02/21/2013 04:10 EST | Updated 02/21/2013 06:02 EST

CRTC Internet Rates Decision: Not Everyone Happy With Regulator's Ruling (UPDATED)


Canada's telecommunications watchdog has claimed a victory for smaller Internet service providers and their customers, but a prominent independent ISP is not convinced it's a winner in Thursday’s decision on wholesale billing.

The Canadian Radio-television and Telecommunications Commission announced Thursday it has established a standard billing model to set limits on how much the telecom behemoths can charge independent Internet providers who need to access their infrastructure.

The decision also lowers the wholesale rates charged to business service providers, bringing them in line with those charged to residential providers.

That means some independent Internet providers could see “significant reductions” in the wholesale rates they pay to the dominant players like Bell and Telus, whose DSL (internet via phone line) networks the smaller ISPs use. After the CRTC ruled Bell’s monthly fee of $2,213 for 100 Mbps of capacity was too high, independents will now have to pay it $1,036 per 100 Mbps.

However, the decision also raises the wholesale rates charged by other providers like Rogers, which charges smaller entrants for access to its cable Internet network.

“The commission expects that, with these changes, many independent service providers will be in a position to compete more effectively and on a more equitable basis in each market,” the federal regulator said in its decision.

“With these decisions, the commission has sought to ensure that individual and business consumers in Canada have a choice of service provider while fairly compensating incumbents for their network costs.”

The CRTC believes the decision encourages competition and the continued survival of indie players, who have worked to offer advantages like unlimited monthly usage, more consistent billing and, sometimes, lower prices.

“Large and small independent service providers now have the certainty they need to continue offering Canadians a choice of innovative and competitive services,” said Jean-Pierre Blais, Chairman of the CRTC.

“We are pleased to finally close this chapter after a careful examination of the wholesale rates, which included a review of the costing information.”

The new universal billing model, which covers high-speed access services, will result in a more straightforward billing process for independent providers, the CRTC said.

The regulator added that while it doesn’t approve the rates and packages offered to consumers, it believes the moves will have “a favourable impact on prices charged in the competitive retail market.”

But Marc Gaudrault, CEO of TekSavvy, a small Internet provider based in Chatham, Ont., says the decision does nothing to enhance competition. Although it brings prices in line across the big telecoms, it also standardizes prices that he considers exorbitant.

“The rates are excessive, particularly on the cable side and even frankly on the DSL side … we’re happy to pay our fair share but we just think these rates are excessive.”

The changes are a win for the company in the business market and on the DSL side, but raise the company’s costs on the cable side, to which some 70 per cent of its users subscribe.

Gaudrault said that may force TekSavvy to pass along some of the higher cable costs to customers. It’s also unlikely that the company will lower costs for DSL users, though value-for-your-dollar could increase, he said, adding that prices had been so high previously that the company had eaten some of the costs rather than pass them along.

But its unlimited monthly packages aren’t going anywhere, he added.

In advance of the decision, big telecom players like Bell and Rogers — announced they will start offering unlimited download packages for the first time in years.

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Still, Steve Anderson of consumer advocacy group Open Media interpreted the decision as a win for smaller Internet providers and consumers, though he said he hadn’t had time to digest the finer details.

“It seems like what the CRTC seems to be listening to is that the independent ISPs should pay for the actual costs of getting access to the Internet, they shouldn’t have to pay any sort of inflated rate,” he said.

“In the past they felt big telcos have tried to inflate those rates to put them out of business and the CRTC kind of let them do it. And so the CRTC decision relies on the kind of philosophy that they should only be paying for the costs and they should be competing on a level playing field.”

The established companies had earlier been asked to submit pricing models in a closed process, which means they did not see what their competitors were charging.

After a lengthy review process, the CRTC made adjustments to the rates charged by some providers to bring all of the wholesale rates charged to independents in line. In some cases, the big players will be able to charge independents more, but will have to reduce charges in other cases. It’s unclear whether the new rates will be passed along to consumers.

Service rates charged by cable players like Rogers, Shaw and Videotron will increase, while Cogeco rates will drop as a result of corrections to some cost methodology assumptions.

Independent providers using Bell in Ontario and Quebec and Telus in Alberta and British Columbia will be charged “significantly lower” rates after the CRTC discovered “costing errors” in those models.

A Bell spokeswoman said the ruling contained a complex set of decisions and that the company was still assessing the impact on the company and its wholesale partners. Telus said it was still reviewing the decision and could not comment.

No adjustments were made to residential wholesale rates charged by Bell Aliant, MTS Inc. or SaskTel.

The CRTC also determined that wholesale prices charged to independents should hold across the board, regardless if they are providing residential or residential service. It had previously contemplated allowing a greater charge for wholesale business providers. As a result, the rates charged by Bell and Telus in Alberta and B.C. will drop.

It also decided that each incumbent should use a single billing model, either capacity-based billing or flat rate for both residential and business providers.

Editor's note: This story has been updated from its original version. It has been expanded to include comments from industry and consumer stakeholders.