High Speed Cable Internet Access

Frustrated by what the CRTC perceived was industry-wide foot dragging, on September 14, 1999, in Telecom Decision CRTC 99-11, the CRTC ordered Canada’s cable companies to give Internet Service Providers (“ISPs”) wholesale access to high speed internet connections within 90 days. Alternatively, the cable companies were ordered to provide resellers with a mandatory 25% discount off their best available retail rates for cable internet service in order to provide the ISPs with the opportunity to offer similar services on a resale basis.

The Decision raises some very interesting policy and operational issues. The Commission did not appear to have costing evidence from which to derive its 25% discount level, nor did the Commission give guidelines on what it would use to distinguish Internet resellers from consumers. On the surface, it would appear that individual consumers could declare themselves to be resellers to benefit from a lower price. The Commission also did not specify whether the customer premises equipment (modems and network interface cards) would be included. The CRTC considered that Canada suffers from an inadequate supply of high speed Internet access services. While Canada enjoys among the highest penetration rates for cable modem Internet access, it has among the lowest penetration rates of DSL technology. Cable companies in Canada have had difficulty properly engineering their networks to meet the monopoly levels of demand and had not yet been prepared to open their networks for competitive access.

Summary – who won?
This decision appears to represent the CRTC venting its frustration on the Cable companies – and cable company stock prices have suffered as a result. Investors are left questioning aspects of Canada’s regulatory regime in the wake of this decision and have pulled back from Canadian cable stocks as a result. Given that cable companies will be left with new ISP sales channels while retaining 75% of the revenues, it is hard to tell if the ISPs really won and the cable companies lost. There is still an outstanding complaint by the ISP community against the phone companies, seeking similar concessions. It will be interesting to see if the CRTC takes the same position in its decision on a similar file in respect of ISP access to telephone company DSL services.

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