Broadband cut possible, big telcos threaten

• Canada’s largest internet providers are threatening to cut investment in broadband networks, especially in rural and remote areas, after the federal telecom regulator drastically lowered the price they can charge smaller competitors for wholesale network access.

Five of the big players expect to take combined charges of $ 325 million this quarter after the Canadian Radio- television and Telecommunications Commission retroactively lowered the wholesale rates last week, a decision that comes as Ottawa pushes for more affordability and competition in the telecommunications sector amid persistent complaints of high prices.

The Competition Bureau recently found that wholesale providers – concentrated in urban areas, these companies serve one million customers across Canada under brands including Distributel and TekSavvy – have brought greater consumer choice, lower prices and increased competition to the marketplace.

But major providers accuse them of freeloading off their network investment and eating into their profits, blowback that could damage the government’s other goal of improving internet connections in rural and remote regions where there isn’t as much of a business case for investment.

BCE Inc. said it will take a $ 100 million hit to its bottom line and as a result is required it to scale back its rural wireless home internet expansion by 200,000 households. Rogers Communications Inc. expects a $140 million charge and said the rates will “certainly impact” planned investments.

Shaw Communications Inc. anticipates a $10-million hit, Cogeco Inc. a $ 25- million charge and Quebecor Inc.’ s Vidéotron a $ 50- million impact. All stated they will review investment plans.

The overall costs to incumbent providers will be higher as some providers didn’t divulge their costs. Eastlink Inc. expects a “significant” financial impact. Sasktel said the decision does not have a short-term financial impact, but that it could “severely impact” long-term expansion plans. Telus Corp. declined to comment.

Eastlink was “shocked and disappointed” by the decision that it said forces it to decrease its rates to onethird of its costs.

“This decision compromises the future of investment in internet networks and infrastructure across Canada,” Eastlink executive vice-chair Lee Bragg said in a statement.

Sasktel echoed the sentiment, stating, “the CRTC seems focused on directing us to effectively give it away to resellers who will invest virtually nothing in the province and likely will not employ any Saskatchewan residents.”

The CRTC refused to comment on the backlash. So far, the federal government seems to be standing by the regulator.

“We are deeply disappointed Bell is considering walking back its commitment to Canadians in rural and remote communities,” Innovation, Science and Economic Development Minister Navdeep Bains said in a statement that noted the new incentives for capital investments.

“This will not distract from our government’s commitment to connect every Canadian to affordable highspeed internet by 2030, and I am confident new competitors will step up to make these investments,” Bains said.

If companies decide to fight the decision, they have 30 days to launch a federal court appeal, 90 days to appeal the decision to cabinet and 90 days to apply for the CRTC to review the decision.

All who commented said they’re evaluating their options, but haven’t confirmed whether they’ll take action, either separately or as a group.

Meanwhile, wholesale providers are pleased with the rates after a contentious three-year process.

Matt Stein, chief executive of Distributel and president of the Canadian Network Operators Consortium, said that wholesale competitors were being overcharged and this was a correction of the rates.

Previously, some of the big providers advertised retail rates that were lower than the wholesale rates, making it impossible for smaller players to compete, Stein said. The final rates include a 30- per- cent markup on costs, he added, making it difficult to argue costs are lower than rates.

While wholesale internet providers admittedly don’t build as much infrastructure as the incumbents, Stein said they do make investments and have introduced innovations such as unlimited internet data plans.