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Smaller telecoms cautious on Ottawa's new CRTC policy directives

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A person navigates to the on-line social-media pages of the Canadian Radio-television and Telecommunications Commission (CRTC) on a cell phone in Ottawa on Monday, May 17, 2021. THE CANADIAN PRESS/Sean Kilpatrick

Some of Canada's independent telecom companies say the federal government is putting too much faith in the country's regulator to foster competition in the telecom sector and ensure internet and wireless services are more affordable.

Independent telecom company TekSavvy says there was a "lack of action" in Ottawa'sproposed new policy directive for the Canadian Radio-television and Telecommunications Commission (CRTC), unveiled Thursday, thatwill materially improve the telecom industry.

TekSavvy was looking for Ottawa to overturn the CRTC's 2021 ruling on wholesale internet rates, which it did not end up doing.

Last year, the CRTC reversed its own 2019 decision to reduce fees big telecoms would be able to charge smaller internet service providers (ISPs) for access to their broadband networks.

The government says the 2019 rates included a series of errors and that it would be "irresponsible" to implement them.

And even though Ottawa says the CRTC "must take action to have more timely and improved wholesale rates available," TekSavvy says smaller companies will now have to "hold out hope that the CRTC will do better in the future."

Like TekSavvy, independent telecom company Distributel also feels that Thursday's decision not to alter the CRTC's 2021 ruling was a "missed immediate opportunity to deliver financial relief to Canadians by lowering internet rates," arguing that it will make it harder for smaller ISPs to do business.

At the same time, Distributel is somewhat optimistic, saying that the government's new policy directives have long-term potential and could help spur competition further down the line by keeping the big telecoms in check.

Based on the directives laid out Thursday, some telecom analysts expect the pendulum will swing more in favour of internet resellers and regional wireless operators in the medium term.

"The new proposed policy direction acknowledges a Canadian telecom market that has high levels of private sector investment, high quality of service, higher prices, lower wireless data consumption and effective internet resellers and facilities-based regional wireless operators," RBC analyst Drew McReynolds said in a client note.

He also says that the outcome won't be "game-changing" for major companies like BCE Inc., Rogers Communications Inc. and Telus Corp., but is likely to be "directionally negative over time."

Other directives include improving the hybrid mobile virtual network operator (MVNO) model – more of a nudge for the CRTC not to get complacent.

MVNOs are wireless providers that buy cell phone network service from the big carriers at a wholesale rate and then sell access to customers at a more affordable rate.

Ottawa is also calling on the CRTC to address what it calls unacceptable sales practices and to lay out new measures to improve clarity around service pricing and the ability for customers to cancel or change services.

National Bank analyst Adam Shine notes that the CRTC is being asked to make decisions while trying to balance the need for greater competition, lower prices and more choices for consumers, investment in high-quality networks, and innovation, which can be in conflict.

He says it's a challenging task.

"Incumbents know that unfettered access to their networks at lower wholesale rates undermines the returns they hope to achieve over time from multi-billion dollar investments in spectrum and infrastructure," he said in a client note. "When they feel threatened, the risk exists that fibre and 5G investments could potentially get reduced which actually wouldn't do any good for consumers and businesses."

The government intends to finalizeits new telecom policy by the fall. Comments on the directives are welcome until July 19.

This report by The Canadian Press was first published May 27, 2022.

Companies in this story: (TSX:BCE, TSX:RCI.B, TSX:T)

The Canadian Press