Legislation to force lower wholesale roaming rates is part of Bill C-31, The Economic Action Plan 2014 Act, No. 1, which was given first reading in the House of Commons on Friday. The Government’s budget implementation Act, formally known as “An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures” contains provisions that will change the Telecom Act, among its “other measures”.
As described in the Summary section of the Act,
Division 16 of Part 6 amends the Telecommunications Act to set a maximum amount that a Canadian carrier can charge to another Canadian carrier for certain roaming services.
There are two sections of the Telecommunications Act in play, as detailed in Sections 239 and 240 of Bill C-31. For the purposes of setting wholesale caps for voice, text and data, a new Section 27.1 is created, which contains the formula for what Canadian carrier can charge a second carrier. In addition, the budget implementation Act intends to give power to the CRTC to enforce these rates, by adding the new Section 27.1 to a list for which compliance is determined by the CRTC “as a question of fact”, amending subsection 27(3) to read:
3) The Commission may determine in any case, as a question of fact, whether a Canadian carrier has complied with this section or section 25, 27.1 or 29, or with any decision made under section 24, 25, 29, 34 or 40.
The proposed new section 27.1 is lengthy, but it results in setting a ceiling on wholesale rates through a simple arithmetic determination of carriers’ average retail rates:
27.1 (1) The amount charged during a year by a Canadian carrier to a second Canadian carrier for roaming services with respect to the transmission of all domestic wireless voice calls and the domestic portion of all international wireless voice calls shall not exceed the amount determined by the formula A/B where
- is the first Canadian carrier’s total retail revenues from the provision of wireless voice call services to its Canadian subscribers, for calls both originating and terminating in Canada, for the preceding year; and
- is the number of minutes provided for those calls for the preceding year.
(2) The amount charged during a year by a Canadian carrier to a second Canadian carrier for roaming services with respect to the transmission of wireless data in Canada shall not exceed the amount determined by the formula A/B where
- is the first Canadian carrier’s total retail revenues from the provision of wireless data services in Canada to its Canadian subscribers for the preceding year; and
- is the number of megabytes provided for those data services for the preceding year.
(3) The amount charged during a year by a Canadian carrier to a second Canadian carrier for roaming services with respect to the transmission of all domestic wireless text messages and the domestic portion of all international wireless text messages shall not exceed the amount determined by the formula A/B where
- is the first Canadian carrier’s total retail revenues from the provision of wireless text message services to its Canadian subscribers, for text messages both originating and terminating in Canada, for the preceding year; and
- is the number of those text messages for the preceding year.
(4) The Canadian carrier shall not charge the second Canadian carrier any other amount in relation to the provision of the roaming services referred to in subsections (1) to (3).
(5) The amount established by the Commission that a Canadian carrier can charge to a second Canadian carrier for roaming services prevails over an amount determined under any of subsections (1) to (3) to the extent of any inconsistency.
The budget Act has an interesting way to make the wholesale roaming legislation a temporary measure. Each of the two sections of Bill C-31 related to wholesale roaming [239 and 240] have two parallel subsections, (1) and (2). The first subsection gives effect to the changes; the second unwinds the changes. A subsequent Section 241 of the bill is entitled “Coming into Force,” designed to enable the unwinding the wholesale roaming provisions in Section 27.1 at some point in the future “on a day to be fixed by order of the Governor in Council.” The changes to enable the legislation creating wholesale roaming caps will come into force with the passage of the bill; these changes can be repealed “on a day to be fixed by order of the Governor in Council.” No further legislation will be required – effectively, just a cabinet directive.
How will carriers be impacted?
By using the overall average retail rates, the government roaming caps do not appear to be as aggressive as they might have been. Although incumbent carriers will see a reduction in roaming rates, the government could have set an even lower cap – such as by setting the formula along the lines of a most favoured nation clause, requiring that new entrants are charged no more than the best rates charged on a retail basis.
Ultimately, the new wholesale rates should provide improved economics for new entrants to remove off-network differential rates for trans-Canada voice, text and data services to their customers. At the same time, the rates are not so low as to remove the incentive for new entrant carriers to extend the reach of their own network facilities to lower their costs. In all, it appears to be a balanced approach.
This is certain to be the subject of some discussion during the Regulatory Blockbuster at The 2014 Canadian Telecom Summit, taking place June 16-18 in Toronto. Have you registered yet?