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Canada’s telecom regulator failed to properly weigh various policy objectives and to be open-minded when it decided to lower the rates that Canada’s large phone and cable companies can charge smaller rivals for access to their broadband networks, the carriers argued in court Thursday.

The Canadian Radio-television and Telecommunications Commission (CRTC) requires larger telecom companies with their own networks to sell wholesale access to third-party operators, who then sell internet services to their own customers. The system is meant to encourage competition in the internet market.

In August, 2019, the regulator lowered the rates that the big carriers can charge and ordered them to make retroactive payments – totalling an estimated $325-million, according to court documents – to third-party operators to compensate for the higher interim rates set in 2016.

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In a virtual Federal Court of Appeal proceeding, which kicked off Thursday, a lawyer for BCE Inc. argued that the regulator failed to consider a number of policy objectives when coming to that decision, including how the reduced rates would affect the company’s ability to invest in its networks.

“There’s no mention in the decision of the impact that this order will have on the ability of Canadians living in rural regions to get access to broadband internet,” Steven Mason said on behalf of BCE. “There’s no mention of the impact this decision is going to have on the development of next-generation networks,” he added.

Justice David Stratas pressed Mr. Mason on whether the regulator failed to consider those factors or whether it simply didn’t give them the weight BCE wanted it to.

Kent Thomson, a lawyer representing a group of five cable companies, argued Thursday that the CRTC failed in its duty to keep an open mind when going through the rate-setting exercise.

Instead, the regulator set out with the aim of reducing wholesale broadband rates and then reverse-engineered the decision-making process to achieve its desired outcome, Mr. Thomson argued on behalf of Rogers Communications Inc., Shaw Communications Inc., Quebecor Inc.‘s Videotron Ltd., Cogeco Communications Inc. and Eastlink Inc.‘s owner Bragg Communications Inc.

The case, which is scheduled to be heard over two days, is one of three avenues that the phone and cable companies are pursuing in an attempt to overturn the CRTC’s decision. The carriers have also appealed directly to the regulator and to the federal cabinet in an attempt to have the ruling quashed.

The Competitive Network Operators of Canada (CNOC), an industry group for independent internet-service providers (ISPs) such as Distributel Communications Ltd. and TekSavvy Solutions Inc., argues that the court proceeding is merely a delay tactic. (The phone and cable companies have not had to make retroactive payments to the ISPs or lower their rates as the CRTC ruling was stayed pending the outcome of the appeal.)

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“What this is really about is protecting the oversized [profit] margins of the incumbent phone and cable companies,” Matt Stein, CNOC chairman and CEO of Distributel, said in an interview.

Independent ISPs drive prices down not only for their own customers but for the customers of the larger carriers as well, Mr. Stein said.

“By delaying a decision like this through actions such as this hearing today, the incumbents are trying to preserve their outsized margins for much longer.”

Mr. Stein also took issue with the Mr. Thomson’s argument that the CRTC had a closed mind throughout the entire rate-setting process, which lasted 3.5 years and involved thousands of pages of documents.

“If they had a closed mind, clearly they could have come up with a decision much faster, without [reviewing] thousands and thousands of pages,” Mr. Stein said.

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