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.