Cabinet decision means higher prices, less competition for Internet services: TekSavvy

In a statement, the federal Cabinet effectively directed the CRTC to increase wholesale rates— above the rates independently set by the CRTC in 2019, after a lengthy proceeding. The CRTC's 2019 rate decision confirmed that the large carriers overstated their costs of providing wholesale access to their networks, corrected their rates based on evidence of their costs and ordered the large carriers to repay amounts they overcharged ISPs over the 3 year process. The CRTC previously condemned the large carriers' rate-fixing conduct as very disturbing because it would drive smaller ISPs out of business and deny Canadians choice for internet services.

However, the large carriers petitioned Cabinet to overturn the CRTC's decision and impose higher rates. Over 150,000 Canadians voiced their support for the CRTC's decision and urged Cabinet to support lower Internet and cell phone bills. In addition, TekSavvy filed a formal Complaint with the Competition Bureau, detailing how large carriers deviated from CRTC-costing rules to grossly inflate wholesale rates for competitors, while at the same time offering retail prices below the wholesale costs they had inflated. TekSavvy submitted that Cabinet should order an investigation into this anti-competitive conduct because it inflates retail prices for Internet services, costing millions of Canadian consumers hundreds of millions of dollars.

Ultimately, in announcing Cabinet's verdict on the petitions, Cabinet caved to pressure from the large carriers, who threatened to hold back investments in rural Canada unless they were protected from competition. The decision is a reversal from Cabinet's previous direction that the CRTC place affordability, competition and consumer interests at the forefront of its regulatory proceedings.

Cabinet's decision is bad news for consumers and for competition, says Andy Kaplan-Myrth, VP of Regulatory and Carrier Affairs for TekSavvy. The government bowed to pressure from the large carriers who used their investment threat to keep prices high and competition low. This is about a government protecting huge profits of already extremely profitable companies at a time when fair pricing for internet is needed by consumers more than ever.

Having gone five years without cost certainty, paying inflated interim rates and facing brazen anticompetitive conduct in a climate of extreme regulatory uncertainty, TekSavvy is left with no choice but to interpret this announcement as an expectation from the government that retail prices should be raised.