Government “disagreed” with incumbent arguments about direction usefulness and legality
By Ahmad Hathout
OTTAWA – Innovation Canada has kept its proposed policy direction to the CRTC largely intact, as the final version released Monday shores up language to reinforce the government’s perspective on the importance of competition and affordability in the wireline and wireless sectors of the telecommunications industry, while maintaining that the direction will encourage innovation and network investments.
The department clarified language in the final version that made clearer the importance in CRTC decisions of network reliability, fair roaming rates, and “just and reasonable” rates at which smaller internet service providers pay to lease network space from the incumbents. (The CRTC must make space in its decisions to outline how its analysis lines up with these policy directions.)
“The CRTC must take action to have more timely and improved wholesale rates available,” a government backgrounder said.
The wholesale rates issue has been a sticking point for independent internet service providers that lease space on incumbent networks and compete in the market on service. The CRTC had initially proposed a revised wholesale rates framework in 2019 that lowered those costs to lease, but the regulator in 2021 reversed course and maintained the higher 2016 interim rates.
Former CRTC chairman Ian Scott and current chairwoman Vicky Eatrides both said the wholesale framework currently doesn’t work as intended and that the commission is currently working on a framework to improve the situation.
The policy direction was proposed on the day the federal department also denied petitions to the 2021 wholesale rate reversal. A government official said during a technical briefing Monday that the policy direction is a “key consideration” in government decisions on appeals, leaving open the question of whether a decision determining the opposite would have emerged if this particular direction were in force at the time.
Some independent ISPs held out hope that the 2019 rates would persist and made business decisions based on that hope – including Distributel purchasing Primus; those providers often complain about the time it takes the CRTC to make these decisions.
The policy direction requires that the CRTC adjust the internet regulatory framework in a “timely manner, including by making proactive adjustments.”
According to the language of the direction, the regulator must “set interim and final tariffs expediently, including by reforming the tariff-setting process and considering external expertise or international best practices.”
A mandate letter to Eatrides from Innovation Canada and Canadian Heritage last week outlined the need for the commission to make decisions in a timely manner.
The Competitive Network Operators of Canada said in a statement that the association representing independent telecoms is pleased that the minister “resisted [the] attempt to water down the Policy Direction, and in some cases enhanced, all with a commanding emphasis on consumer interests and smaller competitors.
“We had recommended a small number of minor changes we propose to align the text with the government’s stated intentions, and are pleased to see that the Minister has confirmed that wholesale rates must be “just and reasonable,” although we remain concerned that the CRTC will, instead of setting those rates, leave it to negotiation,” said CNOC executive director and general counsel Geoff White.
“Although we remain positive about the Policy Direction, and the new leadership at the CRTC, it’s important that the Minister and the CRTC take action urgently because there is a mass extinction event happening in the Canadian telecom sector, with smaller, independent operators struggling under years of a broken competitive framework. When the smaller players exit, consumers suffer,” White added, alluding to a recent flurry of acquisitions including Telus acquiring Start.ca and Altima, Bell buying Ebox and Distributel, and Quebecor buying VMedia.
“TekSavvy welcomes the Government of Canada’s new Policy Direction,” the company’s vice president of regulatory and carrier affairs said in a statement. “It is a clear direction that the CRTC must take urgent action to fix its broken wholesale framework. TekSavvy is one of the only major wholesale-based ISPs left. The CRTC must immediately lower wholesale access rates, enable competitive access to fibre services and prevent big telcos from using predatory pricing to eliminate competition.
The direction also outlines the need for the regulator, an institution operating at arm’s length of the government, to maintain the aggregated wholesale regime even when the providers move to a new disaggregated regime. The aggregated regime allows third parties to rent in a bundle the transport traffic route and the last mile from the incumbents, but does not mandate the incumbents provide last mile fibre in the package. Independent ISPs have requested that last mile fibre be provided in the current regime.
The new proposal is “directing the CRTC not to phase out the existing model for wholesale access by third-party competitors and instead preserve and strengthen it in conjunction with the introduction of a new access model that it is planning to introduce,” a government backgrounder said.
“We are very pleased though to know that the current wholesale framework (aggregated, end-to-end) will remain in place despite the long and tortured attempts to transition to a different (disaggregated model),” White added. “We were also hoping to see stronger wording about mandated access to incumbents’ fibre, which is urgently needed because Canadians are demanding the faster speeds that only fibre can provide, and paying too much for those services.”
CNOC has recently called on the CRTC to mandate third party access to the incumbents’ last mile fibre under the current regime.
John Lawford, the executive director of the Public Interest Advocacy Centre, said Monday evening that the direction is a “wish list for competitors that should allow some rebalancing for wholesale access after the terrible saga of wholesale internet rate-setting.” But he noted that there is no affordability mandates in the direction, “so the talk of affordability and lower prices is hard to ensure as a policy goal without a legal backstop.
“Really, it is not a Policy Direction we need but amendment of the Telecommunications Act to have a Universal Service obligation (not “objective” which is an aspiration never realized) that would require companies to affordably serve all customers (some with subsidies),” Lawford said.
Other policy objectives
The proposal also tells the CRTC to ensure it remains vigilant for the sake of competition in the wireless sector, specifically with respect to the very new mobile virtual network operator model, which only recently had its terms and conditions set for providers to begin negotiations with incumbents. The regime’s mandated negotiations only applies to regional carriers with spectrum and infrastructure.
The lingering reach of the department remains in the new proposal, with the language of the backgrounder including ISED being “prepared to move to a full MVNO model, if needed, to support competition in the sector.”
The direction also requires that the CRTC provide consumer protection measures in the event of outages, which was highlighted by the Rogers network outage last summer that shut down important services in large swaths of the country. The minister got the large telecoms to agree to formal agreements in which they would support each other such such emergencies to ensure Canadians remain connected.
It also asks the CRTC to address bad sales practices, improve transparency on service pricing, implement broadband testing to ensure customers are getting speeds they pay for, improve accessibility, and speed up broadband deployment by providing timely access to poles. It also requires the CRTC increase the operational capacity of complaints watchdog the Commission for Complaints for Telecom-television Services.
In a statement, the Canadian Internet Registration Authority, which manages the .ca domain, said the organization is “pleased that today’s order requires the Commission to ensure that timely internet performance testing is conducted and data made available to consumers, which reflects several stakeholder recommendations linking network speed testing to better policy outcomes for internet users…This new direction will guide and challenge the CRTC in a renewed focus on building a trusted internet—a mission at the core of CIRA’s work.”
ISED “disagrees” with incumbent protests on direction
The policy direction is unusually pointed and prescriptive, which larger telecoms took issue with when they submitted comments to the department about it.
The government official said Monday that the government “just disagrees” with the incumbent arguments that the proposed direction was unnecessary and legally dubious in light of the CRTC’s administration of the Telecommunications Act.
“Each of these provisions is outcome-oriented as opposed to getting into the details of the actual CRTC rules,” the official said. “If you look at how the CRTC actually regulates the sector, it is far, far, far, far more detailed than what is contemplated in the policy direction itself. The direction strikes a balance between providing a clear direction to the CRTC on the objectives that matter for Canadians while still leaving a fair bit of leeway for the CRTC to interpret those instructions into its ongoing activities.”
A Bell spokesperson said in a statement that the company is still studying the direction. A statement from Rogers said the following: “We share the government’s commitment to increased competition, affordability and investment as we continue to build and upgrade our networks. We look forward to working with the government and the regulator to bring more choice, value and connectivity to Canadians.”
The policy direction officially retires the 2006 policy direction of the Maxime Bernier era, which said CRTC decisions must ensure that market forces are relied upon to the greatest extent possible. The new direction completely scraps the words “market forces.”
To that, Lawford said, “good riddance to that monstrosity.”
Photo above of Innovation Minister Francois-Philippe Champagne.
