MONTREAL – Calling BCE’s plan to funnel $40 million to its subsidiary, NorthwesTel, as part of its merger with Astral "wrong on a number of regulatory and business levels," Ice Wireless and Iristel warned the CRTC that the scheme will harm, if not kill, the newly established competitive market in Canada's north.
Ice Wireless and Iristel, which provide vital telephony services to rural and remote communities in northern Canada, are referring to NorthwesTel plans to carry out a five-year wireless network upgrade with a significant portion tied to the CRTC allowing Bell to funnel $40 million of the "public benefits" from the Astral Media deal to NorthwesTel. Without the $40 million, NorthwesTel has threatened to pull back network modernization in smaller northern communities. Their testimony at the ongoing CRTC hearing into the $3.4 billion acquisition of Astral by BCE, echo similar concerns raised in a recent Cartt editorial on the proposed merger.
"When northerners have trouble obtaining basic wireline services or even something as trivial as call display, we know there is a digital divide and that it is real," said Samer Bishay, president of both Ice Wireless and Iristel. "It is healthy competition that drives innovation and value for customers, not anti-competitive former monopolies."
The CRTC’s "public benefits" policy on media mergers requires that new owners pledge new funds to support the Canadian broadcasting system, which typically find their way to content creators.
BCE has pledged to spend $240 million in public benefits, but that includes $40 million to its wholly-owned NorthwesTel for the telecom infrastructure upgrades. Bishay argues that this would not be "new money" as the CRTC has already ordered NorthwesTel to upgrade its aging infrastructure.
"We realize that $40 million inside this multi-billion-dollar Astral deal doesn't add up to a hill of beans to a giant like Bell," said Bishay. "But for Canadians in the north and competitors to NorthwesTel, it is a huge hill of beans."
He maintains that if the CRTC approves the $40 million in public benefits to telecom infrastructure in Canada's north, the funding should be divided among all players, not simply given to NorthwesTel, which has received tens of millions of dollars in subsidies the past decade.
Last December, the CRTC in decision 2011-771 expressed concerns that Northwestel’s shareholders have benefited from the price cap regulatory framework to a far greater extent than its customers.
“Since 2007, Northwestel has received over $20 million in annual subsidy for the provision of service in remote communities and its annual income from operations has nearly doubled to $69.3 million in 2010. Despite this, Northwestel has failed to make the necessary investments in its network as evidenced by the company’s aging infrastructure and the unavailability of services in many remote communities comparable to those provided in the rest of Canada.”
Privately-held Iristel, which is a major shareholder in ICE, has been licensed by the CRTC as a carrier since 2000. It is one of the largest VoIP (Voice over Internet Protocol) service providers in Canada with a coast-to-coast network. Iristel is now competing with Northwestel in a range of telephone services including VoIP and wholesale long distance.
Meanwhile, Ice Wireless’ network is set to expand dramatically in the coming months across the North and compete aggressively with Bell Mobility. New data services will be rolled out, including high-speed 3G data, in the coming months and local cellular coverage will be expanded in larger communities.
