OTTAWA – Saying the CRTC has erred in law and jurisdiction five different ways, Canada’s incumbent cable operators have filed for leave to appeal the recent CRTC decision on aggregated wholesale internet rates. The companies have also filed for a stay of that Commission decision (Telecom Order 2019-288), as well, until a decision on the appeal is set.
Having spent billions of dollars over the years on their networks, Rogers, Shaw, Vidéotron, Cogeco and Eastlink say the rates the Commission has set are below their costs – and the retroactive amount to be paid back to independent resellers (collectively $225 million, according to the filing), unfair.
Indeed, the incumbents (not just cable) and others, have been sounding the alarms over the past 30 days and the feds are none too pleased with the decisions some have made.
According to the motion for leave to appeal, the CRTC erred:
- By fettering improperly its own discretion to set rates, including by adhering rigidly to outdated guidelines and policies that have no application to the technologies currently deployed by the Cable Carriers, in the face of strong arguments and evidence demonstrating that those guidelines and policies are unreliable.
- by behaving arbitrarily, including by failing or refusing to consider highly relevant evidence and submissions concerning the Cable Carriers’ historical, current and prospective costs, while also taking into account irrelevant considerations.
- by breaching the rules of procedural fairness and natural justice, as well as the legitimate expectations of the Cable Carriers. In particular, the CRTC changed the rules of the rate-setting process mid-stream, without providing adequate notice to the Cable Carriers and without allowing them a proper opportunity to adduce evidence and make submissions in response.
- by failing to abide by the objectives of Canadian telecommunications policy as enshrined in section 7 of the Telecommunications Act, and by failing to discharge its obligation under section 27(1) of the Telecommunications Act to set “just and reasonable” wholesale rates. The objectives under section 7 include “foster[ing] increased reliance on market forces for the provision of telecommunications services and [ensuring] that regulation, where required, is efficient and effective”, as well as “stimulat[ing] research and development in Canada in the field of telecommunications and [encouraging] innovation in the provision of telecommunications services”.
- by failing to abide by a binding Direction issued by the Governor in Council to the CRTC on December 14, 2006. That Direction required the CRTC, in making Orders like the one at issue in the proposed appeal, to rely on market forces, promote fair competition and increase incentives for innovation and investment. Telecom Order 2019-288 does just the opposite. That Order discourages innovation and investment, disregards market forces and results in unfair competition by requiring the Cable Carriers to provide direct competitors with access to their networks at unreasonably low wholesale rates.
(Ed note: The CRTC is also bound by another, newer Direction from the federal government which says it must default to consumers considerations and lower prices, so that complicates things.)
The effect of the CRTC decision means the cable companies’ business models will be irrevocably damaged if it is allowed to stand and will also stifle network investment. It will, the motion says “materially unbalance the highly-competitive Canadian market for high-speed access services, including by essentially transferring resources from the Cable Carriers to the Resellers.”
The motion also notes the CRTC did not tie any strings to the new rates and retroactive payments, meaning the independent resellers are free to pocket payments and their savings, although TekSavvy, the biggest independent reseller, headed off that complaint with an announcement today (Ed note: Nice timing!) that it will be cutting prices and/or boosting data plans for its customers.
UPDATE: Also Friday, Bell Canada filed its own motion for leave to appeal (but not a stay), citing similar issues as the above mentioned companies, adding "the CRTC’s reasoning process contains several fundamental legal errors that are hallmarks of an irrational decision.
"Telecommunications Carriers like Bell have invested enormous sums of money to provide Canadians with new and innovative broadband services and the most technologically advanced networks. Despite this, they are now required to provide access to these telecommunications facilities to Resellers – who invest little or nothing in building the actual networks used to connect customers – at wholesale rates below cost. Moreover, they must make retroactive payments to Resellers in excess of $100 million dollars without any obligation on the Resellers to pass on to their customers the benefit of those payments," reads the Bell motion.
"Not only does the Decision fundamentally alter the competitive landscape in a way that impermissibly favours Resellers, it will stifle investment in a vital Canadian industry at a time when that investment is needed most."
At this point, there is no visibility as to when the motions will be heard or if/when the stay might be granted. Please stay tuned.
