Reform necessary to rein in incumbent telecom companies’ foot-dragging

There’s little doubt that telecommunications is an essential service. The pandemic has really underscored just how vital affordable, high-quality connectivity is. Is the Canadian communications sector delivering on that? Are Canadians getting the services, speeds, packages, and pricing they want and need? Are they being treated fairly? They should be. It’s the law. Yet even within our regulatory framework, Canadians are continually being treated unfairly, and the system is being threatened by big companies that take every opportunity to suppress competition and stifle innovation. But with a little work, and a few big ideas, we can make it stand up to these threats for years to come. Incumbents’ tool of choice: overcharging, delays Canadians pay some of the highest telecommunications rates in the world. Not coincidentally, Canada also has three of the world’s most profitable telecom companies. Those three companies, plus several other big providers, charge Canadians unreasonably high prices and extract inappropriate profits. Through their litigation, marketing practices, and mergers-and-acquisitions activity, these incumbents are constantly fighting to keep competition out, prices high and shareholders happy. Whenever the CRTC delivers a decision they don’t like, they leap to appeal it. That’s not because of their passion for doing what’s right. It appears they’re doing it to create delay. The goal? It’s to put off the implementation of changes that might affect their investors’ returns, while waiting for the smaller players to die off. The CRTC’s wholesale framework—through which the independent providers buy access to the incumbents’ networks—is designed to facilitate competition. It should allow competing providers to offer services to their customers at fair prices, as well as to innovate. Competitor innovations have fundamentally shaped the way Canadians access telecommunication services—a great example is unlimited service offerings. This has driven the price disruption and innovation that Canadians need. There are four changes that should be taken into consideration to stimulate healthy, sustainable competition, and bring fairness and innovation back to Canadian telecom. Redesign the process for setting interim rates First, the process for setting wholesale rates has to change. The incumbents set interim rates: the prices they charge the competitors, while the CRTC conducts its rate review, which can take years. The longer it takes, the longer the incumbents can keep prices high. Incumbents should not be setting the interim rates. We should use the “retail minus” approach, which sets wholesale rates based on the actual rates the incumbent is charging in the retail market, minus a set percentage. I suggest we use 50 per cent–set the interim rate at half incumbents’ retail price. Interim rates should also not go directly to the incumbents, but instead should be held in escrow until the final rate is set. That’ll create some urgency. 2. Enforce an equivalence-of-inputs framework Second, we need to stop penalizing Canadians for choosing a competitive service provider. Today, Canadians who make that choice are treated as second-class citizens by the incumbents. Why? Because the incumbents are not required to treat their competitors’ customers the same way they treat their own. So they don’t. We need what’s called an equivalence-of-inputs framework, which requires an incumbent to provide wholesale services on the same timescales, using the same systems and processes, with the same service levels as they use in their retail services. 3. Rein in the appeals process The Telecom Act provides for too many open-ended, consequence-free avenues for appealing a regulatory decision. Decisions can be appealed to the CRTC itself, to the government, and to the court—three avenues that were meant to provide a balanced set of options in the case of some major concern or oversight. That’s important and fair. But it’s become almost routine that the incumbents, if they don’t like a decision, go off in all three directions at once. There’s no time limit, no maximum, and no consequences for appealing repeatedly, even if your first appeals are deemed baseless. We need a clear, limited appeals process, including consequences for acting in bad faith and bringing repeated “claims of dubious merit” (the term the Federal Court of Appeal used in dismissing the incumbents’ most recent appeal. Give CRTC decisions more teeth Finally, the incumbents have too much power in our regulatory environment. They don’t respect the scope of proceedings, they create massive delays, and they simply ignore the CRTC when they don’t agree. Unlike even a few years ago, they are getting away scot-free. The commission’s powers need to be respected and acknowledged by all players. Its rulings need to have more teeth, beyond the ability to impose monetary penalties. (Monetary penalties serve a purpose, but they don’t deter incumbents with double-digit billions in revenues.) If we can’t get this right, it might be time to explore separating the incumbents’ retail operations from their infrastructure operations, which is called “structural separation.” But a great start would be to just go back to the actual goals of telecom regulation: just and reasonable rates, competition that’s sufficient to protect users’ interests, and services and choices that respond to consumers’ needs. These changes will cascade throughout the industry, creating more fairness and innovation across wireline and wireless, bringing Canada back to a place of telecom leadership. If we get this right, no matter what service someone uses, they will benefit. With these four concepts, we can find our way back to what we’ve lost: an innovative, competitive telecom industry that Canadians can be proud of. Matt Stein has frequently appeared before the Canadian Radio-television and Telecommunications Commission and parliamentary committees as a voice for the industry. The Hill Times

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Reform necessary to rein in incumbent telecom companies’ foot-dragging

Through their litigation, marketing practices, and mergers-and-acquisitions activity, incumbents are constantly fighting to keep competition out, prices high and shareholders happy.

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