11/07/2018 18:26 EST | Updated 11/07/2018 19:23 EST

Canada’s Small ISPs Say Big Telecoms ‘Gaming The System To Block Consumer Choice’

Canada risks “reverting to a monopoly” for internet services due to requirements the small players say they can’t meet.

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An industry group representing some of Canada's smaller internet providers is warning consumers could have fewer options for internet service due to federal regulations governing their operations.

Canadian consumers face the possibility of having fewer options among internet providers because the country's smaller ISPs are being squeezed by the dominant players, and federal regulations are inadvertently making things worse, an industry group says.

The Canadian Network Operators Consortium, or CNOC — which represents 35 smaller telecom firms including TekSavvy, Distributel and Primus — has filed a request with Canada's telecom regulator, the CRTC, to change the rules surrounding how they operate, arguing the current rules could push them out of key markets.

These "resellers" of internet services buy space on the networks of the large incumbent internet providers, such as Bell, Rogers, Cogeco and Videotron, then resell it to consumers, often at lower rates than offered by the big telecoms.

Watch: Canadians' top complaints about telecoms (story continues below)

But many of these companies say that, despite CRTC rules mandating they get access to the big players' networks, they are still being hindered from accessing those networks at a reasonable cost.

"The large carriers are gaming the system to block consumer choice," said Janet Lo, vice-president of privacy and consumer legal affairs at TekSavvy, in a statement.

"The large carriers use the same playbook on every customer, whether it's their wholesale customer, like TekSavvy, or their own retail customers. (They) overbilled wholesale customers like TekSavvy for years. Now, consumers are without choice while the large carriers benefit off their new fibre broadband monopoly."

The reference to "overbilling" refers to a 2016 ruling by the CRTC that the big telecoms were overcharging the small players for network access. The regulator slashed the rates the big telcos charged the small telcos by up to 89 per cent.

The CNOC says the overcharges cost Canadians consumers some $300 million.

Earlier on HuffPost Canada:

In 2015, the regulator mandated that the big telecoms must sell access to independent resellers, in order to create more competition in the market. The big telecoms objected, noting that they bore the cost of building these networks.

In order to prompt the small players to invest their own money, the CRTC ordered a change to how they access the big players' networks. Rather than arranging access to an entire market, like a province, small internet providers would have to connect to the big players' networks on a neighbourhood by neighbourhood basis.

"If consumers don't get competitive choices for fibre soon, we're going to see a situation where the incumbents will have a monopoly."Janet Lo, VP, privacy and consumer legal affairs, TekSavvy

The idea was to spur the small players to invest in the building of internet infrastructure. But the small players say this is unworkable. Given the conditions the large players have set out, it will take years for the small players to connect to the big players' fibre networks. In the case of Bell's network, it will take 43 years for small players to get connected, the CNOC told the CRTC in its submission — and that's just for Ontario.

What's more, if the smaller players don't move to the new neighbourhood-by-neighbourhood model, they may lose access to the big players' networks for ultra-high-speed internet, meaning 100 Mbps or faster.

"What's at stake here is, if consumers don't get competitive choices for fibre soon, we're going to see a situation where the incumbents will have a monopoly," TekSavvy's Lo told HuffPost Canada.

In effect, small players may soon no longer be able to offer access to top-tier internet services, and consumers in many markets will be forced to switch back to the large incumbent players, the CNOC said.

"Without regulatory change, in many parts of the country, we could revert to a market monopoly where Canadians have no choice in provider for the internet services they require," Matt Stein, president of CNOC and CEO of Distributel, said in a statement.

For big telcos, a question of who pays

But for the big telecoms, the issue isn't so much about consumer choice, as about who pays for the infrastructure to provide internet services.

In a statement emailed to HuffPost Canada, a Rogers spokesperson defended the CRTC's stance.

"This investment is vital as demand for more bandwidth continues to grow. ... The 2015 CRTC decision reflects a modernized framework, where ISPs will have more access to the highest level technology ... and in exchange ISPs are being asked to invest in modest facilities to provide a small portion of their service."

The CNOC tried previously to change CRTC rules, filing a request with the telecom regulator in 2017 to remove the investment requirement. The CRTC rejected that request, saying that eliminating the requirement would convince many smaller players to avoid investing in internet infrastructure for as long as possible.

The small players say it all comes down to whether regulators come down on the side of consumer choice, or profit for the big telecoms. TekSavvy's Lo notes that there are no small players offering fibre internet in Canada today — this shift in technology is only happening among the large players.

"We're calling on the CRTC to make sure consumers have choice, not only in fibre but also in high-speed internet," she said.