distribution of funds.
“The Commission is hopeful that the introduction of a subsidy will help advance reconciliation by improving the affordability of telecommunications services for Indigenous peoples in the Far North,” the CRTC said in its consultation document. “This will in turn help reduce inequalities between residents of the Far North (many of whom are Indigenous) and those living elsewhere in Canada.”
The proposal follows a CRTC hearing in 2023 on barriers to internet access in the far north. A major theme from that hearing was affordability in the economically difficult-to-service region of the country. The government of the Northwest Territories proposed that the CRTC consider providing a low-income subsidy and a universal service subsidy to deal with the high prices, which the commission estimates is to be $157 per month for 50/10 versus $94 in the rest of the country.
In response to that proposal, Northwestel, the dominant far north provider and the only one in the region whose retail services are regulated, said it would join the low-income Connecting Families program, which provides discount services to those in need.
Northwestel, whose parent Bell has agreed to sell it to an indigenous consortium, had urged the CRTC to avoid implementing a subsidy because it said retail service prices are just and reasonable. But the CRTC does not agree.
The consultation document includes additional proposed checks on Northwestel, including a requirement that it submit yearly reports on internet overage fees for the next five years. This is despite data from the provider showing that overage revenues have been on a downward trend.
The CRTC, however, did reject calls for Northwestel to open its access network for mandatory wholesale, which the commission — in a majority decision — said wouldn’t make sense because the costs are already so high in the region that wholesale competitors are unlikely to make their money back and/or Northwestel wouldn’t be able to make back its investments in the networks it build, unless it significantly increases is internet prices, which would defeat the purpose of this entire exercise.
Instead, it is ordering Northwestel to make improvements to its Wholesale Connect service, which allows companies to use the transport portion of its network.
Automatic crediting in outage events
The commission is also mandating that Northwestel be forced to implement automatic credits – listed as a separate line item on subscriber bills – in the event customers experience network outages, with the exception being outages caused by a customer and those outside of its control.
The auto credit would be on a prorated basis and would be paid no later than three billing cycles after the date of the outage.
The CRTC thus rejected Northwestel’s request that if such a system be set up, all providers should be subject.
“While all Canadians are affected by outages, those living in the Far North experience them with both a higher frequency and longer duration, which has a significant impact on residents and businesses,” the CRTC said in the consultation document.
ISPs including Ice Wireless, SSi Canada, and Northwestel said such a requirement would be an investment burden on them. SSi said such a mandate on it would drive up its costs because outages up north can take days because of a lack of on-site technicians or barriers to access the affected sites. The Canadian Network Operators of Canada, Northwestel, SpaceX’s Starlink, and Telus all argued for a broader proceeding on this matter, which should include all of Canada.
The CRTC said ISPs in the far north already provide bill credits and so it is possible for them to implement them automatically, “rather than placing the responsibility on customers to request compensation for services that they did not receive.
“Providing automatic bill credits is less of an administrative burden than issuing refunds,” it said, adding it will look to a future proceeding to “improve consumer protections in the event of outages” on a Canada-wide basis.
The CRTC is also mandating that Northwestel create a distribution list of retail customers – with opt-in by default – to receive notifications by email or text message regarding planned outages, service disruptions or maintenance, and provide an opt-out option by July 16.
Northwestel will also need to file a yearly report with the commission on internet outages in the far north.
Commissioner Anderson dissents
British Columbia and Yukon Commissioner Claire Anderson disagreed in a dissenting opinion on making the subsidy universal and on forgoing subjecting Northwestel’s networks to wholesale.
“The strong view expressed by northerners was that the introduction of competition was the preferred path for achieving the region’s important social, economic and consumer objectives,” she said about the subsidy. “Competition was viewed as the better approach to facilitating community-based and Indigenous-owned economic opportunities, which in turn would lead to greater local job creation, better service packages, and improved customer service and affordability.”
Anderson also disagreed with the commission’s finding that it “exhausted all avenues” to find a fair wholesale price to incent competition and investment on a far north wholesale model.
She said: “i) the evidence presented by Northwestel on the price of delivering a high-speed access (HSA) service was insufficient to make a reasonable determination on the costs for wholesale implementation; ii) no consideration of subsidizing a wholesale framework was made, despite instances of subsidizing the development and implementation of competitive frameworks in the past; iii) the Phase II costing method isolates Northwestel Inc.’s (Northwestel) retail internet revenues in a manner that ignores the totality of its financial situation as the dominant service provider in the region; iv) no consideration was given to other rate-setting methods, like retail-minus or an efficient operator model; and v) no consideration of the role of the Commission’s Broadband Fund or other government subsidies in incenting innovation and further investment was made.”
