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The federal department of Innovation, Science and Economic Development (ISED) on Thursday announced a proposed new policy direction for the Canadian Radio-television and Telecommunications Commission (CRTC).
The government said the new directive will support its efforts to make telecom services, “innovative, competitive and, most crucially, affordable.”
But at the same time, the government said Thursday it will not overturn a controversial CRTC ruling from 2021 on wholesale internet rates that small internet service providers (ISPs) say has been killing competition.
During a media briefing, a government official said ISED does not have the necessary tools to set those rates itself — it’s the CRTC that has those powers. (Under the rules of the briefing, media outlets may not identify the officials.)
In a surprising reversal one year ago, the CRTC said it made several mistakes in its own 2019 decision on wholesale internet rates, the prices smaller ISPs pay to access the networks of big telecoms like Bell and Rogers.
The 2019 decision set lower wholesale rates but they never came into effect because of a series of appeals by the big companies. In last year’s ruling, the CRTC largely reverted back to higher prices that had been set on an interim basis in 2016.
Given the mistakes the CRTC said it made in setting the 2019 rates, the government official said it would be “inappropriate to reinstate them.”
“The government wants to move forward and not continue to debate the 2019 rates,” he said.
But the spokesperson said there is still “room for improvement” in the wholesale internet market and that the policy directive will help address that.
He also said it would help “break the cycle of appeals” that small ISPs say have become a major threat to their business model.
The commission operates at arm’s length from the government but ISED’s policy directions act as a guide that the CRTC must follow on telecom matters.
The announcement comes only three years after the Liberal government issued another policy direction to the CRTC, one that also focused on competition, lower prices and consumer welfare.
However, this year’s proposed order includes more specific directives aimed at supporting the business models of smaller competitors in both the wireless and high-speed broadband industries.
It also sets out new measures to protect consumers from aggressive sales practices and make the process of buying telecom services more clear and transparent.
The more detailed instructions suggest the government has not been fully satisfied with the work of the CRTC.
“(The direction) aims to make CRTC decisions more clear, timely and effective,” said the government spokesperson.
The draft order also specifically directs the CRTC to reconsider parts of its approach to the wholesale markets for both home internet and wireless service, which is a more interventionist tack than the government has taken in the past.
In both cases, the government said it wants the CRTC to support measures that would make it easier for smaller players to compete.
On wireless, it said it would impose a “full” mobile virtual network operator (MVNO) model if necessary to improve competition in the sector.
Last year, the CRTC said it would introduce a “hybrid” model that lets smaller players rent access to the big carriers’ networks, but only if the small players invest in spectrum licences and network infrastructure of their own.
Canada has high-quality networks, according to background documents ISED published, with widespread adoption of high-speed internet, but on the wireless side, the country lags behind some of its international peers on subscriptions and data usage.
It said prices have been coming down for wireless service but “more progress can still be made,” and mid-range and higher-end home internet plans are also expensive when compared to other countries.
“Competition in the sector is a foundational element that puts downward pressure on prices, and there is more work to be done,” ISED said.
The government will publish the order in the Canada Gazette and invite comments from the public until July 19. The spokesperson said the government hopes to have it finalized by the fall.
For several years there have been two seemingly competing policy directions to the CRTC on the books.
A 2006 direction made by the then-Conservative government instructed the CRTC to encourage telecom companies to invest in network building and rely on the market to deliver competition, access and affordability.
In 2019, the Liberal government issued a new direction, ordering the regulator to put more emphasis on lower prices and the protection of consumer rights.
But the government never revoked the 2006 direction. ISED said Thursday both of those older directions will be cancelled and replaced by the new one, which will “bring forward the key parts of the 2019 direction to ensure that internet and wireless services better meet the needs of Canadians.”
