New-look CRTC sets out to fix the internet market it broke

March 15, 2023

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Last week’s announcement that the CRTC is finally taking action to fix Canada’s broken internet market is welcome news for consumers and independent service providers such as TekSavvy.

With competitors dropping like flies over the past year and choices for internet users drying up, emergency action is warranted to prevent the nation’s big telecom companies from completely carving the market up amongst themselves.

To that end, the CRTC has launched an expedited review of the wholesale rules and fees by which indie ISPs access portions of networks owned by the likes of Bell, Rogers and Telus. The regulator has also instituted an immediate 10-per-cent cut to some components of those fees.


What fees are actually being cut?

Most media articles reported the cut but didn’t delve into the all-important details – namely, that it applies only to one part of wholesale fees – a small fraction of the overall exorbitant wholesale charges paid by indie ISPs.

The vast majority of ISPs’ wholesale costs come from access fees, which are paid on a per-customer basis. The announced cut, however, applies only to usage rates, which are essentially how many megabits-per-second of capacity each indie ISP purchases per month.

These usage fees account for a very small percentage of overall wholesale costs, so the cut – while welcome nevertheless – is not material and ultimately won’t lead to lower customer bills.

However, the CRTC says it is prepared to make further adjustments as appropriate – and the need for it to do so remains urgent.


Is meaningful change coming?

That said, where the CRTC is going under new chair and competition expert Vicky Eatrides – and the speed at which it hopes to get there – is encouraging.

In its announcement last week, the regulator highlighted its problematic 2021 wholesale decision, which reversed an earlier ruling that would have significantly lowered rates for indie ISPs and therefore the prices that consumers pay.

That fiasco, engineered by former CRTC chair Ian Scott – the ex-Telus executive who was caught on camera having private beers with Bell chief executive Mirko Bibic days after the company had filed its appeal – destroyed the competitive market and led to the acquisition of nearly every major indie ISP by the big companies.

At the time, the Scott-led CRTC argued that the current system was being phased out in favour of a new incoming “disaggregated” model, so it did not bother setting proper wholesale rates. It instead opted to make permanent a set of temporary rates established in 2016, with some minor adjustments.

The reversal also fleeced indie ISPs of hundreds of millions of dollars owed to them for years of overpayments to the big companies, which undoubtedly led to many of them exiting the market.

The fact is, Scott’s CRTC shredded an evidence-based rate decision that took five years of exhaustive study and which had withstood attempts to appeal to cabinet, the Federal Court of Appeal and the Supreme Court. In its place, the former chair arbitrarily set rates that significantly benefited his friends at the big companies.

This issue is at the core of TekSavvy’s ongoing appeal of the reversal with the Federal Court of Appeal. Last week’s moves by the new CRTC certainly strengthens our case, in our view.


Could fibre competition be close?

The CRTC’s new leadership is going further with an acknowledgement that competitor ISPs have been blocked from selling fibre network speeds since 2015, thereby giving big companies a monopoly over those services.

The new review puts a potential solution on the table: giving competitors wholesale access to the big telecos' fibre to the home as an interim measure. The CRTC is inviting companies and the public to comment on whether it should take this step this by Apr. 22.

These are the correct priorities on an expedited timeline, which could be a sign of a nimble and more agile CRTC to come. That would be a welcome contrast to Scott’s willfully sluggish and industry-captured regulator.


Let the games begin

We must hope, however, that the CRTC’s new leadership is prepared to stare down the big companies’ inevitable gaming.

When the regulator last embarked on a review of wholesale rates in 2015, Bell and other big companies bogged down the process with delays. They ignored filing deadlines, violated expectations on cost studies, and requested stay orders. They also threatened to withhold expanding networks into rural areas, despite getting billions in subsidies to do so.

The ploys ultimately worked, dragging the process out for four years only for the CRTC’s ultimate decision to be arbitrarily reversed by an industry insider chair in 2021.

This masterclass in regulatory gamesmanship created the current dire state of affairs.

As the new chair, Eatrides and company seem ready for it, with last week’s announcement warning that unnecessary delays and attempts to slow the review will be shut down.

For the sake of consumers and the few competitor ISPs remaining, we sincerely hope so.

(Photo: Government of Canada handout)

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