Bell, Rogers ask Ottawa to overturn CRTC resellers ruling
Bell Canada and Rogers Communications Inc. are among Canadian internet giants petitioning the federal cabinet to overturn a regulatory decision that slashes the fees they charge resellers, saying the lost revenue is needed to boost infrastructure for imminent 5G technology.
The Canadian Radio and Television Commission in August ordered the network-operating telecoms, such as Bell, a unit of BCE Inc.; Rogers; Shaw Communications Inc.; and Videotron, a unit of Quebecor Inc.; to chop their wholesale rates to internet resellers by as much as 77 per cent. The price drop has allowed resellers to boost their retail client numbers and undercut the networks.
“If this pace continues (and it will only accelerate if the rates set by the order are maintained) resale-based competition will supplant facilities-based competition and network investment will be significantly curtailed, especially in rural and remote areas,” Bell said in its petition filed to the cabinet on Wednesday to overturn the CRTC decision.
The ordered rates are below network costs and a return to the previous higher rates is needed to “preserve incentives for network investment at a critical juncture in the investment cycle as Canada transitions to higher speed fibre and 5G wireless networks,” Bell said.
Other affected carriers are Telus Communications Inc. of Vancouver, Montreal-based Cogeco Inc., Winnipeg-based Bell MTS, SaskTel, and Eastlink Inc. of Halifax. Canada’s major cable carriers, Shaw, Rogers, Videotron, Cogeco, and Eastlink also filed their own joint petition to cabinet on Wednesday.
The cabinet’s ruling on the petitions could take six to seven months, a senior telecoms insider estimated.
The relevant ministry is Innovation, Science and Economic Development, according to Patricia Valladao, a CRTC spokeswoman. Telecoms can also appeal directly to the commission by making what’s known as a review-and-vary application. The window for those submissions was extended a month to Dec. 13, Valladao said by phone.
In August, CRTC chairman and CEO Ian Scott said the new lower rates “will foster increased choice at more affordable prices while encouraging a more robust and competitive marketplace across Canada.”
Internet resellers have championed the CRTC move on the behalf of consumers, arguing they will see prices fall, that the concerns of telecoms are overblown, and that they have enjoyed near monopoly conditions to impose higher wholesale rates for decades.
“We’re disappointed to see that they’re continuing to fight the CRTC decision,” Janet Lo, a vice-president at Chatham, Ont.-based internet reseller Teksavvy Solutions Inc., said by phone from Gatineau, Que. “It looks like they’re just trying to exhaust all possible appeal mechanisms to fight a decision that enables Canadians to benefit from competition. Canadians can’t wait for competition to deliver lower prices.”
George Burger, co-founder of Toronto-based VMedia Inc., took his ire to the Financial Post opinion page Sept. 13: “Some of the most profitable companies in Canada are now threatening to cut rural communities off from high-speed internet because they must now offer internet at fair wholesale prices. What nerve! This, after having built their business on a hundred years of public subsidies and market monopolies.”
It looks like (the telecom giants are) just trying to exhaust all possible appeal mechanisms to fight a decision that enables Canadians to benefit from competition.
Janet Lo, vice-president, Teksavvy Solutions Inc.
However, some cable operators see an impact. Videotron said this month that it pulled its one gigabyte service because it can’t afford the necessary upgrades at the current rates. The CRTC’s order would only allow Videotron to charge about the same amount as Bell does for a service about 200 times slower, according to Bell’s petition.
The telecoms and cable companies have also applied to the Federal Court of Appeal to hear the case. The court has already ruled to keep the existing rates in place for now and said in September the rate chop could cause “permanent market distortion which could be extremely difficult to remedy afterwards.”
Burger said by phone the reselling industry believes the case lacks merit. “The issues they’re debating before the court are issues of fact, and decisions by tribunals are typically only overturned if it’s issues of law.”
Commission policy requires the large cable and telephone companies to make parts of their networks available to competitors — in this case the resellers — at rates that are set by the CRTC. It previously lowered the wholesale rates in 2016 as interim measure. The August ruling lowered them even more. Bell said it wants the CRTC to revert back to the interim rates.
Bell cited a TD Bank report saying investment in wireline and cable infrastructure in 2021 would fall by $1.75 billion because of the new rates. The reduced investment “could render Canadian telecoms, and the Canadian digital economy as a whole, uncompetitive versus most other developed economies,” TD said.
Meantime, resellers are flourishing in the market and the new rates have allowed them to cut their costs by about half, Bell argued.
On top of the new rates, the CRTC also made them retroactive to 2016, a move that will cost the networks $325 million in reimbursements to the resellers who have no obligation to pass on the savings to their customers, Bell said.
That amounts to just 0.5 per cent of the $60 billion in profit that the six large publicly traded telecoms have declared over the same three years, VMedia’s Burger said.
“The incumbents have no business howling about the unfairness of this recent decision,” Burger said. “Any unfairness pales in comparison to what Canadian consumers have had to put up with for years.”