The CRTC issued a press release concurrent with its decision to lower internet prices in the far north.
The press release offers a quote from Chairman JP Blais:
Although we recognize the exceptional situation that exists in Northwestel’s territory, we must not let these challenges hinder the development and affordability of telecommunications services in the North. Access to reasonably priced Internet services plays an essential role in the North’s economic and social development. With this decision, we are reducing the gap between what consumers pay for Internet services in the northern and southern parts of Canada.
I suspect – perhaps hope – that more of the media looks at the dissenting opinion appended to the decision and seeks more comment from CRTC Commissioner Candace Molnar who delivered a brutal critique of the Majority:
Citizens and regulated entities alike deserve a Commission that is fair, predictable, and transparent ‒ and one whose decisions are based upon the evidence of the proceeding. In this instance, the Commission stated that it would determine the appropriateness of the stand-alone surcharge based upon detailed costing information. The detailed costing information filed in this proceeding clearly indicates that a stand-alone fee is warranted, yet the Majority deny the surcharge.
At a minimum, the decision of the Majority is not predictable.
As Commissioner Molnar enumerates, over the past few years, the Commission has put Northwestel under a microscope because the CRTC determined the company “was not meeting the needs of Northern consumers.” There were two comprehensive reviews of Northwestel’s operations, a denial of request to increase local telephone services prices and the CRTC opened the market to competition. Commissioner Molnar has “been firmly in support of the initiatives undertaken by the Commission to address issues related to service quality, availability, and affordability in the North.” But she disagreed with the 10-30% reductions in the price of consumer internet services that were ordered by the majority – reductions in prices that were already below cost.
The majority decision by the CRTC says “it must take exceptional measures in this case to ensure that residential Internet service is provided at reasonable rates across all of Northwestel’s operating territory.”
“Reasonable” is a term of art in the regulatory world. According to Canadian Telecommunications Law and Regulation, “[n]ot only may the rate being charged for a particular service be unreasonably high, it may also be unreasonably low. While a low rate will not be objectionable to the customers receiving that service, … the rate shortfall attributable to the charging of unreasonably low rates for one service may lead to the imposition of unreasonably high rates on the customers of other services.”
The below cost rates were characterized in the proceeding as “predatory”. As acknowledged by the CRTC decision:
SSi submitted that Northwestel’s proposal for below-cost retail Internet service rates – that is, rates for which the price floor test is not met – and comparable service at comparable rates across Northwestel’s operating territory effectively amounts to predatory pricing. SSi added that such pricing has forced it to shut down retail Internet service in a number of communities where it could not compete, despite having previously established a significant broadband market presence in those communities.
Competitors get shut down, Northwestel shareholders are effectively ordered to subsidize broadband internet to the entire geographic region, regardless of financial needs.
“The Commission acknowledges that these changes may have a negative effect on competition for these particular services, but considers that it must take exceptional measures in this case to ensure that residential Internet service is provided at reasonable rates across all of Northwestel’s operating territory.”
In other words, the CRTC is dispensing with its customary rules for rates in order to achieve a government political objective without impact on the federal budget. As regular readers know, I prefer to see targeted subsidies based on need, rather than perpetuating the patronizing politics of presuming the need for rural and remote services to be offered below cost, regardless of means.
It is hard to imagine why there would be any incentive for Northwestel to invest in continued service improvements, capacity expansion or geographic reach. At a certain point, the shareholders may have to assess the returns being delivered from the asset.
Calvinball continues.