Bell bringing cabinet’s wholesale appeal response to Federal Court

Lawyers representing BCE Inc. have asked a Federal Court of Appeal judge to allow them to make fresh submissions in the already-heard appeal of the CRTC's wholesale rates, following a statement issued by Innovation Minister Navdeep Bains saying that the federal government thinks those rates are too low and would harm investment. The statement was issued in response to petitions to cabinet from incumbents asking the government to overturn an August 2019 decision from the CRTC lowering wholesale rates. The government said on Saturday morning it wasn’t necessary to order the CRTC to reconsider the rates, since it was already considering a review-and-vary application, but Bains issued a statement agreeing with incumbent arguments that the rates are so low as to harm investment in networks and rural broadband. In addition to the appeal to cabinet, and the ongoing CRTC review-and-vary, the incumbent telecoms are also challenging the lower rates in Federal Court, which already heard arguments across two days in late June. In a letter filed with the court Monday, lawyers for Bell wrote that the company, "would appreciate the opportunity to make brief submissions on the relevance and applicability of the Order in Council, if the Court would find such submissions useful." The court has given Bell three days to file its submissions, after which respondents TekSavvy Solutions Inc. and Competitive Network Operators of Canada (CNOC), representing the smaller ISPs who buy wholesale service from incumbents, can file replies. Both TekSavvy and CNOC today blasted Bains’ response to the petition-in-council, in which the government said that the CRTC's wholesale rates from August 2019 "do not, in all instances, appropriately balance the policy objectives of the wholesale services framework” and that it is “concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas.” TekSavvy’s vice-president of regulatory affairs Andy Kaplan-Myrth said in a phone interview that "this just really makes more of a mess of things, creates more uncertainty. And we're left to act on the uncertainty, instead of acting on knowing where the rates are going to go.” He said the company has already raised its rates in response by between $5 and $10 a month for new customers. CNOC president and Distributel Communications Ltd. CEO Matt Stein said in a phone interview that he was "very disappointed that the government was not unequivocally supportive of the CRTC." Stein said that "instead, while the government did not review, vary, or rescind the decision in any way, it started off with an ambiguous preamble that is unclear." He added that he thought taking a position on wholesale internet rates in mostly urban areas was not the best way to solve the problem of rural broadband connectivity. "If the real issue is getting billions of dollars of broadband funding out the door, doing something that tips a balance, or weighs in on a dispute about a few hundred million dollars of overcharging by big phone companies doesn't seem like the best way to address the problem," Stein said. Kaplan-Myrth also said that the issue of rural investment should be dealt with separately from wholesale rates. "The government needs to say 'wholesale rates do not determine your investment decisions.' Wholesale rates are important for competition broadly, and that is going to also lead to investment. They have to give no weight to that argument," Kaplan-Myrth said. "Instead what they've done is they've given the incumbents the power to control what tools they have for rural broadband and what tools they need for rural broadband. Proper wholesale rates is not a tool to ensure rural broadband," he said. Regarding upcoming submissions to the Federal Court of Appeal's wholesale rates case, Stein said he didn't think the government's position was relevant. "I would have thought the case, when it was argued, was argued, and that new evidence and new things that come up shouldn't impact upon the case," Stein said. "It’s very disturbing to think that a government that has claimed repeatedly that they are for the middle class and want to see internet rates come down didn't do what feels like a much easier thing, of responding to the petition by saying 'no, the CRTC are already instructed with our policies, and the CRTC are the experts, and they are already dealing with this' and leave it at that. But instead by seeing fit to editorialize, they've injected uncertainty and delay," Stein said. Financial analysts covering the publicly-traded incumbents, on the other hand, praised the cabinet response to the petition. "Sometimes things are just obvious and other times it takes a pandemic to make things clearer," wrote National Bank analyst Adam Shine in a Sunday note. "In short, the pandemic made clear how important high-quality networks are to the functioning of economies and the CRTC over-stepped and needs to seriously rethink its decision," he wrote. Scotiabank analyst Jeff Fan wrote that "we were positively surprised by the strong choice of words used by Cabinet to support network investment, which promotes facility-based competition over non-facility-based competition." "The Cabinet decision reaffirms our thinking that the relationship between the network operators and government/regulators has improved in recent months because of the importance of network resiliency and the moves they have all made to support Canadians through COVID-19," Fan wrote in a Monday note. CRTC chairman Ian Scott told The Wire Report last week that the CRTC largely played a hands-off role during the COVID-19 pandemic in a bid to allow Canadian telecoms to “do what needed to be done,” while ISED allowed companies to defer about $263 million in fees and made other changes to its spectrum licence procedures, measures that about half of spectrum licencees opted to take advantage of. Fan also added that he thought there would be a knock-off effect for the pending decision on whether to mandate network access for mobile virtual network operators, saying that it would "reduce the emphasis on wholesale.” — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell bringing cabinet’s wholesale appeal response to Federal Court

News | August 17, 2020

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Bell bringing cabinet’s wholesale appeal response to Federal Court

News | August 17, 2020

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