Government sides with telecoms in appeal of CRTC’s lower wholesale rates

Telecom giants have argued that the lower fees will have significant negative impacts on their ability to invest in high-quality networks

The federal government is supporting Canada’s largest telecoms’ appeal of the CRTC’s lowered wholesale rates.

“On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas,” said Innovation Minister Navdeep Bains in an August 15th statement.

“Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments.”

Last August, the CRTC lowered the wholesale rates that large providers can charge for access to their high-speed broadband networks, stating that this would “facilitate greater competition.”

This resulted in capacity rates dropping five percent to 43 percent, while access rates lowered three percent to 77 percent. At the time, the CRTC argued that the new capacity rates were 15 percent to 43 percent lower than the interim rates, with access rates three percent to 77 percent lower than the interim rates.

Smaller ISPs like TekSavvy and Distributel have expressed satisfaction over the changes. However, telecom giants have called for the CRTC to reconsider lowering the wholesale rates, stating that they stand to lose roughly $350 million in retroactive payments to smaller providers as part of the decision. This, in turn, would greatly hinder their ability to invest in high-quality networks, the larger carriers have argued.

For now, though, Bains noted that it’s not necessary to refer the wholesale decision back to the CRTC for reconsideration, given that the regulator is already in the process of reviewing it. To that end, Bains said he encourages all parties to cooperate with the CRTC for the time being.

“We will continue to monitor the CRTC proceedings closely to ensure our frameworks have the right incentives for investment and competitive choice, while preserving our policy flexibility for the forthcoming CRTC decision to ensure these important objectives are met,” concluded Bains.

Consumer advocacy group OpenMedia has since responded to Bain’s statement, criticizing the minister for supporting big telecoms on their appeal of the lowered wholesale rates.

“We’re disappointed to see Innovation Minister Navdeep Bains side with Canada’s telecom giants. In no way does this morning’s decision help improve internet affordability, despite Minister Bains long promising it to be a priority,” said OpenMedia executive director Laura Tribe in a statement.

“Let’s be perfectly clear on what’s happening here: the government has effectively told the CRTC that they expect the rates to go up because they’re worried about investment. But these increases will most certainly be passed along to customers. If Minister Bains actually cares about network investment, then he and Rural Economic Development Minister Maryam Monsef should get on with it and release their much-delayed $1.7 Billion Universal Broadband Fund.”

The Universal Broadband Fund in question is meant to help the government meet its target of connecting 100 percent of Canadians to 50Mbps download and 10Mbps upload speeds by 2030. The government opened applications to the fund in June.

Tribe continued:

“Minister Bains talks a good game about affordability, but it seems that’s all it is – talk. Two weeks ago we learned that cell phone prices have not come down, despite repeated promises from the government. Today we see a government decision that will inevitably lead to higher Internet prices for Canadians. This is not what’s needed right now. Canadians and small, independent Internet service providers are already on the ropes due to COVID-19. Internet users across the country have lost their jobs, and small ISPs are fighting for their lives at the Federal Court and CRTC. We need bold action to help Canadians and promote choice and affordability – not weak, half-measures that maintain the status quo and put small providers at risk.”

Bains has not yet responded to OpenMedia’s statement.

Source: Innovation, Science and Economic Development Canada

Update 15/08/20 at 2:50pm ET — Updated to include comments from OpenMedia.