Over the weekend, the Governor in Council issued an order responding to petitions to the Governor in Council concerning Telecom Order CRTC 2019-288. For some background, CRTC 2019-288 was a landmark decision by the CRTC whereby after three years of uncertainty the final rates for the services independent ISPs purchase from incumbent ISPs were finally set. When these rates were issued, there was much rejoicing in the Canadian ISP community - the Commission finally set wholesale rates based careful professional analysis of costs plus a far return for investment by utilizing costing methodologies that have been in place for decades. Independent ISPs were finally in a position where the wholesale rates paid for access to incumbent networks would allow them to lower prices consumers pay while still enjoying a healthy operating margin. Teksavvy, a large independent Canadian ISP, even immediately lowered its rates in response, much to the joy of their customers.
But as we've seen time and time again in the regulatory arena, the decision was immediately appealed by the incumbent providers, but this time on three separate fronts - an appeal to the CRTC, an appeal to the Federal Court, and an appeal to the Governor in Council. In all three appeals the message was simple - the CRTC made all sorts costing mistakes in setting the rates, and as a result, the final rates were too low. If left this way, they claimed, they wouldn't have any money left to invest in new networks. Bell said they would scale back rural internet plans, leaving 200,000 households without faster internet. Eastlink said it would cut $50-million to capital investments over the CRTC decision. Shaw said "In time, this decision will be seen as short-sighted, and have negative far-reaching consequences for consumers and for the future investment required to build network capacity in all parts of Canada". If you listened to the rhetoric coming from the incumbents, Canada would quickly become sort of proverbial digital backwater if this decision was allowed to stand.
This isn't the first time we've heard the disincentive to invest argument from the incumbent players. In 2010, the CRTC issued a speed matching decision allowing wholesale service providers to get access to the same internet service speeds offered by the incumbents. For example, if Bell was offering customers a 50/10 package, that same service had to be made available on a wholesale basis. At the time it was another seminal CRTC decision that allowed independent ISPs to compete on a level playing field with the incumbents. Back then, Bell claimed the same things they are claiming now and ran the same playbook - shouting loudly from the rooftops that speed matching would leave "billion dollar companies with no choice but to no longer invest in infrastructure". Did that happen? Of course not - since 2010 Bell alone has spent billions of dollars upgrading its fibre optic network in Toronto, Montreal, and other cities. Rogers, Telus, Videotron, and all the other incumbent providers have built out fiber based network access - investments continued to be made. The sky didn't fall in 2010, and it wasn't going to fall in 2020.
While the Federal Court and the CRTC themselves have not decided on the appeals of the 2019 rate decision yet, the Government fell for the lobbing efforts by the incumbents hook, line, and sinker. In the order this weekend, while they decided to abstain from flat-out overruling the CRTC, they instead strongly suggested without any evidence that the rates the CRTC set were too low and the disincentive to invest was not given sufficient weight. The incumbents were thrilled.
In this order, Minister Bains and the rest of the Federal Cabinet did Canadians a major disservice by buying into this tired argument about investment instead of trusting the experts at the CRTC with years of experience in telecom rate setting and costing. If any decision was warranted, which I believe none was, the right decision would have been to signal to the CRTC a desire that they properly balance the objectives of increasing both incentives to invest and increasing competition. Instead, they decided to state that the rates will, in some instances, undermine investment incentives while providing no explanation as to how they determined that to be the case. In short, they listened to the "chicken little" lobbyists from Bell, Rogers, Telus and others who told them the sky was falling. They bought into the fear of Canada becoming a digital backwater and now Canadians are going to pay the price.
Without the lower rates from the 2019 decision, the future is simple - independent ISPs won't be able to compete, Canadians will lose choice, and prices will rise. In retrospect, maybe the sky is actually falling now.