OTTAWA – CRTC chair Ian Scott (above) found himself in the position of defending recent Commission decisions as well as his meeting with then chief operating officer of Bell, Mirko Bibic when he appeared before the Standing Committee on Industry and Technology on Tuesday.
Scott spoke to the parliamentary committee about the CRTC’s ongoing work in support of competition as well as investment in the marketplace so all Canadians have access to broadband and wireless services.
“We understand your concerns about the affordability of these vital services for the Canadian population, and we share those concerns,” he said. “We’ve been working to implement a policy that is intended to foster competition among Internet service providers in the marketplace.”
In an opening speech to committee, Scott was quick to bring up and defend the Commission’s May 2021 decision on wholesale rates.
“Much has been said about the decision we issued in May 2021, which set the final wholesale rates for aggregated high-speed broadband access services,” he said. The reason he gave for the reversal, which he has given before, was that the Commission got the initial 2019 decision wrong.
Scott acknowledged the May 2021 decision is creating challenges for some companies as it made permanent the higher interim rates, which were established in 2016. He maintained, however, the CRTC made the right decision when it reversed its 2019 decision.
“I would stress also that the 2019 rates were never in effect in the marketplace,” he said. “It is true that some competitors lowered their retail rates on the basis of that decision, but that was a business decision and a risk that they assumed given the appeals that were being filed at the time.”
Nathaniel Erskine-Smith, a member of the committee from the Liberal party, pushed back on this comment later during the meeting. The companies, while assuming risks, are “making business decisions with the confidence that you’re getting a comprehensive review right after over three years,” he said.
Erskine-Smith indicated it was then unfair to “flippantly sort of say they assumed risk,” and argued that “fundamentally the decision undercuts competition and you’re mandate I hope is to encourage competition.”
Erskine-Smith asked Scott how the Commission managed to get the decision wrong in the first place. A comprehensive review was undertaken, which took over three years, he pointed out while noting the term “comprehensive” was not his word choice, but the word used to describe the review in the 2019 decision.
“And that comprehensive review, despite its comprehensiveness, was incredible incorrect I guess because less than two years later you reversed course almost entirely,” he said.
Scott responded by saying costing processes are very complex. “To give you a sense of the size and scope of that material, we were dealing with something like 150 costing models, 20,000 pages of evidence, over 100 rate elements to be calculated and all of those are, if you will, contested,” he said. “On the one side you have parties submitting rates and defending their representation of the appropriate costing and others contesting it and asking for changes.”
Scott said the Commission sought more information after a review and vary application was filed, and decided based on the record, there were errors in the 2019 decision.
The CRTC chair noted several times during the meeting that the May 2021 decision was the right decision. Erskine-Smith, however, argued we still do not have a good answer on what the rates should be, pointing out the 2021 decision indicated the Commission was concerned completing another full review to determine new rates would require time and resources.
“So, isn’t it the case, that you identified errors, but you didn’t necessarily correct those errors because it would take too much time and cost too many resources, so we still don’t really have a good answer despite two fulsome reviews,” he said. The question appeared to be rhetorical as Erskine-Smith did not wait for a full response before moving on to his next question.
Scott was further challenged by members of the committee on how the CRTC’s May 2021 decision will help foster competition and lower rates for Canadian consumers.
Ed Fast, a member of the standing committee from the Conservative party, pointed out in 2019, the CRTC lowered the wholesale rates set in 2016 “presumably to increase competition,” he said. “And within two years that decision is reversed and the rates, the wholesale rates are increased, and I think it’s fair for Canadians to ask how in the world will increasing wholesale rates improve competition and lower the rates that consumers pay?”
Scott reiterated the May 2021 was a costing decision and said the costs were not “increased”. “You’ve said several times, ‘increasing the costs’, no, determining the final rates based on costs. And that was what we did,” Scott said.
Fast also asked Scott about whether the reversal decision had “anything to do with improving the prospect that large telcos would invest further and to a greater degree in the infrastructure required to expand broadband across Canada, especially in rural areas.”
Scott said he does not recall that being part of the record of the proceeding. “I’m well aware that parties made submissions after in relation to court proceedings and before cabinet that related to their investments, but the decision that we are discussing is related to costing not to deployment of facilities,” he said.
Several members of the standing committee also brought up the meeting Scott had with Bibic. The CRTC chair once again defended his decision to meet the Bell COO (now CEO) for a beer, arguing he did not do anything wrong. Bernard Généreux, another Conservative member of the committee, pushed back on this and said the perception of the meeting is very negative and reflects badly on the CRTC, according to an English translation of his comments, which were given in French.
During the standing committee meeting, which touched on a wide variety of topics, Scott was also asked questions about the CRTC’s MVNO decision and why the Commission chose to limit which companies are eligible to be an MVNO under the mandated system.
Scott said the record of the proceeding showed “mandating unlimited MVNOs would have detracted from competition and in fact done damage to the existing competitors who are making inroads against the big three and who are having a meaningful impact on wireless rates in Canada.”
During the meeting it was pointed out several times the government directed the CRTC in 2019 to look at how it can create a more competitive environment and increase affordability.
Erskine-Smith wondered whether Scott has done enough in terms of fulfilling the government’s directive.
“If the mandate is competition and affordability for an essential service like the Internet, and you’ve been in the job for over four years, what I see is a wholesale rates decision that undercuts competition as Mr. Fast suggested, and then I see an MVNO decision that very modestly pushes the needle in addressing competition,” he said.
“And after four plus years don’t you think we should expect more?”
