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Oct. 7 — A decision by Canada's telecommunications regulator to prescribe interim wholesale rates for competitors' access to high-speed broadband systems, including new fiber-based networks, has been met with mixed reviews from telecom providers and consumer advocates.
Telecommunications providers that sell wholesale access to their networks to competitors say such price regulation hurts investment in network upgrades and expansion. Consumer advocates argue it will lead to more competition and lower prices for consumers.
The Canadian Radio-television and Telecommunications Commission's Telecom Decision 2016-396, issued Oct. 6, followed on the directive it issued in Telecom Decision 2016-379 for large service providers BCE Inc. (Bell Canada), Cogeco Cable Inc., Rogers Communications Canada Inc. and Videotron G.P. to propose rates for wholesale access to their services.
The commission's latest ruling found that the rates proposed by those companies, as well as other large telecom operators that filed proposed tariffs — Manitoba Telecom Services Inc. (MTS), SaskTel Corp. and Shaw Communications Inc. — were unreasonable and had to be revised downward.
“Competitors that provide retail internet services to Canadians using wholesale high-speed services must have access to these services at just and reasonable prices,” CRTC chairman Jean-Pierre Blais said in a statement. “The fact that these large companies did not respect accepted costing principles and methodologies is very disturbing.”
The commission said it reduced the proposed transport component rate for some companies by up to 89 percent and the proposed access component rates of some by up to 39 percent. Its ruling directs the companies to post the revised tariffs on their websites by Nov. 7, 2016. It notes that the final rates may be made retroactive, but does not provide a timeline for when the final versions could be issued.
“These interim approved monthly rates reflect the wholesale high-speed access service providers' cost estimates submitted in response to Telecom Decision 2016-117, adjusted by the Commission to reflect the costing principles the wholesale high-speed access service providers should have applied, together with an appropriate markup,” it said.
In the short term, the commission's decision will force the large cable and telephone companies to sell their services for less, which could in turn could lead to lower profits for them and higher profits for competitor firms, James Swanson, a partner and technology lawyer with Miller Thomson LLP in Calgary, said Oct. 7.
“It does look like the CRTC is currently setting itself up as quite friendly to consumers,” Swanson told Bloomberg BNA in an email.
But these rates are only temporary and the regulator will at some point set final rates that could be higher or lower than the interim ones, he said. That action will in part be based on additional comment and input provided by wholesale and retail communication service providers, he said.
“This will be important to consumers as the ultimate pricing will depend, in part at least, on how the CRTC finally resolves the issue of pricing for smaller resellers of bandwidth and connectivity” that buy services from larger companies on a wholesale basis, he said.
Canada’s Competition Bureau said Oct. 7 that it is aware of the CRTC’s ruling, but didn’t intervene in the case. “The Bureau recognizes the CRTC’s expertise to make such determinations,” the agency told Bloomberg BNA in an emailed statement.
Rogers Communications said Oct. 7 that it is disappointed with the ruling and does not agree with setting “arbitrary” rates. “We believe in an evidence based, fair balance that both covers the cost of building and maintaining Canada's world-class networks and incents further investments,” the company told Bloomberg BNA in an email.
Bell Canada declined Oct. 6 to comment. “We are reviewing the decision,” spokeswoman Jacqueline Michelis told Bloomberg BNA.
Cogeco and Videotron did not respond to Oct. 6 requests for comment.
Industry consultant Mark H. Goldberg said Oct. 6 that the pricing decision could further hinder the expansion of fiber-based networks. Canada's large telecom and cable operators warned after the regulator's 2015 decision mandating wholesale access to their broadband networks (Telecom Regulatory Policy 2015-326) that those rules could slow the rollout of fiber networks, Goldberg, of Toronto-based Mark H. Goldberg & Associates Inc., told Bloomberg BNA.
“It certainly doesn't help the incentives for investment with significant reductions in the wholesale rates,” he said.
The ruling could also signal how the regulator might rule in its ongoing review of wireless wholesale roaming rates that incumbents charge to new mobile entrants such as WIND Mobile (a division of Shaw Communications), Eastlink and Videotron, Goldberg said, as some costing principles are the same.
The Canadian Network Operators Consortium Inc., which represents more than 30 competitive telecom providers, applauded the regulator's decision as providing the rates its members need to stay competitive.
“There is no question that the CRTC is acting to ensure that Canadians continue to have access to a wide selection of competitive, innovative and differentiated Internet services,” Matt Stein, the group's spokesperson and chief executive officer of Distributel Communications Ltd., said in an Oct. 6 statement.
The decision signals that the CRTC is serious about ensuring competitive access to broadband services, John Lawford, executive director and general counsel with the Ottawa-based Public Interest Advocacy Centre, said Oct. 7.
“It was refreshing to see the Commission recognize incumbents clearly gaming the system to effectively slow implementation of fair rates,” Lawford told Bloomberg BNA. “However, the final wholesale rates will be crucial, so we hope CRTC maintains its nerve.”
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The CRTC decision is available at http://www.crtc.gc.ca/eng/archive/2016/2016-396.htm.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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