New policy requiring CRTC to improve telecom competition, lower rates comes into force

The final version of a new telecom policy directive first unveiled by the federal government in May of last year is now in force.

The government’s new directive to the Canadian Radio-television and Telecommunications Commission (CRTC) means the agency must put in place new rules to improve competition in the telecom industry, Industry Minister Francois-Philippe Champagne said Monday.

“Under the Telecommunications Act, the CRTC is responsible for implementing the policy direction and is required to take certain steps and approach all of its future decisions in a way that is aligned with it,” Champagne said in a statement.

“I trust that the CRTC will act on this important work, and I look forward to seeing the direction being put into action soon.”

The directive rescinds a 2006 policy direction that said the CRTC should rely on market forces in making decisions.

Instead, the federal government is now emphasizing consumer rights, affordability, competition and universal access.

The new directive will require the CRTC to take action to have more timely and improved wholesale internet rates available. Too-high wholesale rates discourage competition, but rates set too low discourage the company’s largest telecom providers from making costly wireless infrastructure upgrades.

The government is also directing the CRTC to improve its hybrid mobile virtual network operator (MVNO) model and says it is prepared to move to a full MVNO model to support competition if necessary.

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MVNOs are wireless providers that buy cellphone 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 lay out new measures to improve clarity around service pricing and the ability for customers to cancel or change services. It also wants to see service providers implement mandatory broadband testing so Canadians will understand what they’re paying for.

The directive also calls on the CRTC to improve consumer protection in the event of a service outage. In July of last year, a major Rogers Communications network outage affected more than 12 million mobile and internet customers across Canada.

Some of Canada’s independent telecom companies said last May that the federal government is putting too much faith in the country’s regulator to foster competition and ensure internet and wireless services are more affordable.

But some telecom analysts have said the new policy direction appears to signal a shift in favour of internet resellers and regional wireless operators in the medium term.

In a client note last May, RBC analyst Drew McReynolds said 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” for these big players.

Ottawa’s telecom policy directive comes into force just days before the Feb. 17 deadline set by Rogers Communications Inc. and Shaw Communications Inc. for their proposed $26-billion merger.

The deal still requires Champagne’s approval, though the Minister has said he is not bound by the companies’ timeline.

The deal has already received approval from the Competition Tribunal, a decision that was upheld by the Federal Court of Appeals last month.