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CRTC Eliminates Affordable Internet Costs, So What Should Canadians Know?

The Canadian Radio-television and Telecommunications Commission (CRTC) recently lowered its wholesale pricing in 2019, which would have reduced the cost of lending networks to smaller ISPs, which has raised concerns between independent Internet service providers (ISPs) and created waves of excitement. Partisanship in the leadership of CRTC.

In a background briefing on May 27, the CRTC said the 2019 wholesale rate contained errors in its methods for setting the new rate. In addition, the CRTC said that the adoption of a different wholesale could save costs for independent competitors.

Based on its new evidence, the commission reduced its 2016 wholesale sales rate by 10 percent. The revised 2016 rates will supersede the rates mentioned in the Telecom Order 2019-288.

what went wrong
With such a dramatic turnaround, almost all the parties concerned are wondering what went wrong. The CRTC listed the following items which were calculated incorrectly to determine a new rate:

Cost attribution for digital subscriber line access multiplexer (DSLAM), navel fiber, and Ethernet port access facilities.
DSLAM installation labor cost per port.
project development cost.
Demand-related cost adjustments.
unrealized costs.
Assigned incident rates for manual handling of orders and travel time in cost studies for bonded access installation charges.
Exclusion of pole and groove structure cost in cost study.
Repair cost in the bonded access service cost study.
In the new order titled 2021-181, the CRTC pointed out that the old method used to derive 2019 rates miscalculated the cost of using the equipment. In some instances, a competitor will only pay about 70 percent of the equipment cost, even though the wholesaler will lose access to said equipment when it leases (paragraph 87). The CRTC is of the view that the wholesaler will not be able to recover the difference directly.

The Commission also observed that it should not apply the same installation labor cost to the bale as it did with the other functionaries due to independent contract and internal labor cost (paragraph 107). In addition, the Commission acknowledged that it doubled Bell's amortization period for the final project development cost estimate (five years versus 10 years, as outlined in paragraph 124).

According to the CRTC, other erroneous criteria include incorrect estimation of TCI's capital high-speed access (HSA) cash flow at the beginning of the study period and misperceptions of unrecoverable costs related to a combination of different cost studies (paragraph 151).

a turbulent past
The whole mess began when the CRTC introduced Telecom Order 2019-288 in August 2019, in which it reduced the rates that existing ISPs (also known as facility-based providers or wholesalers) would have to independent competing ISPs (TechSavvy, , etc.) to borrow a portion of its network and sell Internet service under its own brand.

In an earlier petition to the federal cabinet, Bell said that if the CRTC's 2019 rates take effect, independent ISPs will pay 42 percent less for access and up to 90 percent less for capacity costs. The pricing was also retroactive to 2016, which meant that incumbents would have to return three years' excess pay to independents. Furthermore, the company denied that Canadians would benefit from the lower rates.

But the 2019 rates came in and out of balance and never took effect. Bell and other major ISPs appealed to the federal cabinet several times, including the above petition. On September 27, 2019, the Federal Court stayed the pricing of the CRTC, but eventually lifted it on September 11, 2020.

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