Battle heats up over wholesale Internet access rates charged to small providers
TORONTO The scuffle over wholesale high-speed Internet rates is heating up between big Internet providers and the indie providers who buy access to their networks and resell it to consumers at lower rates.
Major providers and consumer advocates waded into the fray this week after smaller providers demanded that Canada’s Internet regulator, the Canadian Radiotelevision and Telecommunications Commission, throw out the interim wholesale prices proposed by large providers last week.
Smaller providers were baffled when the proposed wholesale rates went up almost across the board even though the CRTC indicated the existing rates were likely not just and reasonable. The Canadian Network Operators Consortium asked the CRTC not to approve the interim rates and to send the large companies back to the drawing board, as they deviated from the CRTC’s cost calculation formula.
Shaw and Cogeco, Internet providers who bucked the trend and proposed some lower prices, wrote to the CRTC to ignore the consortium’s demand for a redo.
Shaw disagreed that the wholesale providers inappropriately deviated from the CRTC’s calculations. The calculations needed to be tweaked to reflect current network costs and market assumptions, some of which were more than 10 years old, it argued in a letter. “Contrary to CNOC’s suggestion, there is nothing inappropriate or improper about this process,” the letter stated.
The Public Interest Advocacy Centre stepped in to support the smaller players. In a letter Tuesday, it argued the “jarring” price increases appeared to result from non-compliance with the CRTC’s rules. It argued the proposed rates are “plainly at odds” with the CRTC’s guidance and efforts to increase competition, choice and affordable pricing for broadband.
The wholesale prices will ultimately dictate retail prices resellers can charge consumers. Small providers, who hoped cheaper rates would be in place before the busy back-to-school season, already claim to have meagre profit margins and have said that even a small increase could make it difficult for their businesses to survive. But big players said costs needed to go up to account for massive increases in Internet use in the past few years, especially due to the popularity of online streaming.
In a letter sent Monday, the CRTC said it needs more time to evaluate the proposed interim rates. The CRTC recognized that providers want rates set as soon as possible, but stated an in-depth analysis of cost study methodologies, assumptions and inputs is necessary.
Contrary to CNOC’s suggestion, there is nothing inappropriate or improper about this process.