REGULATING AN INDUSTRY involves a careful balance. Telecommunications is a perfect example. It is regulated so that consumers can expect fair prices, quality of service and universal access. On the other hand, the regulated telecom carriers require a predictable environment that allows them to make a reasonable profit in order to satisfy their shareholders and make forward-looking investments to expand their business and keep up with technological innovations.
It has been the mantra of CRTC that regulation should be fair, transparent, predictable and timely.
Telecom in Canada has been regulated since its inception. After all, it is a networked industry, meaning interconnection and established norms are key to its efficient functioning. It is necessary for the government, as a neutral arbiter, to establish appropriate rules and norms.
Without regulation in such an interconnected industry the providers would be able gouge consumers and discriminate in terms of service and prices. In addition, given the demographic and geographic shape of Canada, without regulation the small centres and sparsely populated regions would suffer.
As with most industries in Canada, by reason of those demographic and geographic challenges, the telecom industry is dominated by a few major players and a number of small niche players. To prevent the large carriers from establishing an effective oligopoly, the regulator sets rates and terms at which the large carriers must resell access to their networks.
The recent CRTC decision regarding wholesale access to the high speed wired networks took three years to establish. The CRTC initially set a temporary rate for reselling wholesale internet access which independent ISPs found excessively high. After howls of protests and reconsideration at government urging, on August 15 the Commission set the monthly capacity rates between 15% to 43% lower than the interim rates and the access rates between 3% to 77% lower than the interim rates.
"Adjusting prices retroactively and asking large ISPs to refund negates the principle of predictability."
Most importantly, it also ordered the large ISP providers to reimburse retroactively the difference between the interim and final rates to small ISPs from October 2016 to the present.
However, looking at this decision in terms of transparency, predictability, fairness and timeliness, it leaves a lot to be desired.
The CRTC process undoubtedly was transparent. All sides made extensive submissions and there were lengthy hearings.
However, it was not predictable. Business must be able to plan for the future. It needs to know what the rules of the game are so that it can adapt its business practices to them. Adjusting prices retroactively and asking large ISPs to refund negates the principle of predictability.
In addition, it does nothing for consumers. The money will go to small ISPs and not consumers and it is far from clear as to what portion will be invested in further network capacity, what portion will go to enhance profits and what, if any will be passed on to their customers.
While the outcome would appear to be fair in terms of the rates – although the large carriers of course argue that it will stifle investments – it certainly is anything but fair in providing for retroactive adjustments. It is also anything but timely. Establishing resale rates is complicated because all of the relevant data is owned by the large carriers themselves, but taking three years in an industry as fast moving as telecom is unacceptable.
Bottom line, a successful regulator must ensure a fair balance in order to realize a healthy industry, a competitive environment and so that consumers enjoy quality, fair prices and decent service.
The recent CRTC decision does not do this, but the threatened reaction by large carriers to cut back on rural service and investments also makes no sense. It is a retaliatory consequence of an unfair decision.
The CRTC should, on its own initiative, revisit the decision and eliminate the retroactive portion.
