TORONTO — Independent Internet and TV service provider VMedia Inc. has submitted an objection to cabinet (officially the Governor-in-Council) in response to Bell Canada’s and the major incumbent cablecos’ petitions in November, in which they asked cabinet to overturn the CRTC’s August decision concerning final rates for aggregated wholesale high-speed access (HSA) services.
VMedia filed its submission on February 14, the last day to do so, and has posted a copy on its website. On Thursday, the independent ISP issued a news release to publicize its submission to cabinet and to explain its arguments for why the Commission’s decision regarding final wholesale Internet access rates should stand. VMedia is also a member of the Canadian Network Operators Consortium, which has also filed a counter-petition with the GiC.
In its submission, VMedia characterizes the petitions by Bell and the cable carriers (Cogeco, Eastlink, Rogers, Shaw and Videotron) as containing “inaccuracies so egregious as to leave no other conclusion than that they seek to mislead the Governor-in-Council itself.”
VMedia’s main contention is “both Petitions attempt to characterize the participation of ISPs in the internet business as robust, growing in market share, and indeed significantly reducing the Incumbents’ business, at current tariff levels. They argue that reducing tariffs further would make their penetration even greater, significantly harming the Incumbents’ business, leading to less investment, and so on.”
In its news release, VMedia CEO Alex Tchernobrivets is quoted as saying: “The distortions and misrepresentations contained in their petitions destroy the credibility of the petitioners, and reinforce the reasons for the CRTC’s rejection of their arguments supporting higher Internet prices in the first place.”
As noted by VMedia in its news release, the CRTC determined in its August decision that the interim rates for aggregated whole HSA services were “not just and reasonable” (which is why the CRTC decided to have the final rates applied retroactively to 2016, when the interim rates were set).
VMedia also highlights two elements of the major carriers’ petitions that it calls “clearly inaccurate”. The first relates to market share figures quoted in the petitions, in which both Bell and the cable companies say Internet resellers hold 13% market share, when VMedia says the CRTC’s own Communications Monitoring Report 2019 shows wholesale-based service providers have an 8.9% market share. VMedia accuses the major carriers of overstating and inflating the resellers’ market share by including “other facilities-based providers” in the number, which the CRTC does not do in its analysis of the market.
(Bell and the cable companies were actually quoting a market share figure for wholesale-based competitors from the Competition Bureau’s Delivering Choice report that studied Canada’s broadband market and was published in August 2019.)
The second problem VMedia highlights in its GiC petition relates directly to Bell’s, whose analysis of ISP margins quotes an $82.05 average monthly price for 50/10 Mbps Internet service in 2016, a figure that VMedia’s submission to cabinet says “is either a fabrication, or based on deliberate or negligent miscalculations, just like the calculation of ISP market share.”
Bell’s petition “distorts and greatly exaggerates the margins which ISPs generate from Internet services, by citing supposed retail prices charged by ISPs which are far above those actually charged by all of the major ISPs, including VMedia,” reads VMedia’s news release.
George Burger, co-founder of VMedia is quoted in the release as saying: “These blatant misrepresentations reflect the cynicism of the major companies, and their disrespect for the Federal Cabinet and the Canadian people. It is astounding that they thought they could get away with it, after being sanctioned for these same tactics by the CRTC.”
VMedia is asking the federal cabinet to dismiss the carriers’ petitions “as expeditiously as possible”.
CORRECTION, March 4, 2020: While noting in our article Bell and the cable companies relied on a market share figure from the Competition Bureau’s Delivering Choice report — and not data from the CRTC’s CMR 2019, as highlighted by VMedia in its press release and submission to the Governor in Council — the author of the Cartt.ca piece failed to bring attention to Bell’s and the cablecos’ omission of the Competition Bureau’s caveat regarding its market share figure including not just wholesale-based competitors. Cartt.ca regrets the error.
Furthermore, the error was compounded by the author’s use of the phrase “wholesale-based competitors” to describe the contents of the market share chart (Figure 3 in the Competition Bureau’s report). As noted above, the chart’s market share data was not limited to wholesale-based competitors. In fact, the heading of the chart was “Share of Canadian internet subscribers served by ISPs other than large telephone and cable companies”. Again, Cartt.ca regrets the error.
