CRTC final broadband wholesale rate ruling good news for incumbents

The Canadian Radio-television and Telecommunications Commission (CRTC), Canada’s telecommunications regulatory authority, delivered a final ruling May 27 on the wholesale rates incumbent network operators can charge competitive service providers for access to their broadband infrastructure. In finalizing a process that had begun in 2015, the CRTC reversed a 2019 ruling that significantly reduced the wholesale rates, saying that “the information provided on the record caused the CRTC to doubt the correctness of certain aspects of its August 2019 decision.” The commission instead adopted “interim rates” set earlier in the process that are higher than the 2019 rates.

The interim rates essentially are the wholesale rates that had been approved prior to the rate review initiated in 2016. The review was part of the runup to a revision of the market CRTC had mandated in 2016 that would see wholesale services then provided on an “aggregated” basis (closer to the core, necessitating the cost of optical transport) move to a “disaggregated” model (in which wholesale customers would tap into the access network). While the wholesale customer would have to integrate into the infrastructure supplier’s network at more points, the overall cost should be lower, CRTC believes.

Ian Scott, chairperson and CEO of the CRTC, said the ruling puts the spotlight back on this evolution. “Since 2016, the CRTC’s objective has been to complete the transition to a disaggregated wholesale model for access to the large companies’ high-speed broadband networks,” he stated. “This model will foster greater competition and further investments, so that the industry can better serve the needs of Canadians. Today’s decision will allow us to focus on that goal, while providing certainty in the marketplace for internet service providers.”

The new ruling is a double blow to independent operators. The 2019 ruling not only set lower rates but determined that incumbents had overcharged for access for several years and that those excess charges should be refunded to the independents. Not surprisingly, the competitive service providers expressed displeasure at the regulatory about face.

"This is an arbitrary decision that appears to be the result of lobby pressure and false big telco threats and indicates that the CRTC is too afraid to take on the job of making telecom more competitive in Canada," said Matt Stein, chair of the Competitive Network Operators of Canada (CNOC) and president of independent ISP Distributel. "The big question is 'what has changed'? What new evidence backs up this decision? Nothing. Canada's largest telecom companies, while simultaneously taking federal subsidies and paying dividends, continue to charge high prices and engage in poor customer service. Unless the federal government intervenes, Canadians will continue to get hosed."

Independent ISP TekSavvy took that sentiment further, calling on the federal cabinet to reverse the CRTC ruling and either fire Scott or force him recuse himself from wholesale rate discussion due to what TekSavvy alleged was “clear bias” towards the disaggregated market model. "The CRTC's disregard for both its own mandate from Cabinet, as well as Cabinet's mandate from the Prime Minister, makes it clear that the CRTC actively undermined this government's agenda and promises to Canadians," asserted Andy Kaplan-Myrth, TekSavvy's vice president of regulatory and carrier affairs. "The CRTC has ignored Cabinet's directions to it and has placed the interests of large incumbent telecommunications providers above the interests of Canadians."

For their parts, the incumbents are ready to move on. Bell announced yesterday that it will increase the amount of money it had previously earmarked for broadband infrastructure investment by as much as CAN$500 million, “in response to the support for infrastructure investment reflected in recent federal regulatory and policy decisions.” The company previously had announced plans to spend CAN$1.0 billion to $1.2 billion through next year on new broadband networks (see "Bell plans CAN$1 billion for network deployment in next two years").

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