Telecoms say CRTC wholesale decision violates Harper-era directive

In their Friday appeal of the CRTC decision on wholesale internet rates, the affected cable companies are asking the Federal Court of Appeal to defer to a 2006 Harper-era directive that advised the regulator to base its decisions to the “maximum extent feasible” on market forces. The CRTC’s August decision established a new pricing regime for the selling of wholesale internet rates that dramatically lowers the rate at which the companies are allowed to sell wholesale internet to resellers, and will cost the telecom industry roughly $350 million in retroactive payments to resellers. The decision was the result of some three years of deliberation and analysis. The CRTC last cut wholesale rates in 2016. A number of errors on the part of the CRTC, reads the motion for leave to appeal from a grouping of five companies, resulted in an “order that one-sidedly favoured the Resellers over the Cable Carriers in a manner that contradicts directly express provisions of the Direction issued to the CRTC by the Governor in Council in 2006.” The five companies who filed together are Bragg Communications Inc., Cogeco Inc., Rogers Communications Inc., Shaw Communications Inc., and Quebecor Inc. The new rates, the filing from the five companies says, “are inimical to investment, innovation and to the long-term interests of Canadians.” In addition to the claim that the new rate regime contravenes the 2006 directive, the companies are also arguing that the regulator adhered to “outdated assumptions related to inapplicable technology,” and that they “acted arbitrarily” by ignoring evidence. The methodology used by the CRTC for determining the costs to carriers of providing service, the carriers argue, are based on an era before coaxial cable and hybrid “fibre-coax” cables were as common as they are now in telecommunication systems. In other words, the CRTC used old methodology applied to new tech. According to the companies, there are three key principles in the 2006 directive: that the CRTC should rely on market forces; that the CRTC should promote fair competition between Cable Carrier, Incumbent Local Exchange Carriers (ILECs), and Resellers; and that the regulator should prioritize “increasing incentives for innovation and investment in and construction of competing telecommunications network facilities.” In their filing, the five cable companies argue that the CRTC “disregarded all of these key principles” from the 2006 direction. In June of this year, the government issued a new policy directive, stressing competition and consumer affordability. The directive, which came after the CRTC had already began reviewing wholesale rates, had been the subject of several months of back and forth since being announced in February, as smaller telecom companies wanted more forceful language and incumbent telecoms companies wanted more reference to investment, language which eventually made its way into the final version of the directive. The cable companies also argue that the CRTC violated paragraph (f) of Section 7 of the Telecommunications Act, which states that a priority of telecommunications policy is to “foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective.” The regulators approach to setting the new rate regime, the cable companies argue, “wholly frustrates the role of market forces in the setting of rates, thereby disregarding objective (f).” On Friday September 13, the last day the cable companies had to file the motion to appeal in Federal Court, both TekSavvy Solutions Inc. and Start.ca announced they would be reducing their internet rates with direct reference to the CRTC’s new rate regime. This week, Distributel Communications Ltd. followed suit, lowering its rates and pointing to the CRTC’s new rate regime. “We are moving quickly to pass along the benefits of the CRTC's ruling to our customers because it's the right thing to do," Matt Stein, Distributel CEO and president of the Canadian Network Operators Consortium, said in a Tuesday release. Financial analysts have been divided on what kind of impact the new rates would have on the industry. In a September 4 report, TD Securities analyst Vince Valentini wrote that he believed there was “good odds” that the wholesale rate decision will be overturned, “or at a minimum revised in favour of the facilities-based telecom and cable players.” — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Ahmad Hathout at ahathout@thewirereport.ca

Telecoms say CRTC wholesale decision violates Harper-era directive

News | 09/17/2019 5:13 pm EDT

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