Canada’s telecommunications regulator says it is launching a review of the rates that small internet service providers must pay to operate through the networks of incumbents, and is lowering some of those rates immediately by 10 per cent.
In a news release, the Canadian Radio-television and Telecommunications Commission said the consultation will aim to increase competition, create more choice and lower prices for telecommunications services.
The wholesale framework supports competition by enabling competitors to access the telecommunications facilities and network from incumbent carriers, and then offer their own services to consumers, often at a discounted rate. The announcement is a positive sign for these competitors, who according to the CRTC represent 16 per cent of the market in Canada.
The CRTC is also launching an expedited review of whether large telephone and cable companies should be required to provide independent providers with mandated access to the fibre-to-the-home networks, which would allow them to offer higher speeds.
“Canadians want change, and we are wasting no time,” said CRTC chair Vicky Eatrides in an interview.
Currently, independent internet service providers are able to negotiate access to those networks, but say the prices are too high to allow them to be competitive. If it were to make this access mandatory, the CRTC would set the prices, known as tariffs, to allow wholesalers to compete. The CRTC has directed the incumbents to supply suggested fibre access rates by April 24.
In addition to these measures, the CRTC said it may consider retail regulation to better protect consumer interests, citing concerns about “relying solely” on wholesale rates. This would mean setting caps on the price of phone and internet services for consumers.
Ms. Eatrides said while the CRTC prefers to rely on market forces to drive down prices, “retail regulation is not off the table.”
Since the 1990s, the CTRC has avoided using a heavy hand to shape telecom prices. The CRTC only regulates telecommunications prices in the North. Most large regulators in other countries have also resisted setting rates, or only cap prices for a limited range of services or people, said John Lawford, executive director at the Public Interest Advocacy Centre.
The announcement of the wholesale regime review itself is not a surprise – since January, Ms. Eatrides has signalled that a review was imminent. However, independent providers say the immediate reduction of rates and the expedited review of fibre network access demonstrates Ms. Eatrides’s commitment to supporting wholesale competition.
“Today, chair Eatrides and the commission acknowledged what the industry has warned for some time: that the current wholesale structure was not promoting competition for consumers,” said Paul Andersen, president of Competitive Network Operators of Canada, the industry group representing independent providers.
In a note to investors, Desjardins analyst Jerome Dubreuil said the 10-per-cent price drop would immediately reduce the cost of doing business for wholesalers, setting “a negative tone from an incumbent’s perspective.” He said the incumbents are already facing a competitive pricing outlook for wired services, as they compete to attract new subscribers to newly-deployed fibre networks.
Caroline Audet, a spokesperson for BCE Inc.’s BCE-T Bell Canada, said the company is studying the decision. Rogers Communications Inc. declined to comment and Telus Communications Inc. did not immediately respond to requests for comment.
The review is the latest in a string of regulatory proceedings concerning wholesale competition, most of which have been controversial within the industry.
In 2019, the CRTC slashed the prices that telecom and cable companies could charge small internet service providers to access their networks. This decision prompted regulatory challenges, with incumbents arguing the lower rates could curb investments in network infrastructure.
After a lengthy review, in 2021 the CRTC reversed that decision, saying it had found errors in its original calculations. It reverted to 2016 rates sparking outrage among small providers. The providers have attributed the recent spate of acquisitions by incumbents to these rates.
In the past year, Bell has acquired Ebox and Distributel, Quebecor Inc. has purchased VMedia Inc., Telus has taken over Start.ca and Altima Telecom, and Cogeco has acquired Oxio. TekSavvy Solutions Inc. is Canada’s only remaining large independent internet provider.
More industry concentration is on the way, with Rogers’ takeover of Shaw Communications Inc. now resting on final approval from Industry Minister François-Philippe Champagne.
In response to growing concerns about competition in the sector, Ottawa directed the CRTC in January to “take action” to review wholesale rates as part of its updated policy direction. The government specifically directed the CRTC to ensure that wholesale internet access is available evenly across the market, including on fibre-to-the-home networks.
The CRTC will accept interventions until June, which will be followed by a hearing process. The date of that hearing has not yet been set.
“The proceeding itself will take some time because we want to hear from everybody,” Ms. Eatrides said. “We’ll take the time to make sure we have that balance between competition and the continued incentives to invest.
Irene Galea