Rogers, Shaw Business Dismayed by CRTC Decision on Broadband Wholesale Rates

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Rogers Communications has confirmed that it is very disappointed by the CRTC’s decision to dramatically reduce the aggregated wholesale rates that third-party Internet resellers pay to access broadband networks in Canada.

The final rates do not recognize the true cost of building and expanding Canada’s world-class broadband networks and will certainly impact Rogers future network investments.

As a result of the CRTC decision, Rogers expects to record a charge of approximately $140 million in the current quarter to account for the retroactive impact of the lower rates.

The company is determining next steps, including a review of all future investments in rural and remote communities.

The CRTC decision follows a recent Competition Bureau market study that found Canada is well-served by world-class broadband networks. The study further warned of negative consequences for investment if wholesale access rates are not set at the correct level.

CRTC – the Canadian Radio-television and Telecommunications Commission is a public organization in Canada with mandate as a regulatory agency for broadcasting and telecommunications. It was created in 1976 when it took over responsibility for regulating telecommunication carriers.

Decision Threatens Canada’s Broadband Future

Highlighting its opoinion on this issue – Shaw Communications Inc. has confirmed that there will be long-term negative consequences to Canadians from the CRTC’s decision to dramatically reduce federally regulated wholesale broadband prices charged to third party internet providers.

“We cannot understand the CRTC’s rationale for drastically reducing the wholesale broadband rates available to third party internet resellers,” said Brad Shaw, CEO of Shaw Communications. “In time, this decision will be seen as short-sighted, and have negative far-reaching consequences for consumers and for the future investment required to build network capacity in all parts of Canada.”

As a result of the reduced wholesale rates, which the CRTC requires to be applied retroactively to January 2017, Shaw will incur a one-time charge of approximately $10 million in its fourth quarter results for fiscal 2019.

“While the CRTC appears to be trying to use the reseller market as a primary source of broadband competition, it is ignoring the fact that the resale model relies on the investments of facilities-based providers like Shaw to create robust, fast and reliable networks for the future,” Mr. Shaw said. “In light of the decision, we are reviewing our future plans for capital expenditure and network deployment.”

In its August 7, 2019 study of broadband competition in Canada, the Competition Bureau noted that “facilities-based competitors engage in a dynamic form of competition to successively introduce better networks over time through investments in new technologies.” Importantly, the study also noted “wholesale access regulation can have a negative effect on the willingness of facilities-based competitors to make the necessary investments to maintain and evolve their networks.”

“At Shaw, the network investments that we have made in a pro-competitive environment have allowed us to double the internet speeds to our customers twice in the past year,” Mr. Shaw said. “Unfortunately, the CRTC decision undermines the direction from the government to expand broadband connectivity to all Canadians and to make Canada a leader in the digital economy.”