Wholesale debate: What the CRTC ruling means for ISPs

Written by Erin Green

It’s been all over the news the last week or so. The Canadian Radio‑television and Telecommunications Commission (CRTC) has reversed its mandate to lower wholesale internet prices charged by Canada’s large network carriers to smaller, independent carriers.

These smaller carriers say they’ve been overcharged for years, and were backed by the CRTC until this most recent decision. So what happened? And how will a decision like this impact the telecom industry—both in Canada and around the world?

 

What’s the story?

In 2019, the CRTC, which regulates the telecommunications industry in Canada, started the necessary procedures for a mandate to lower wholesale internet prices by 25% over two years. The original intention was to ensure larger network owners weren’t overcharging. This in turn would promote healthy competition and a better landscape for consumers.

At the time, those larger networks countered that slashing the prices they could charge for wholesale internet would force them to sell at a loss. It would also limit their ability to build their networks, including expanding into rural areas.

Those appeals got overturned for years—until now.

In a surprise turn of events in this saga, the CRTC decided to reverse its original decision, calling the original decision a mistake.

 

Why did the CRTC change its mind?

Though it’s not entirely clear, this decision appears to have been heavily influenced by the COVID-19 pandemic.

With so many people working from home in rural and urban areas alike, networks have faced an enormous spike in demand. It’s become painfully clear just how important it is to have good, reliable internet available to all users. And it’s become just as clear that there’s a difference between urban and rural networks.

According to this article published in the Toronto Star, the federal government specifically said that it was concerned about how reducing wholesale prices would “undermine investment in high-quality networks, particularly in rural and remote areas.” This echoed the concerns voiced by the larger networks and clearly opposed the original decision.

 

What does this mean for ISPs?

This decision has a few major implications for ISPs, especially third-party resellers, across Canada.

First, this is going to have a major impact on the prices they charge their customers. It wasn’t just that the CRTC was thinking about mandating lower prices; it actually did. And many third-party resellers set their own prices based on the drastically lower prices they were paying, and presumed they would continue to pay.

It’s likely that prices will need to go up to account for the change in cost to the ISP. And in that case, it can turn into a dangerous situation for customers. As smaller companies need to raise prices to handle their costs, larger companies can raise their prices because the competition is.

But this shouldn’t be as scary as it sounds.

“What we’re seeing right now isn’t very far off from what we saw our Australian customers go through just last year,” said Jason Moore, CEO of RouteThis. “They’ve faced the dilemma of either needing to increase costs or decrease bandwidth following forced increases from wholesale suppliers. We’ve seen them rise to the challenge, adapt, and succeed brilliantly.”

Alternatively, it may force ISPs to evaluate their operations and find ways to cut costs elsewhere in an effort to maintain current prices. For example, they may start considering ways to reduce the bandwidth they pay for. That then puts additional pressure on support to solve speed issues quickly.

Second, in the event that smaller ISPs have to raise their prices, it creates pressure on them to establish other value points that can offset customers’ frustration and disappointment. They may need to invest in better support experiences, provide extra resources, or even find ways to adjust plan options.

This decision also sets a precedent for third-party resellers around the world. Wholesale internet prices affect the health of a market’s competition, as well as the overall success of these resellers. The decision not to limit those prices may inspire similar movements and wholesale increases in other markets if it doesn’t create too many waves.

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