How CRTC flip-flop on wholesale internet will hurt consumers

Last week, in a move that has already negatively impacted consumer internet costs in Canada, the CRTC reversed it’s 2019 decision to lower the rates charged by large ISPs to wholesale service providers for access to their networks. Wholesale internet providers, such as TekSavvy and Distributel, will now have to pay the higher, pre-2019 rates to run their internet services, and these extra costs will likely be passed on to consumers.

Under the Canadian telecoms system, wholesale internet providers are able to access the excess capacity on networks owned by large ISPs, such as Rogers, Bell and Telus, to provide their own commercial internet. The rates they must pay to access these networks are set by the CRTC. This system is intended to allow smaller ISPs to provide internet services without having to own all of the necessary network infrastructure. Access to the networks of incumbent service providers is mandated by the CRTC to foster competition in Canada’s telecom market.

However, the CRTC has itself acknowledged that wholesale providers have historically been subject to unfair costing practices by the large providers, who are less incentivized to support competition. The ability of companies like TekSavvy and Distributel to provide affordable services is therefore significantly dependent on the wholesale rates set by the CRTC. These rates are commonly challenged in court by the large telecom providers — as they were after the 2019 decision to lower them — resulting in significant uncertainty for wholesale service providers.

The most recent decision by the CRTC to undo its 2019 rate lowering, in an apparent buckling to big telco demands, is problematic for the future of competitive and affordable internet rates in Canada.

Cybera has previously commented on the importance of supporting wholesale internet services in order to increase competition and reduce internet costs in Canada. Internet plans from wholesale ISPs are 15-20% cheaper, on average, than comparable plans from incumbents. In fact, when the CRTC lowered wholesale rates in 2019, a number of wholesale providers immediately passed on the savings they realized to their customers in the form of reduced prices on plans.

Since the CRTCs decision to reverse the 2019 rates last week, we have already seen these same wholesale service providers say they will have to raise their prices or discontinue services. In addition, this reversal comes after nearly two years of legal challenges by the large telecom providers, where competitive providers have been denied retroactive payments (which they will now have to absorb the cost of).

This is a troubling move for the future of internet quality and affordability in Canada. Cybera will monitor the effects of the CRTC’s decision on wholesale prices, and will continue its advocacy efforts to improve internet market access in the country.