CRTC Reverses Decision of Keeping Cell Phone and Internet Rates Lower

A CRTC decision to reverse a decision that kept cell phone and Internet rates low is sending shock waves across Canada.

With the Heritage Minister, at the behest of lobbyists, trying to crack down on free speech, it seems that other arms of the Canadian government are not exactly being consumer friendly.

Canada’s telecom regulator, the CRTC, has reversed a 2019 decision that has kept wholesale rates low. This is a rather perplexing decision especially given that Canadians pay some of the highest rates in the developed world, so “low” might be a weird turn of phrase. Well, apparently, rates could have been even higher had it not been for the CRTC deciding to keep rates at a certain level on the wholesale side of things.

Wholesale broadband is one of the band-aid approaches to try and stimulate competition in the area of cell phone and Internet rates. The large providers, who build infrastructure through taxpayer funded subsidies, have to sell parts of their network to independent providers. Those independent providers have long argued that the rates are already inflated as it is and it’s difficult to turn a profit at the current rates.

Apparently, the CRTC has changed their minds and figure that those small independent providers can pay more for the same bandwidth. From the CBC:

In a victory for Canada’s large internet and phone companies, Canada’s telecommunications regulator has reversed a 2019 decision to drop wholesale internet rates.

The CRTC says it made errors when it ordered major phone and cable companies to slash their wholesale internet rates.

It said all of the 2019 rate changes have been set aside. That means the majority of the wholesale rates set in 2016 remain in effect, with the exception of a markup by phone companies.

Matt Stein, chair of the 30-member Competitive Network Operators of Canada and chief executive of Distributel, said he was “absolutely dismayed” by the CRTC’s reversal.

He predicted internet prices will go up “immediately” and there will be fewer of the smaller competitors, because they’ve counted on some relief from the higher 2016 rates.

“And so this means the competitors have to raise rates, just to stay in the game. And when competitors raise their rates, all that does is create more room for the incumbent phone and cable companies to raise theirs,” Stein predicted.

Independent carrier, Teksavvy, immediately responded by saying that they will pull out of the cell phone market because the costs would be far too high:

TekSavvy Solutions Inc. (“TekSavvy”) said it was shocked and disappointed by today’s CRTC decision, which reversed its 2019 decision lowering wholesale rates charged by Canada’s largest carriers (such as Bell Canada and Rogers) to smaller competitors (like TekSavvy). TekSavvy said today’s CRTC’s decision will have immediate, devastating impacts to its business and investments and guarantees even higher retail prices for consumers.

“Today’s CRTC decision is a tombstone on the grave of telecom competition in Canada” said Andy Kaplan-Myrth, TekSavvy’s VP of Regulatory & Carrier Affairs “Canada’s largest and most profitable telecom companies have successfully gamed the system with impunity. As competitors begin to exit the market, Canadian consumers will pay the price”.

Kaplan-Myrth added that as a result of today’s CRTC decision, TekSavvy has scrapped plans to offer mobile services and informed Industry, Science and Economic Development Canada (ISED) that it is dropping out of the upcoming spectrum auction as it scales back investment plans.

The CRTC today reversed a 2019 Rates Order that confirmed the large carriers systematically broke the CRTC’s rate-setting rules to grossly inflate their costs of providing access to their networks, resulting in higher retail prices for consumers. The 2019 Rates Order set new rates and ordered the large carriers to repay amounts they overcharged competitors during its 4-year long regulatory process.

Today’s reversal came despite the CRTC previously condemning the large carriers’ rate-fixing as “very disturbing” and the 2019 Rates Order being upheld on appeals by the Federal Court of Appeal, the Supreme Court of Canada, and the Federal Cabinet.

All this is happening on the backdrop of Rogers wanting to buy Shaw for $26 billion. That deal would shrink the number of players in the Canadian telecom market from 4 big players to 3. That effort to consolidate the market has been almost universally condemned.

This also represents a complete rebuke of all the calls to bring in a better approach to connect rural and indigenous communities to high speed Internet. Poverty is a major problem in a number of these communities, so during the last election, political parties were lining up to support such an initiative. This latest move is a step in exactly the wrong direction for achieving such a goal. When you introduce something that could very easily increase rates across the board, those who are less fortunate will get left behind regardless of whether those services are available or not.

University Law professor, Michael Geist, is reacting to this story on the angle that if the CRTC is this anti-consumer, why would anyone trust them with regulating user generated content through Bill C-10?

Much of the blame rests with the government as it appointed CRTC Chair Ian Scott, who has presided over a dismantling of a pro-consumer, pro-innovative policy approach. Moreover, the former ISED Minister Navdeep Bains opened the door to this decision last summer by inviting the CRTC to re-examine the 2019 decision and current ISI Minister Francois-Philippe Champagne is seemingly completely uninterested in his own department’s digital files. I’ve written that this government has become the most anti-Internet government in Canadian history and the path that led to yesterday’s decision vaults to near the top of the evidence list.

The wholesale Internet process is remarkable for its incompetence. The CRTC simply decided that “completing a fulsome revision of all the cost studies would prolong the period of regulatory and market uncertainty” so why bother. Competitors reduced prices in response to the 2019 CRTC decision (which Scott now says they should have known were not final) only to have the Commission find substantial doubt with 12 of its own previous findings. That is an astonishing level of fundamental disagreement with a decision issued by Scott himself less than two years ago.

The CRTC’s lack of competence and dismissal of competitive concerns combined with the government’s willingness to vest the future of Internet regulation in its hands creates perhaps the greatest threat arising from Bill C-10. That bill is notable both for how little guidance and how much power the government provides to the Commission. When MPs and concerned citizens raise fears of the Bill C-10 risks to freedom of expression and net neutrality, Canadian Heritage Minister Steven Guilbeault has often responded that Canadians can trust the CRTC.

After this most recent decision, that assurance is just not credible. This is the same CRTC that under this chair:

  • rejected a public inquiry into misleading telecom sales tactics, arguing “Canadians already have a variety of options available to them to seek redress depending on the nature of the issue.” The government ordered the Commission to examine the issue.
  • announced plans to create a Consumer Internet Code only to have consumer groups boycott the entire proceeding.
  • released the Harnessing Change report that called for extensive Internet regulation including new mandated fees on all Internet and wireless services to support the creation of Canadian content. In other words, it supported higher costs for Internet access.
  • called for new regulatory powers to regulate online service providers including discoverability requirements. The words Charter, freedom of expression, or free speech did not appear in the submission.
  • while acknowledging that “for wireless in Canada .. If you’re asking me if rates are too high, the answer is yes”, refused to require wireless competition because doing so would require “careful and ongoing regulatory assistance” involved in operating a wholesale regime. That decision is already a failure with TekSavvy now saying it will not enter the market.
  • called the prospect of increased prices from yesterday’s decision a “false narrative”, adding “Why would it go up? I’m not buying this – not as a result of the establishment of these rates.” Within hours, competitors said prices would be going up.

The consumer perspective is seemingly viewed as irrelevant under the current Scott-led CRTC administration with little concern for the costs of Internet services (wireless, broadband, and streaming). Further, the Commission isn’t even willing to do the hard work, suggesting fulsome cost reviews take time and could lead to market uncertainty.

So, if you are a consumer that pays for cell phone and Internet, be prepared for prices to start shooting up. Now, more than ever, Internet access is crucial for people to participate in a modern economy. Internet access is sometimes required to apply for jobs, access some government services, even to get COVID-19 vaccines in some instances. When the COVID-19 pandemic hit, more and more people were relying on Internet services such as Amazon to purchase items when physical stores were shut down.

Now, while we are still in the midst of a pandemic, this decision to send rates soaring is precisely the wrong move to be making. Who knows, though? Maybe the thinking behind the scenes is that private islands don’t grow on trees and those CEO’s will need that extra cash to buy them every month. At any rate, the focus is clearly not on the consumers who will be left with paying more for less.

Drew Wilson on Twitter: @icecube85 and Facebook.

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