House Call with Carol Hughes

Telecoms react to CRTC ruling by threatening to cut expansion of
internet services in rural Canada

Competition is a healthy component of a capitalist system. It forces businesses to refine their practices while delivering choice and lower prices to consumers. That is why it is disheartening to see the reaction from big telecom companies to a CRTC (Canadian Radio-television and Telecommunications Commission) ruling in August designed to increase competition for internet services. That led some of Canada’s biggest internet providers to claim they will have to cut back on service in rural areas and any plans for expansion.

At the heart of the problem is the fact that Canadians pay some of the highest prices for internet services in the world. Even in Australia, which has comparable challenges for population and geography, consumers pay less for internet and cell services. The CRTC ruling will force the biggest telecom companies to lower the price they charge smaller competitors for wholesale network access. While there is no doubt this will cut into profits, the claim that this must be addressed by scaling back expansion and even existing service in rural areas amounts to a threat to Canada’s plans to improve service to these locations.

It also reflects the fact that Canada’s biggest telecommunication companies have had it their way for too long. Consider that in 2017, profits of the ‘Big Five’ telecom companies totaled $7.49 billion, and their profit margins reached an astonishing 38.3 percent. The amounts they claim they will lose are a drop in that bucket and CRTC must stand firm on its decision.

What’s puzzling is the fact that most Canadians still stay with the biggest providers when choices are available. Unlike the United States, most here are reluctant to use smaller providers which offer lower rates and utilize the same networks the big companies do to deliver the service. There are 550 resellers of internet service in Canada. These companies buy the service from bigger companies at wholesale prices and still make a profit while delivering at a lower price. Despite that, only 13 percent of Canadians get their internet from resellers. Adding to the woes of rural customers is the fact that most of these companies operate in big cities.

The CRTC ruling means that companies like Bell and Rogers will be forced to sell access to their infrastructure to smaller internet providers to improve competition and lower prices. The new rates are being set as much as 77 percent lower than rates charged in 2016 which led Canada’s  largest internet providers to threaten cuts to investment in broadband networks, especially in rural and remote areas.

The challenge for the government is set as balancing the desires of the few big players who dominate telecommunications in Canada against the rights of consumers not to be gouged or even to have any service at all. It is a problem of our own making which should have been addressed much earlier. By allowing a few companies to dominate this vital sector, the stage was set for this showdown.

Canada should have developed better plans to expand and improve rural and remote services long ago, but government after government has proven susceptible to the strong lobbying efforts of big telecoms who happily developed a system that delivers easy money. Apart from challenges related to bringing service to new areas, many rural customers are sold packages for internet at speeds that are never matched by the service they receive, with no concern raised by the government. The upshot is that consumers are not well-served and rural areas are being held hostage as they struggle to keep up to date on important technologies. It all points to a lack of vision and leadership that allowed the problem to develop in the first place.