A Nova Scotia-based internet company says it can’t compete against Canada’s big three internet providers — Telus, Bell and Rogers — in the current regulatory setup and may have to stop serving some small, money-losing rural markets.
Lee Bragg, the executive vice-chair of Eastlink, issued a statement earlier this month expressing disappointment with Ottawa’s decision to uphold a CRTC ruling on wholesale internet access that allows the country’s largest telecommunications companies to provide service to customers using the fibre networks of smaller, regional providers.
The federal communications regulator says its policy will encourage more competition in the telecommunications sector.
Bragg disagrees.
“Telus comes in with more retail presence than I do,” he said in an interview.
“The ability to bundle my high-speed internet that they’re buying from me below cost with their cellular, with their marketing dollars, like they’ll push us out of the market and all I’m left with is the operating responsibility to run the network and they get to collect all the revenue and we just say that’s not fair.”
Bell had argued against the policy, saying it discourages the major providers from investing in their own infrastructure, while some independent carriers raised concerns it would make it more difficult for them to compete against larger players.
Telus had defended it as a way to boost competition in regions where it doesn’t have its own network infrastructure, which then improves affordability for customers.
Following the federal government’s decision, Bragg instructed company officials to begin assessing its operations “to identify communities that will become unprofitable and therefore require shutdown as a result of this decision.”
He said the company is continuing its evaluations but a “significant number” of rural communities could be affected given the company’s presence not only in Atlantic Canada but also in rural parts of Ontario, Alberta and British Columbia.
“You know, we’re not happy about it but we’re kind of left with no choice,” Bragg said.
He said the CRTC’s policy is stifling competition rather than stimulating it.
“It drives me crazy that we’re prohibited now, economically, from trying to grow our business and to the point where, if third parties like Telus get a significant number of customers in these communities, it’s better from an economic standpoint for us to shut the network off than it is to operate it at a loss, basically for the benefit of Telus shareholders.”
Geoff White of the Public Interest Advocacy Centre says Bragg has a point.
“And Eastlink’s not alone about being concerned about the way the CRTC is going about honouring a direction from the federal government to promote, quote, unquote, competition,” White said.
He said the government has been sending mixed messages about how it wants to increase competition and improve services for consumers. He said it’s part of a broader problem in Canada in which specific industries, including telecommunications, lack sufficient competition.
“And what we’re seeing are ineffectual or watered-down policies that are claimed to be in the public interest and the consumer interest, but they tend to get watered down through litigation or political interference.”
Bragg said smaller internet providers — he named City Wide and Purple Cow, which operate in the Halifax area — could take up to 25 per cent of his customers using their access to his network. He said Telus, with its retail stores and much larger presence, could take even more.
“They could price the Maritimes below cost and absorb it across their big base out west,” he said.
“The reverse isn’t true, I can’t sell at a loss in Edmonton and absorb it with the profits I make in Halifax.”
For its part, Telus is actively campaigning to maintain the status quo. The company says it has more than 400,000 signatures on a petition it’s sponsoring to lobby Ottawa to leave the current regulatory regime in place. Telus also says that its foray into the Quebec and Ontario markets has led to a more than 13 per cent reduction in prices for internet.
White said this issue is far from over.
“There will be more litigation about this and I will be looking for whether or not our high prices for home internet, our high prices or high complaint volumes, whether or not that is going to change with this recent CRTC decision that the big players are entitled to share each other’s networks.”
