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Competition suffers in Canada as government backs big guns in wholesale battle

The Canadian government has completed a review of wholesale rates instigated by the country’s main fixed-line providers and it looks like they are coming out on top.

This time last year the Canadian Radio-television and Telecommunications Commission (CRTC), set new, lower rates for wholesale access to high-speed networks with the stated aim of promoting greater competition in the fixed broadband market and potentially reducing prices for consumers. It set new wholesale access rates of between 3% and 77% lower than the interim levels it introduced in 2016 and at the same time ordered the network providers to make retroactive payments to their customers to reflect the price discrepancy over the previous three years.

It came as no surprise later in the year when the big players objected. Amongst other things, Bell Canada, Telus, and a group of cablecos comprising Eastlink parent Bragg Communications, Cogeco, Rogers, Shaw and Videotron petitioned the government to intervene or to refer the matter back to the CRTC.

On Saturday the Ministry of Innovation, Science and Industry essentially declined that request. That might seem like a setback for the big guns, but a closer look at the wording of the government’s statement shows that in fact the opposite is true.

The government has chosen to do nothing simply because the CRTC is already reviewing its own decision, following complaints from the network owners. And it has made it quite clear that it supports the big players in their quest to charge more for network access.

“On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas,” writes Navdeep Bains, Minister of Innovation, Science and Industry.

“Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments,” he added.

In a nutshell: investment in networks must be protected at all cost.

It’s a reasonable stance, but one that will always get backs up in Canada, where complaints over the high cost of Internet plans have been rife for years, even though global statistics don’t always bear out the gripes.

Laura Tribe, executive director of Open Media, a non-profit organisation geared towards promoting affordable Internet services in Canada, said she was “disappointed” to see the government “side with Canada’s telecom giants” over wholesale rates.

“Let’s be perfectly clear on what’s happening here: the government has effectively told the CRTC that they expect the rates to go up because they’re worried about investment. But these increases will most certainly be passed along to customers,” Tribe warned. “If Minister Bains actually cares about network investment, then he and Rural Economic Development Minister Maryam Monsef should get on with it and release their much-delayed $1.7 billion Universal Broadband Fund.”

The CRTC detailed the first five projects to take place under the auspices of the fund as recently as last week.

Minister Bains did not address the fund directly, but made the usual comments about how the government is supporting the rollout of high-speed networks in rural and remote areas. “We are committed to increasing higher speed broadband coverage and supporting competition, choice and the availability of services for Canadian consumers and business users,” he said.

But it seems it is just a matter of time until the CRTC delivers the news the big players are waiting for: that wholesale rates will remain at a level that suits them. Or to put it another way, it’s business as usual in Canada.

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2 comments

  1. Avatar Manish Sinha 17/08/2020 @ 2:39 pm

    I think protecting network cost is also required. Telecom is a captive investement industry. Lowering the tariff will hit the Telcos and eventually many will burn out, which happened in India. Regulator has to listen to operators as well as think of innovations to provide services at best prices for greater access to customers.

  2. Avatar Shawn 18/08/2020 @ 4:06 pm

    The only cost the third party providers should not be incurring is what it costs the network owners (Shaw, Telus Bell etc) to support their customer (how much does it cost for a call / chat to their call centre). That is a cost the TPIA providers would have to in cure based on their profit margin after the wholesale rate they pay.

    you really have to take the network as a whole (including the cable to the home but not what is inside the house)
    the distribution equipment to home,
    the line to the distribution point (Underground and Aerial)
    the node (system that feeds the distribution point)
    the fibre cable that feeds the node
    various amplifiers and other network equipment along the way
    The fibre backbone
    The cost of maintaining, and replacing that equipment over the life of the equipment (how long each piece lasts and cost with labour to replace),
    The electricity to run everything
    The rent some providers may pay to otehr providers to have their lines on telephone poles
    when otehr providers rent space on otehr network fibre lines
    plus the cost to the network owner for the support team to support the TPIA providers (adding / removing hardware, how often techs are routed for their customers etc),
    cost of network expansion (node splits, upgrading from to faster infrastructure hardware eventually,
    that is ultimately what makes up the true wholesale price of the service.
    The TPIA costs are primarily for their modems, call centre / and support teams, and whatever regulatory fees
    They don’t have the physical network building, maintenance, and upgrading costs which is why the wholesale rate even I felt was wayyyy too low and would give them the ability to sell for $30 and be making a $200% profit (if wholesale was $10) that was just BS and unreasonably low.

    Remember it isn’t about what work has been done already and money spent to build the network it is about building, maintaining and ultimately expanding the coverage.

    Would you expect any network owner to spend several million dollars running new lines to homes and a neighbourhood if they didn’t have a reasonable expectation that the service being used there over the next 10 years would pay for the investment they put in the ground / to the home?

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