Angry competitive ISPs say prices and regulatory distrust will increase
By Ahmad Hathout
GATINEAU – Large independent internet service provider TekSavvy, having been in the process of building its fibre facilities, was gearing up for next month’s critical 3.5 GHz spectrum auction. In January, competitive ISP Distributel purchased telecom Primus. And several other competitive ISPs reduced their prices in light of what they anticipated would be a new era of lower wholesale internet fees.
But those business decisions were based on the assumption the CRTC would choose lower bulk internet purchase rates that at least were between the interim rates set in March 2016 and the much lower, supposedly final, August 2019 rates, which were then of course the subject of many appeals by the larger incumbent players who would have to provide network space for much less money – and pay the third party internet access (TPIA) providers millions in retroactive payments,
On Thursday, the regulator did the unexpected: It abandoned the final rates set that summer of 2019 and made permanent the much higher 2016 rates. It said it made errors in its three-year-long rate-setting process, and said it wouldn’t go through it again because it would “prolong the period of regulatory and market uncertainty.”
But it’s for precisely the regulatory and market uncertainty that competitive ISPs said they will be reeling from this decision, said Matt Stein, head of small ISP representative the Competitive Network Operators of Canada and president and CEO of Distributel, in an interview.
“This is not going to lead to price decreases,” Stein said. “This is instantaneous price increases.”
A couple of hours after the decision was released, TekSavvy announced it was pulling out of the 3.5 GHz spectrum directly because of the decision. On Twitter, TekSavvy vice-president of regulatory affairs Andy Kaplan-Myrth said even investment in the company’s fibre facilities is now “in doubt,” and in a press release the company said it is scaling back on investment plans.
The subtext is that these competitive ISPs, having been shown the direction that the regulator was going to go, had the rug pulled out from under them on Thursday.
“We made many business decisions based on that decision,” Stein said, when asked about how reliant its purchase of Primus was on having lower wholesale rates. “It was an enormous part of the deal.
“Nothing in today’s decision should drive price increases.” – Ian Scott, CRTC
“This is as much of the business uncertainty that you wouldn’t expect to have in an industry like this, or a time like this,” Stein said.
In an interview, CRTC chairman Ian Scott said the final rates were never implemented, alluding to the lack of certainty from which those business decisions were made.
When the final rates were released in the summer of 2019, a number of competitive ISPs dropped prices for their subscribers despite the incumbents swiftly challenging the decision at the CRTC, the federal court and to the federal government. The price decision was made based on where the regulator was leaning.
Retail prices rose again when Innovation Canada — through an order-in-council — said the lower wholesale rates would in some cases harm incumbent network investments. That decision was based on an interpretation that the federal government expected fees to be raised.
Despite this fluctuation in prices, Scott said, “Nothing in today’s decision should drive price increases,” adding prices have been “essentially flat” for a long time. But with more clarity now that the final rates are the old interim rates and not the 2019 final rates — which will be held for at least a while even with a lengthy appeal process — competitive ISPs will be making more tough decisions about their future.
George Burger of ISP VMedia, who said the decision was made with “incredible incompetence,” wondered, “How can anyone trust any regulatory process in this country anymore?”
“Commissioners and staffers responsible for this reversal should resign, and an immediate Parliamentary investigation should be launched.” – George Burger, VMedia
“Commissioners and staffers responsible for this reversal should resign, and an immediate Parliamentary investigation should be launched,” said Burger.
“The CRTC just performed what appears to be the most egregious reversal of its own administrative decision, one that was five years in the making, in the history of Canadian regulatory tribunals,” Burger added. “Canadians are now condemned to pay the highest prices for broadband services in the industrialized world, while Canadian telcos and cablecos continue to reap the largest profit margins.
Burger and Stein said the decision is an affront to the 2019 policy direction to tne CRTC, but Scott said the regulator wouldn’t have released the decision had it not conformed to the direction.
The Public Interest Advocacy Centre said in a press release that the decision will increase prices and lower consumer choice.
What also went with the August rates was the roughly $325-million in retroactive fees that the CRTC said was owed to the smaller ISPs. That’s because that amount was based on the difference between the final rates and the interim rates, spread over more than three years.
Part of the reason the CRTC chose not to reexamine the final rates is because it said it was worried it would take regulatory resources away from evaluating final rates for the new disaggregated regime. That regime will allow third-party ISPs to get fibre-to-the-home at regulated rates, on the condition that they buy or lease their own transport facilities.
Innovation Minister Francois-Philippe Champagne said in a statement that, “We have taken note of the Canadian Radio-television and Telecommunications Commission’s decision today and thank them for their continued important work during the COVID-19 pandemic. We will be reviewing the decision and its implications to ensure they align with our policy priorities of affordability, competition and innovation in the sector.”
Rogers, Telus and Shaw did not respond to a request for comment.
In a statement, Bell spokeswoman Jacqueline Michelis said, “We’re pleased the CRTC has recognized the critical role that network builders play in connecting Canadians everywhere.
“It’s a positive decision that enables the major infrastructure investments Canada needs, including Bell’s accelerated capital plan to connect even more Canadians and help drive the country’s ongoing recovery, while also ensuring ongoing vigorous competition.”
It is unclear whether there will be an appeal in the decision, as those Cartt spoke to did not tip their hand on that. But in another tweet, Kaplan-Myrth said, “We’re not done yet. We will keep fighting for competition and consumers. That’s what we do, and it’s a hill worth dying on.”
