Two years ago, after several years of careful work, the CRTC issued a watershed decision aimed at lowering the high cost of internet service in Canada.
The ruling was about the rates that independent internet sellers pay to access the networks of the big, incumbent phone and cable companies, such as Bell Canada, Telus and Rogers. Canada’s internet network was largely built by the former monopolies, and those physical networks are to some extent natural monopolies – replicating them is “unlikely,” according to a 2019 review by the Competition Bureau. In no rational universe would competing internet providers – or competing electric utilities, or water providers, or sewage firms – compete for your business by each building a pipe or wire to your home.
Instead, Canada’s rules promote competition by giving smaller firms – serving more than one million households – access to the incumbents’ networks, at wholesale rates.
It was those wholesale rates that the Canadian Radio-television and Telecommunications Commission decided to lower in August, 2019. The goal, CRTC chair Ian Scott said at the time, was “increased choice at more affordable prices.”
The dominant phone and cable companies were outraged. Bell said the decision would cost it $100-million. Four days after the CRTC ruling, Bell said it would drop 200,000 homes from a planned expansion of rural internet.
Bell, Rogers and others fought the CRTC decision in court, and lost. The Supreme Court declined to hear an appeal.
They also sought respite from the federal cabinet. There, they found a more friendly ear.
Before the pandemic, Ottawa’s big concern was the high cost of internet and wireless service. “Affordability” was the mantra. There was a push to lower prices by opening up networks to competition. But the incumbents said that would hinder their ability to invest in 5G wireless and rural internet. The threat of a stalled build-out of high-speed infrastructure to rural and remote communities was a message sent to Ottawa.
Ottawa heard it – loud and clear.
Last August, on a Saturday, Industry Minister Navdeep Bains announced the Liberals’ new view. He said the government was “concerned” the CRTC’s lower wholesale rates “may undermine” spending on speedy internet networks, especially in rural Canada. He wanted to strike a different balance, “so as not to stifle network investments.”
The big internet companies wanted cabinet to overturn the CRTC decision, but the Trudeau government declined to do that. Mr. Bains, having issued his signal, left the review of the CRTC decision to ... the CRTC.
The regulator, across the Ottawa River from Parliament, appears to have heard Mr. Bains – loud and clear.
Last week, the CRTC effectively scrapped its own 2019 ruling. It said it had made “errors.” Wholesale rates will remain at earlier, higher levels.
For the big phone and cable firms, it marks the second regulatory win in two months. In April, the CRTC’s final decision on opening up wireless networks was far more timid than its initial position. Bell on Monday cheered the rulings by announcing that annual network capital spending will increase by 10 per cent, this year and next, to about $5.6-billion.
There is no doubt that a careful balance is necessary, when it comes to the wholesale rates charged to upstarts for network access. Capital investment in the latest and best networks is necessary. The pandemic made clear a good internet connection is vital to the modern economy.
It is also true that while 99 per cent of urban households are reached by a pipe carrying fast and unlimited internet, that’s only true of 46 per cent of rural households, according to the CRTC. The latter figure is rising but is still too low.
What’s also true, however, is that internet service in Canada is expensive. And prices rose in 2020, after ticking down for several years. Deals disappeared. According to one federal study, prices for faster internet connections in Canada “tend to be higher than those in most other [Group of Seven plus Australia] countries.” The posted rate for a moderately fast Bell plan is more than $1,000 a year.
In the span of just two years, Ottawa has completely reversed its thinking – from worrying about the impact of high prices on Canadians, to worrying about the impact that lower prices would have on big telco capital spending. It’s a striking about-face. And you’re going to pay for it.
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