The Billion Dollar Glass of Beer

By George Burger, Co-Founder of VMedia Inc.

Canadian Internet Service Prices: Will The Long-Term Fight Continue?

Once again, Canadians have been singled out as the global patsies when it comes to telecom services. ReWheel, an independent Finnish research firm, recently found that prices of Canadian mobile services, which it describes as a “de-facto network duopoly”, continue to be among the highest in the world.

This is no surprise to anyone paying attention. Indeed, successive federal governments have been wringing their hands for over a decade about the gouging of Canadian consumers by the dominant players in all telecom services, including residential internet, with little result.

Indeed, as reflected in a notorious photo, shown above, of the head of one of the largest telcos having a glass of beer in a bar with the current Chair of the CRTC, Ian Scott (himself a former senior executive of the other large telco), the  Commission has no interest in promoting competition, to protect the interests of us hapless consumers.

In fact, in a recent decision restricting competitive internet services in apartment buildings, the CRTC actually wrote that it “does not consider that competition and consumer choice qualify as public good considerations”, a statement that would embarrass Marie Antoinette.

The CRTC has not been this blatantly supportive of the “network duopoly” since the early 1990s, when the CRTC granted small service-based competitors access to Bell’s long distance lines. That step led to the reduction of usurious long distance rates, like $2 per minute for calls between Toronto and Montreal, by up to 90%.

Today, service-based competitors also offer residential internet, provided by small companies like VMedia, Distributel and Start, which obtain access to the facilities i.e. wires and networks, of the same network duopoly. These competitors offer lower prices and innovative consumer-friendly services like unlimited internet packages, which they introduced in 2010.

Service based competitors pay tariff prices for that access that must be just and reasonable, relative to the duopoly’s own costs. However in 2019, after 3 years of investigation and consultations, the CRTC found the tariff rates were not just and reasonable. The rates were significantly lowered, and the decision promised to usher in a new era of more affordable internet. Indeed, in anticipation of the implementation of that decision, VMedia and others dropped their monthly rates by as much as $10 a month, saving their small share of the market over $100 million a year.

Faced with those lower prices, the duopoly would have been forced to reduce prices as well, generating further savings of over $1 billion a year.

But it was not to be. The duopoly launched a series of appeals to the courts and Cabinet. All were rejected. However, it also appealed to the CRTC, asking it to review and vary its own decision, a process to be overseen by Chairperson Scott.

Which brings us back to the glass of beer. That private quaff took place right after the review and vary application was submitted. There were no notes of the discussion over the beer, or aides in attendance.

Finally, in May 2021, the decision was indeed reviewed, but it was not just varied. To the astonishment of the entire industry, including telco executives, it was completely reversed.

Most unusually, its release was preceded by the Chairperson’s own public admission that he prefers facilities-based competition, because service-based competition was not sustainable. This is false. For example, the benefits of service-based competition in long distance services continue to this day, 30 years after its introduction. And it was in fact the costly facilities-based mobile competition offered by WIND that could not be sustained. So this statement too was a shocker.

The CRTC is a quasi-judicial tribunal, and its commissioners are de facto judges, bound by administrative law principles of fairness, natural justice and above all impartiality, forbidding even the appearance of bias. That private glass of beer and those statements clearly expressing the Chairperson’s “preference” for facilities-based competition, combined with the Chairperson’s own career with one of the beneficiaries of the reversal, raise serious concerns about the process.

When this CRTC says it does not concern itself with competition and consumer choice, Canadians should listen. They are paying up to a billion dollars more a year for internet services, and based on the ReWheel research (service-based competition in mobile was also recently rejected by the CRTC), who knows how many times that in cellphone rates.

Cabinet is in the process of reviewing the CRTC’s reversal. It has the power to restore the original findings, and implement the cost reductions. It has the opportunity to show Canadians that it truly cares about affordability, especially when it comes to the essential service of internet, and that it will not support decisions so cavalierly dismissive of the interests of Canadians, just to benefit a dominant market duopoly that is a proven global outlier.

There are few opportunities for a government to show it is aligned with the interests of virtually every single Canadian, and that it will not tolerate regulatory processes not in compliance with the highest standards of transparency and fairness. This is such an opportunity, and Cabinet should grab it.

This entry was posted in "General" : , on 2021.11.19