Decision drops Bell’s wholesale Internet rates 53%; Rogers’, Shaw’s, Quebecor’s rise

Rogers Communications Inc., Shaw Communications Inc. and Quebecor Media Inc. can charge more for their wholesale Internet services while BCE Inc.’s wholesale Internet rates will fall in Ontario and Quebec, according to a CRTC decision that reviewed the companies' rates. In a series of nine decisions released Thursday, the CRTC said it established “final rates” for its capacity-based, wholesale Internet billing regime, signalling the end of a two-year saga that involved a grassroots consumer movement against an earlier “usage-based billing” decision for wholesale Internet that was based on the volume of data transmitted. “Large and small independent service providers now have the certainty they need to continue offering Canadians a choice of innovative and competitive services,” CRTC Chair Jean-Pierre Blais said in a release announcing the decisions. “We are pleased to finally close this chapter after a careful examination of the wholesale rates.” In one of the decisions issued Thursday, 2013-73, the CRTC reduced the monthly capacity rates Bell and its subsidiaries can charge in Ontario and Quebec by 53.16 per cent. The commission determined that Bell had “significantly overstated” how much it costs the company to measure the proportion of network traffic used for wholesale. Rogers new rates will rise significantly, the commission said in decision 2013-76. It said Rogers can increase the monthly wholesale capacity rates it charges small ISPs by 11.9 per cent, from $1,251 per 100 Mbps of capacity under the old rates to $1,400. Rogers can also hike the additional fees it charges small ISPs per month for each of their retail customers, the CRTC said, with its approved rates now ranging from $12.06 per customer per month for 0.5 Mbps Internet services, up to $23.32 for a 50 Mbps service. Rogers' former rates for those services were $11.97 and $22.69, respectively. In the November 2011 capacity-based billing decision (2011-703), released following a review of the CRTC's usage-based billing regime, the commission established a new capacity-based system with maximum rates that each incumbent telco could charge small, third-party Internet service providers (ISPs) for wholesale access to their networks. Those rates, which were calculated using the incumbents’ reported costs of operating their wholesale businesses, outlined new wholesale fees structured on the number of retail customers the small ISP had and the total Internet capacity it ordered for the month. Like the number of lanes on a highway, small ISPs’ monthly capacity orders determine how much Internet traffic they can move across their networks at any point in time. It directly impacts the number of retail users they can accommodate as well as the service speeds they can offer during peak periods. In the days immediately following the release of the new capacity system in 2011, small ISPs and incumbents questioned the CRTC's rates and disparities between how much each incumbent could charge. In 2012, incumbents Bell, Rogers, Quebecor's Videotron, Shaw Communications Inc. and MTS Allstream Inc. filed requests for the commission to review the maximum monthly rates. The Canadian Network Operators Consortium, which represents a coalition of small ISPs, also requested a review of the incumbents’ approved rates, saying they would put unfair, upward pressure on their consumer pricing as demand for bandwidth continues to rise. In decision 2013-70 released Thursday, the commission said those requests caused it to undertake a “detailed review” of each incumbents’ claimed costs of offering wholesale services, and how the commission used those costs to calculate the incumbents’ wholesale rates. During that review, the commission said, it determined that it had made mistakes in how it determined the rates for each of the incumbent cablecos, causing it to increase the approved rates for Rogers, Shaw and Videotron, and to decrease the rates approved for Cogeco Cable Inc. The commission said it had also discovered “costing errors” in the cost studies submitted by telcos Bell and Telus Corp. that led it to “significantly lower” the approved rates for each in parts of their service territories. In the decisions Thursday, the CRTC said Videotron may raise its monthly capacity rates by 7.46 per cent, from $1,890 per 100 Mbps under the old pricing to $2,031. Shaw, which charges its wholesale customers on a monthly flat rate that does not account for capacity, can raise its rate for 1 Mbps services from $10.72 to $11.07, while its wholesale rate for 100 Mbps services rose from $85 to $91.25. Cogeco, which under the old pricing had the highest approved monthly capacity rates, saw its approved rates fall by 5.16 per cent from $2,695 per 100 Mbps of service to $2,556. Bell’s approved monthly capacity rate for Ontario and Quebec fell by 53.16 per cent from $2,213 per 100 Mbps of service to $1036.49, the commission said. It said Bell’s monthly per user rate will increase, rising from $24.70 to $25.47 per customer on a 6 Mbps plan, the lowest tier wholesale service, and from $25 to $25.62 for a top-tier 25 Mbps service. In a phone interview with The Wire Report, CNOC president Bill Sandiford said his organization is happy with the rate reductions though it is concerned that increases to the cablecos’ rates would prevent small ISPs from offering competitive cable services. Many of those independent ISPs, he said, expected the cablecos’ monthly capacity rates to fall, not go up. “What we were expecting was that the capacity rates, which we already believed were extremely inflated, would come down,” he said, adding that Cogeco’s reduced rate is too high. “I think indies were expecting to see that rate cut in half,” he said. Sandiford said he heard from one ISP that said it may have to stop offering cable services as a result of the new rates. He said he also decided to abandon plans to launch cable services through his own small ISP Telnet Communications. The commission’s decision to make the price changes retroactive to Feb. 1, 2012, when the first capacity-based billing regime came into force, will hurt small ISPs that have been offering cable services, Sandiford said. “They can’t go to their customers and say, ‘I’m now increasing your retail service rate by 10 per cent retroactively,’” he said. “We think it’s going to be a tough day for some of these guys.” Rogers spokeswoman Patricia Trott said in an emailed statement that the decision to increase the company’s approved rates reflected the company’s costs of providing faster Internet services. “The Rogers rates approved 15 months ago were significantly lower than rates for Bell, Cogeco and Videotron,” she said. “We think there were some errors that meant that we were not able to recover the cost of providing service to resellers. We asked for this to be corrected and, while not all of our concerns were addressed, the rates have been adjusted. This still leaves Rogers with rates that are generally below those of its competitors and peers: Bell, Videotron and Cogeco,” Trott said. Bell spokeswoman Jacqueline Michelis said in an emailed statement that its rate reductions would not cause the company to roll back network investments. “It’s a complex set of decisions and we’re assessing the impact on Bell and our wholesale partners,” Michelis said. “Our focus will continue to be working with our wholesale customers to ensure the best possible Internet experience for all end users. Bell continues to invest $3 billion a year in broadband network expansion, which benefits both Bell and wholesale Internet customers with increasing speeds and capabilities.” Telus, which charges small ISPs on a flat monthly rate like Shaw, saw its residential wholesale prices in Alberta and B.C. drop from $17.72 to $17.40 for its low-end 1 Mbps service and from $39.51 to $29.84 for its high-end 25 Mbps service. The commission did not apply any rate changes to wholesale rates it had established for MTS, SaskTel, or the Bell companies in Atlantic Canada. In its decision Thursday, the CRTC also reversed part of its November 2011 decision to allow incumbents to charge small ISPs more if their customers were businesses as opposed to retail. The commission said it recognized that wholesale services for business and retail are “essentially the same” and that “most incumbents do not distinguish” between the two. The wholesale business rates were effective Thursday, the commission said. The CRTC opened a consultation Thursday to determine whether Bell’s wholesale services for businesses on slower, “legacy” networks, should also be tied residential rates in Ontario and Quebec. It opened a second consultation to settle outstanding issues relating to “interface rates, optional upstream speed rates, and modem certification requirements,” the commission said. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Decision drops Bell’s wholesale Internet rates 53%; Rogers’, Shaw’s, Quebecor’s rise

News | 02/21/2013 10:47 pm EST

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