Ottawa says it will direct the federal telecom regulator to emphasize competition and affordability in the internet and mobile phone markets and to improve its wholesale network access regimes.
The new policy directive, announced Thursday, aims to eliminate some industry confusion by replacing two previous policy directions that some saw as conflicting with one another. The first, introduced in 2006 by the then-Conservative government, emphasized relying on market forces and encouraging network investments by telecoms. The second, which was put in place in 2019 by the Liberal government but did not replace the earlier directive, instructed the regulator to emphasize affordability, competition and consumer rights.
The new directive seeks to promote competition while also encouraging investments in networks in a sector that has attracted criticism from government and consumer advocates for having high prices.
The announcement comes at a time when the government is in the midst of reviewing Rogers Communications Inc.’s proposed $26-billion takeover of Shaw Communications Inc. Critics argue that the merger of the country’s two largest cable systems would reduce competition and lead to higher prices for consumers.
The federal government also opted not to overturn a controversial ruling by the Canadian Radio-television and Telecommunications Commission, which in 2021 reversed its 2019 decision to lower the rates that Canada’s large phone and cable companies can charge smaller internet providers for access to their broadband networks.
The regulator has said it found significant errors that cast doubt on the correctness of that decision and opted to largely maintain the interim rates that have been in place since 2016.
“The wholesale rates decision made by the CRTC in 2021 is an attempt to correct errors made in 2019, and it makes permanent the rates that have been in force since 2016. The decision provides stability, and the government has determined that it will not alter this decision,” François-Philippe Champagne, Minister of Innovation, Science and Industry, said in a statement.
“That is why the new policy direction would require the CRTC to support a wholesale Internet regime that is sustainable, effective and fair, because wholesale broadband is a proven regulatory tool for increasing retail competition in the Internet service market,” Mr. Champagne added.
The proposed new policy directs the CRTC to improve wholesale broadband rates in its future decisions and to require large telecoms to provide their competitors with access to faster speeds. The policy does not specify the rates that the government would like the CRTC to implement, leaving it up to the regulator to make that decision. (Large telecom companies are required to sell broadband network access to third-party operators, which then sell internet services to their own customers.)
Matt Stein, who is CEO of Distributel Communications Ltd. and chairman of the Canadian Network Operators Consortium (CNOC), an industry group for independent ISPs, said the decision provides clarity for regulators.
“This is not what we asked for, but this is good, too,” Mr. Stein said, adding that he’s disappointed that the government opted not to overturn the CRTC wholesale rates decision, but is encouraged by the directive’s emphasis on consumers.
“It’s a really good start and hopefully they do bring it into force,” Mr. Stein said.
The federal government is also instructing the CRTC to improve its regime governing wireless network access for eligible regional competitors “as necessary.”
In April, 2021, after a lengthy review of the country’s wireless industry, the telecom regulator ruled that Rogers, BCE Inc., Telus Corp. and SaskTel must sell wireless network access to regional competitors who commit to building their own networks.
However, the CRTC stopped short of opening up national wireless networks to competitors without their own infrastructure, known in the industry as mobile virtual network operators, or MVNOs.
Still, the government is prepared to move to a full MVNO model, if needed, to support competition in the sector, the department of innovation, science and economic development said Thursday in a backgrounder document.
Canadians have until July 19 to submit comments on the proposed new directive, which the government aims to finalize by the fall.
The proposed new directive also instructs the telecom regulator not to phase out the current wholesale broadband regime when it introduces the new model it is developing. Under the current “aggregated” system, the large telecoms are required to sell to third-party operators services which bundle access to the “last mile” – the connection into customers’ homes – along with transport of data to and from the broader internet.
Under the new “disaggregated model,” competitors will gain access only to the last mile, and then will be able to either provide their own data transport or lease it from other service providers. The new model is meant to encourage network investment.
The government said it has concerns that phasing out the aggregated model could harm competition.
Ottawa is also instructing the CRTC to strengthen consumer rights by introducing new measures to address what it calls “unacceptable sales practices,” overhauling the governance of the telecom ombudsman to give consumers a more prominent role, and implementing a number of other changes. Speeding up the deployment of internet access, for instance by making it easier for telecoms to access infrastructure such as telephone poles, is another priority that the government has identified.
Anthony Lacavera, chairman of Globalive Capital, said that “when implemented and enforced, this new policy direction will help ensure true independent competition in wireless and internet services.”
Globalive Capital is one of the potential bidders circling around Shaw’s Freedom Mobile, which is up for sale as part of Rogers’ $26-billion takeover of Shaw.
