Innovation, Science and Economic Development Canada (ISED) has announced a new policy directive for the Canadian Radio-Television Telecommunications Commission (CRTC), aiming to improve competition and enhance access. It also aims to make CRTC decisions and activities more clear, timely, and effective.
A policy directive allows ISED to issue directions to the CRTC on broad policy matters, to apply generally to their activities on telecommunications. It has issued two directions in the past, and the most recent one will repeal both, leaving one to guide the CRTC.
As with the decisions before it, the newly announced policy directive announced on May 26 concerns the CRTC’s fundamental functions in promoting competition and the affordability of Canada’s telecommunications. But ISED also said that the directive now also includes more specific guidance on these goals, such as the consideration of how its decisions foster lower prices.
In a briefing with the press, the ISED noted that the market needs a balanced approach to telecommunications. And there has been some progress, it’s been too slow in some cases and needs to go further in others.
A large portion of the new directive concerns the CRTC’s cost investigations, particularly when pertaining to the wholesale internet prices that independent service providers pay to facility-based providers.
The wholesale access model allows independent internet service providers to “rent” a portion of a network belonging to Canada’s facility-based providers–or those that have physical infrastructure–for a wholesale fee.
The rate-setting exercise has been a heated and ongoing three-way battle between independents, incumbents, and the CRTC. The commission had originally proposed a dramatic rate cut in Telecom Order 2019-288, but due to a series of appeals and challenges from Canada’s facility-based providers, it never came into effect. The proposed rate was scrapped with the introduction of Telecom Order 2021-181 due to errors the commission had made when studying the cost. Both ISED and the Federal Cabinet agreed with the error assessment and concluded that it would be inappropriate to apply the 2019 wholesale rates.
However, ISED also noted that while the 2019 rates were erroneously derived, there’s still room for improvement. As such, ISED has set new requirements for the CRTC to evaluate wholesale internet rates and to improve the framework of fixed internet access in future and ongoing cost studies. Also, ISED has specified directions around preserving the existing model for competition to ensure that it can exist in parallel with the new access model under development.
Additionally, ISED looks to enforce principles of effective regulation by setting out those that apply to the CRTC’s regulatory activities, such as how it conducts market monitoring and evaluates evidence.
In the background briefing, ISED said that the Telecommunications Act does not give it the power to directly compel the filing of detailed cost information by the carriers, and therefore it cannot conduct an alternative study. It further underscored that a new direction is indeed to improve the wholesale framework and to “break the cycle of appeals” to address the broader issues and improve clarity around the policy.
Further, the policy directive has provisioned new instructions to speed up deployment and support universal access more quickly, and to adjust the various broadband funds to coordinate with other programs to develop infrastructure in rural areas.
For mobile competition, ISED described the recently announced mobile virtual network access model in effect, which allows a new network provider who owns spectrum licenses in an area to rent infrastructure from large providers if it promises to build its own network within a certain time frame. The new directive has added instructions to the CRTC to monitor MVNO’s deployment progress in Canada and ensure the model is effective. ISED expects the CRTC to apply good principles and evidence practices highlighted above in evaluating its efficacy.
The directive also outlined some measures to protect consumer rights, including requiring new measures to address unacceptable sales practices and improve transparency and clarity of pricing. Moreover, the directive also wants the CRTC to raise awareness of the Commission for Complaints about Telecom-television Services and its powers to resolve telecommunication-related complaints about Canadians.
Canadians have until July 19 to submit comments via email on the new directive. The comments will be posted on the government’s spectrum management and telecommunications website. ISED explained that the directive will take effect on the day it’s finalized. When it does, it will apply to all of the CRTC’s practices, and set specific timelines for certain activities.
Government missed the chance to save Canadians money, say independent service providers
Although the hopes of reinstating the 2019 wholesale rates have been dashed, some of Canada’s smaller network providers still praised the directive for its long-term benefits to Canadians.
“The government had a real opportunity to act on those appeals and mandate lower wholesale rates, which would have put money back into the pockets of Canadians,” said Matt Stein, chief executive officer of Distributel in a news release. “That would have had an immediate impact. While the broader proposed policy changes will benefit Canadians in the long-term, the government missed a very real chance to bring immediate, tangible benefits to Canadian consumers.”
Other providers shared the same view. Eastern Canada internet service provider TekSavvy said that while the policy directive may encourage competition in the future, reversing the 2019 wholesale rates is still a “big loss for consumers and competition in general.”
“The federal government says its proposed policy direction is a win for consumers and smaller ISPs, but it is not,” said TekSavvy spokesperson Peter Nowak in a press release. “Instead of immediately lowering prices by overturning a bad CRTC decision, it is asking us to hold out hope that the CRTC will do better in the future. This lack of action and faith-based policy approach is why competitors will continue to exit the market and Canadians will continue to pay some of the highest telecom prices in the world.”