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TORONTO (Reuters) – Two recent decisions by Canada’s telecom regulator are freezing out competition in the country’s highly concentrated industry, critics argue, making it even harder to bring down prices for mobile and internet service.
For years, Canadian consumers have complained about high cellular bills, which rank among the steepest in the world, and Prime Minister Justin Trudeau’s Liberal government has threatened to take action if the providers failed to cut bills by 25%.
On Thursday the Canadian Radio-television and Telecommunications Commission (CRTC) ruled that it would not significantly lower the rates that small companies must pay to access the high-speed broadband networks of larger rivals, including BCE (NYSE:BCE) Inc, Telus (NYSE:TU) Corp and Rogers (NYSE:ROG) Communications Inc, known as the Big Three.
That followed a CRTC ruling in April when it asked large telecoms firms to offer wholesale wireless access to so-called Mobile Virtual Network Operators (MVNOs), smaller outfits that can then resell the capacity at reduced retail prices and pass on the savings to consumers, but with several stipulations that were seen as wins for big companies.
While the two decisions were intended to foster competition, critics say they will only marginalize the smaller players.
Thursday’s ruling will allow the big carriers to charge rates similar to the prices originally set in 2016 for wholesale access to their broadband networks. The decision overturns a 2019 ruling – which was still under appeal – that would have forced large telecom operators to lower their wholesale rates and make retroactive payments to small companies.
The Thursday ruling will result in much lower retroactive payments.
TekSavvy, an internet service provider with around 300,000 subscribers across Canada, said it was petitioning the federal government directly to overrule the CRTC’s decision on broadband access rates, one of several avenues open to contest the ruling. It is also asking that CRTC Chair Ian Scott be removed from his role.
Andy Kaplan-Myrth, a vice president at TekSavvy, told Reuters, “I never heard this scenario discussed seriously, and never really considered that they would do this.” He described the ruling as a “tombstone on the grave of telecom competition in Canada.”
The Big Three operators control 89.2% of subscribers and 90.7% of revenue in Canada’s telecom industry. Lawmakers and analysts have warned the concentration will only intensify if Rogers’ planned $16 billion acquisition of Shaw Communications (NYSE:SJR) Inc is allowed to proceed.
FALLING SHORT
TekSavvy said it would pull out of the upcoming 3500mHz spectrum auction in June, the frequency required for 5G rollout, and scrap plans to launch a mobile service, as a result of the broadband ruling.
Critics also said measures to allow MVNOs fell short of what was needed to encourage robust competition.
“The CRTC itself actively acknowledges just how concentrated the market is, and yet their decisions continue to not just uphold the status quo, but tip the scales even sweeter in big telecom’s favor,” Laura Tribe, executive director of OpenMedia, a community organization that advocates for affordable and accessible internet, said.
Scott, the CRTC’s chair, in an interview with Reuters defended the latest decision, stating that “we make determinations that we believe are balanced and in the public interest.”
Rogers and Telus did not respond to requests for comment on the Thursday decision. BCE said it was pleased with the ruling.
Michael Geist, an internet law expert at the University of Ottawa, said the Trudeau government’s hands-off approach to the issue – passing decisions back to the CRTC, Innovation Minister Francois-Philippe Champagne declining to push for significant legislation – sent a signal to the market that the government would not be a strong voice for consumers.
Champagne’s office did not immediately respond to a request for comment but his office previously said it was reviewing Thursday’s ruling.
Geist called the current atmosphere “a dark period” for smaller companies.
“But obviously it’s ‘happy days are here again’ for the Big Three,” he added.
