Regulator finds it charged higher rates for some competitors to use its network

The federal telecom regulator has slapped Rogers Communications for unjust discrimination against competitors in its wholesale Canadian roaming rates for smaller carriers.

“Rogers has imposed exclusivity clauses in roaming agreements that prohibited smaller service providers from using networks from any other carrier,” the Canadian Radio-television and Telecommunications Commission (CRTC) said Thursday in a news release. ”

In other words, if certain competitors wanted their subscribers to roam on Rogers’ network, they were forbidden from striking agreements with other carriers to roam on their networks.

Additionally, Rogers unjustlycharged some new Canadian service providers significantly higher roaming rates compared to rates for other wireless service providers, the commission added

In the decision, it is immediately prohibiting exclusivity clauses, which probably means Rogers will have to re-negotiate the deals. But is also frees smaller carriers to strike better deals, which they hope will lead to better pricing to subscribers.

The commission will go deeper into the wholesale roaming rates issue when it starts a public hearing Sept. 29 into wireless competition. That hearing was ordered after preliminary research found Canadian mobile wireless carriers were charging or proposing to charge significantly higher rates for wholesale mobile wireless roaming services to other Canadian mobile wireless carriers than to U.S.-based carriers.

“We’re happy to see the commission stepping on this,” Wind Mobile chairman and CEO Anthony Lacavera said in an interview. “We continue to believe this action is necessary to ensure the viability of a fourth carrier in every region.”

In a statement Rogers said it is “surprised and disappointed by the decision.

“The exclusivity clauses with some new entrants were put in place four or five years ago. Every signatory had a choice. They could sign a long term or a short term agreement or a deal with an exclusivity clause. Some carriers chose to sign exclusive agreements because they got a discounted rate.

“We’re also surprised by the rate decision,” Rogers added. “Our agreements are based on a number of factors including volume. As with any sales agreement across any industry, the higher the volume the lower the rate. U.S. carriers have far greater roaming volume than Canadian carriers. In addition, there’s mutual benefit- Our customers get to roam broadly on these U.S. networks. Our customers don’t roam on new entrants’ networks in Canada.”

Roaming is vital to new carriers if they want to come close to matching the huge coverage of incumbents like Rogers while they are building out their networks. That’s why when Industry Canada set the rules for the 2008 spectrum auction it told incumbents they had to let new entrants — like Wind, Mobilicity, Public Mobile, Videotron and Eastlink — roam on their networks. The department didn’t set the rates, however.

When two of those new entrants were ready to open their doors (Wind in December, 2009; Mobilicity in May, 2010), for technical reasons Rogers was the only network they could roam on. By all accounts Rogers (TSX: RCI.B) drove a hard bargain. That only changed when Bell Mobility and Telus Corp. partnered to launch their new HSPA network.

New entrants have long complained that the domestic roaming rates they have to pay have forced up their prices.  In fact, Wind has said it pays less to its U.S. carrier partner for subscribers to roam south of the boarder than it pays here.

The Harper government set a temporary cap on domestic roaming roaming rates in the recent federal budget. The CRTC hearing may lead to a more formal pricing regime.

In a statement OpenMedia.ca, a consumer site, called today’s decision a “landmark.”

The finding “proves what Canadians have known all along – that Big Three cellphone giants are unfairly rigging the market to limit choice and keep prices artificially high,” executive director Steve Anderson said in a statement. “These unfair practices show that more affordable independent providers have been boxing with one hand tied behind their back. We need action to prevent the Big Three from unfairly blocking Canadians from the affordable, independent options they deserve.”

In its decision the CRTC noted that Rogers, Bell and Telus denied they engaged in “unjust discrimination or undue preference on their wholesale roaming rates, seamless roaming or exclusivity.

There were complaints that the big three charged U.S. carriers less to roam up here than small Canadian competitors. In reply they told the CRTC that wholesale roaming agreements with U.S.‑based mobile wireless carriers can’t be compared to agreements with other Canadian mobile wireless carriers because the U.S. deals generally two-way agreements, while Canadian deals are generally one-way agreements.

In addition, they argued that domestic and international markets cannot be compared. They also argued that retail (subscriber) mobile wireless rates cannot be compared to wholesale mobile wireless roaming rates because a national carrier’s retail customers remain on their home network and do not access a visited network, and are therefore not roaming.

The regulator disagreed, saying wholesale mobile wireless services are the same regardless of whether they are provided to Canadian or U.S. carriers.

The Canadian wholesale rates from all carriers “varied widely,” it concluded, and that the variation is discriminatory.

In in addition, it cited Rogers for entering into discriminatory exclusive wholesale roaming agreements with some unnamed new entrants and not others.

Discrimination and exclusivity isn’t forbidden by the Telecommunications Act, which governs carriers unless they are unjust. The CRTC found that some factors — traffic volume, reciprocity, timing of the agreement — could account for some of the difference in the rates Rogers charged. But, it added, they couldn’t account for the range of difference in the rates it charged some and not others.

As for the Rogers exclusivity clause, the commission found it isn’t common in current wholesale agreements. Given that the clause prevented new entrants from negotiating better roaming terms with other carriers, it was unjust discrimination, the CRTC concluded.

The commission refused to get into setting domestic wholesale roaming rates for those it found unjustly discriminating with their fees, arguing that the federal cap reduces the risk of it happening again.

As for Rogers’ unjust exclusivity clause, it found that ordering a prohibition on such wording enough. “Exclusivity clauses in current wholesale roaming agreements between Canadian carriers are therefore rendered inapplicable as of the date of this decision,” it said.

 

 

 

 

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