It can be easy to lose focus, to lose sight of the prize. In early July, I wrote “Keeping priorities in order”, trying to prepare my regular readers for a summer with far fewer posts than usual. I typically write a couple posts per week but as I warned, I’ve had 5 higher priorities visiting for much of the summer. I kept my priorities in order. So here we are, August 19, with my first post this month.
Maintaining sight of the prize seems relevant to my impression of last week’s CRTC decision. In “Competition in Canada’s Internet service markets”, the CRTC’s summary begins with a single concise statement. “The Commission is taking action to ensure that Canadians benefit from affordable access to high-quality Internet services.”
That is a reasonable objective: “affordable access to high-quality Internet services.”
Note, the CRTC did not say the prize was counting the number of competitive internet service providers (ISPs). From the outset, we are told the target is consumer focused. “Ensure that Canadians benefit from affordable access to high-quality Internet services.”
It is through this lens that Canadians should read Telecom Regulatory Policy CRTC 2024-180.
How does the Commission envision us getting there? Indeed, how does one define affordable access? What I consider affordable is different from what other people due to a wide range of factors. I suspect the CRTC is using the term “affordability” as a euphemism for lower prices. In reality, that doesn’t solve the problem of affordability for the most vulnerable households, but wins political points for a wide range of consumers (voters).
What qualifies as a “high-quality internet service”? What utility to I get from my connection? What are the household financial circumstances? How many people share the connectivity? Is it used for business and personal use? What kind of devices do I plan to use for connectivity?
I couldn’t find answers to any of these questions in the decision.
There are some interesting statements set out as facts that should have greater supporting arguments. For example, at paragraph 17 we read
- Since that time, the industry has continued to develop. The Commission observes the following:
- Consumers have fewer choices when buying Internet services: in recent years, competition has been declining. By the end of 2022, independent ISPs served significantly fewer customers than they did at the start of 2020. At the same time, several of the largest independent ISPs have been purchased by incumbents.
- The incumbents are using wholesale HSA services: various incumbents or their affiliates are increasingly using wholesale HSA services both inside and outside their traditional serving territories. This is different than in the past, where independent ISPs accounted for substantially all use of wholesale HSA services.
- Not all Canadians are connected to higher-speed Internet services: while more than 83% of households and businesses reached by the incumbents have access to at least one gigabit-speed Internet connection, ISPs must continue to deploy and upgrade networks to ensure all Canadians can benefit from these services.
- These facts suggest that the Commission’s prior regulatory approach, which prioritized facilities-based competition, has not brought about sustainable competition that delivers more choice and more affordable services to Canadians, nor has it resulted in universal access to higher-speed Internet services. The Commission must therefore set objectives that continue to incentivize network investment and facilities-based competition while supporting increased choice and greater affordability for Canadians.
I could devote an entire blog post to paragraph 18 and the factual flaws contained within. It appears to be policy-based fact making, rather than the other way around.
Considering the objective of affordable access to high-quality internet service, I found it somewhat strange to find no mention of Connecting Families, or any other affordable connectivity initiative to be found in the CRTC’s policy document. Ted Woodhead recently wrote an excellent post, “The FCC’s Affordable Connectivity Program ending in the United States”. His post talks about the key differences between the American government-led initiative, and Canada’s innovative carrier-developed and funded programs. Ted and I were there from the beginning.
I am sure I will return to paragraph 18 at a later date.
For now, let’s look briefly at the “facts” set out in paragraph 17. The CRTC says “Consumers have fewer choices when buying Internet services”. I’m not convinced. It isn’t as clear to me that there are fewer choices or, for that matter that competition is declining. Prices are in decline and service providers are investing billions of dollars in network upgrades. The second bullet seems to contradict the first one: “various incumbents or their affiliates are increasingly using wholesale HSA services both inside and outside their traditional serving territories”. The exit of smaller, wholesale-based ISPs in favour of better capitalized “incumbent” affiliates could be celebrated as providing greater choice and bundled services.
The decision refers to the Competition Bureau observation, “while any bundling by the incumbents could be a barrier to entry for smaller ISPs, the competitive benefits of an incumbent accessing wholesale HSA services outside its footprint likely outweigh the risks.”
As the decision notes:
- In setting out its regulatory framework, the Commission seeks to create opportunities for innovative competitors to differentiate themselves and bring new choices to consumers. Importantly, this is not the same as guaranteeing that one type of competitor can profitably compete without risk. In respect of wholesale HSA services, the Commission enables wholesale access at just and reasonable, cost-based rates. It is then up to competitors to find commercial strategies that deliver an attractive value proposition that responds to consumers’ needs.
Too often, people lose sight of the prize. The wholesale framework is a means to an end, not an end in and of itself. It is not the CRTC’s role to preserve the independent wholesale-based competitive ISP industry. We do not guarantee “one type of competitor can profitably compete without risk.”
The target is to ensure Canadians benefit from affordable access to high-quality Internet services. And, despite what the CRTC said in paragraph 18, that is where the industry has been heading.