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The reversal of a 2019 regulatory decision lowering wholesale broadband rates has sparked outrage from consumer advocates and small internet service providers, and prompted independent telecom TekSavvy Solutions Inc. to scrap its plans to enter the wireless market.

Canada’s telecom regulator requires large phone and cable companies to sell network access to independent ISPs, such as Teksavvy and Distributel Communications Ltd., who then sell internet service to their own customers. In August, 2019, the Canadian Radio-television and Telecommunications Commission (CRTC) slashed the rates large telecoms can charge smaller providers for access to their networks, prompting legal and regulatory challenges from the phone and cable companies, who argued the decision would stifle investments in their networks.

On Thursday, after a lengthy review, the CRTC reversed its 2019 ruling, saying it found significant errors that cast doubt on the correctness of the decision. Instead, the commission said it will maintain the interim rates that have been in place since 2016, with some adjustments. Those adjustments include removing a 10-per-cent markup that big telephone companies – Bell Canada, Telus and SaskTel – were previously able to charge.

Teksavvy, a Chatham, Ont.-based independent ISP, announced late Thursday it is pulling out of the June 15 auction of 3500 MHz spectrum – airwaves used to transmit wireless signals – because it won’t have the cash it needs to participate.

The company had wanted to purchase licences to the mid-band airwaves, which are considered beachfront property for 5G, in Southwestern Ontario, as well as possibly other regions, with the aim of improving its fixed wireless home internet service and eventually entering the mobile market. “We were waiting to find out how much money we had,” said Andy Kaplan-Myrth, Teksavvy’s vice-president of regulatory and carrier affairs.

Teksavvy had expected to receive a substantial sum in retroactive payments from the large telecoms to compensate it for the prices it has been paying since the interim rates were introduced in 2016. Instead, it will receive only a fraction of that money, Mr. Kaplan-Myrth said. He described the decision as a “tombstone on the grave of telecom competition in Canada” that will lead to higher prices for internet users.

VMedia, an independent telecom services provider based in Toronto, denounced the ruling as a “hit job on consumers and competitive players” and called for the head of the regulator to step down.

“The decision raises serious doubts about the leadership and competence of the CRTC, and the integrity of its process,” VMedia CEO Alexei Tchernobrivets said in a news release. “CRTC Chairman Ian Scott should resign, and Parliament should launch an immediate investigation into this incoherent outcome and whether political and corporate influence impacted this decision.”

The company vowed to pursue every legal avenue available to get the decision overturned. Those avenues include challenging the ruling in court and appealing to the CRTC itself and the federal cabinet.

Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, said the ruling signals a change in tone from the federal government. The 2019 decision came at a time when prices for communications services were top of mind amid a federal election, Mr. Geist said.

Now, after a “full court press” from large telecom companies, and amid a global COVID-19 pandemic that has increased society’s reliance on the internet, Ottawa’s priorities appear to have shifted.

Mr. Geist said comments by former innovation, science and industry minister Navdeep Bains last August likely paved the way for Thursday’s ruling. Mr. Bains had said the federal cabinet was concerned the 2019 rates “may undermine investment in high-quality networks, particularly in rural and remote areas.”

“I think that the signal that was sent last summer by Bains was heard loud and clear by the sector and presumably by the CRTC as well,” Mr. Geist said. He added that Thursday’s decision follows a pattern of similar moves by the regulator, which, under Mr. Scott’s leadership, has “completely abandoned the more consumer-centric public interest approach that we saw previously.”

The commission said in response that it is an independent regulatory body that makes decisions based on the public record of its proceedings.

“It is important to note that CRTC decisions are not made by the chairperson alone, but by commissioners, of which there are currently nine,” CRTC spokeswoman Caroline Bédard said in an e-mail.

“While the CRTC makes decisions in the public interest, several recent decisions have benefited or will benefit consumers, including funding from the CRTC Broadband Fund to improve internet access in rural and remote communities, providing greater protection for wireless consumers, requiring the implementation of a call-blocking system and encouraging the introduction of data-only, low-cost and occasional-use wireless plans.”

François-Philippe Champagne, who took over from Mr. Bains as Minister of Innovation, Science and Industry earlier this year, said Ottawa will review the ruling and its effects on the sector “to ensure they align with our policy priorities of affordability, competition and innovation in the sector.”

The decision is seen a victory not just for Bell, Telus and Rogers Communications Inc., but also for the four smaller cable companies – Shaw Communications Inc., Quebecor Inc.’s Videotron Ltd., Cogeco Communications Inc. and Eastlink Inc. owner Bragg Communications Inc. – that provide wholesale access and had also challenged the 2019 ruling.

Marie-Hélène Labrie, a spokeswoman for Cogeco, said the ruling “provides a more stable regulatory framework.”

“This stability helps ensure continuity in current investments to increase access to high-speed internet, especially in underserved areas,” Ms. Labrie said in an e-mail.

Videotron also welcomed the outcome of the CRTC’s review, saying it provides the industry with the regulatory certainty needed to deploy new technologies and make investments. “Those investments have produced the robust, reliable networks that proved so important during the pandemic,” the company said in a statement. Eastlink said the decision “confirms that the rates established in the 2019 decision were not appropriate.”

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