Independent Internet providers appear to have won a partial victory after the federal telecom regulator made what it called some “significant reductions” in the wholesale rates big phone and cable companies charge them for Internet connectivity.
However, the regulator also increased the rates three cable companies can charge the ISPs, which will find its way into the bills of subscribers.
In a complex series of decisions issued Thursday, the Canadian Radio-television and Telecommunications Commission (CRTC) tried to finalize a 2011 decision that ISPs hope will allow them to compete against the incumbents by offering competitive Internet speeds to residents.
It didn’t completely do that: the commission wants to consult with the industry on lingering issues not covered by Thursday’s decisions.
But in a statement CRTC chairman Jean-Pierre Blais said the decisions should help competition.
“Large and small independent service providers now have the certainty they need to continue offering Canadians a choice of innovative and competitive services,” Blais said. “We are pleased to finally close this chapter after a careful examination of the wholesale rates, which included a review of the costing information.”
All large telephone and cable companies that provide wholesale high-speed access services to ISPs must now use a single billing model and offer the same rates for business and residential end-users, the commission also ruled.
It lowered wholesale business Internet rates Bell Canada can charge ISPs in the Maritimes, Quebec and Ontario, and Telus can charge in B.C and Alberta.
“This will result in a more straightforward billing process for independent service providers,” the commission said. Previously, certain large companies charged different rates under different billing models for wholesale and residential business services.
The commission doesn’t regulate the retail rates subscribers pay, but it does control the wholesale rate cable and phone companies charge ISPs for connectivity.
Within minutes of the decisions being issued Bill Sandiford, the head of the Canadian Network Operators Consortium (CNOC), a group of some of the largest independent Internet service providers in the country, was unhappy with the rulings.
For ISPs that buy DSL connectivity from carriers like Bell Canada in Ontario and Quebec, and Telus Corp. in B.C. and Alberta, the ruling is encouraging, he said. The commisision lowered wholesale residential rates it set in 2011 for those carriers.
However, because the commission significantly raised wholesale rates for ISPs that buy from or want to buy, from cablecos Rogers Communications, Shaw Communications and Videotron “it looks like the death of the industry." It will have a "negative impact on wholesale competition and ultimately not bring the cost relief to the Canadian consumer that independent ISPs would have liked to have seen."
Unfortunately, he said, the commission used evidence from a previous hearing and wasn't dealing with new carrier information disclosure rules it set up recently. That would have vastly increased the ability of ISPs to challenge costs carriers placed before the commission behind closed doors, Sandiford said.
But the result is the new wholesale cable rates that have come out "are so exorbitant it’s hard to believe ...We're still scratching our heads at how those prices came to be."
Marc Gaudrault, CEO of Teksavvy Solutions, a national ISP with some 200,000 cable and DSL subscribers, said that "in the long run competition is not enabled" by the decisions. One the one hand wholesale rates of Bell and Telus were dropped "significantly," he said. But cable rates are still excessive, he added. He isn't sure yet if he'll have to raise the fees TekSavvy charges cable subscribers.
For its part Rogers issued a statement saying Thursday's decision "slightly increases" its wholesale rates from ones set in 2011. It complained those rates were much lower that ones set for Bell, Cogeco Cable and Videotron, which Rogers attributed to errors by the commission. But, the statement added, Rogers' new wholesale rates are still lower than the others. As for the ISPs, the statement notes that they still have the flexibility to price their plans any way they want.
Spokespersons for Bell and Telus said the carriers are still studying the decision.
ISPs still waiting for CRTC on pricing
When cable and phone companies began raising residential Internet speeds, ISPs started losing customers. This despite the fact that the CRTC had set a policy that incumbent phone and cable companies had to let ISPs match their speeds.
After fielding complaints about user-based billing and getting slapped by the federal government, in November, 2011 the commission set a new policy around capacity-based billing which was supposed to solve two problems: letting ISPs offer Internet speeds closer to those the big carriers offer, and increasing competition.
ISPs, most of whom buy connectivity from phone companies, hoped the new regime would give them the choice of switching to cable providers.
Instead the ISPs complained that the carriers wanted to impose punishing technical conditions on them to switch to the new billing regime.
In some cases, they said, carriers wanted ISPs to split their residential and business traffic streams in an uneconomical way.
CNOC filed its first objection to the CRTC in January, 2012, barely two months after the capacity-based billing ruling, seeking clarification of rules. That escalated into a call for the commission to take a second look at large parts of its ruling. Some carriers also objected to parts of the ruling.
The result is that over a year after the 2011 ruling many ISPs aren’t much further ahead in their fight to gain more market share.
[More analysis and comment coming]