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Canadian cable Internet bills may soon start to hurt

Admit it: Any time your Internet connection stops working for a prolonged length of time you think about switching providers. Then you probably think, ‘Well, apart from the usual conglomerates, who else is there?” Then you go back to being on hold for technical support, and hope for the best.

Those smaller Internet service providers who want to become the next Bell or Rogers, meanwhile, had been getting their hopes up too, until Thursday. That’s when the CRTC released a series of decisions it has been mulling for a long time about what kind of prices ISPs need to pay to access services from the big players.

There are still a lot of people who don’t realize that it’s nearly impossible for a new ISP to create the kind of network that’s run by the telcos and cable companies. That’s why, as incumbents, they are expected to purchase them from those giants as wholesale services. But if the leading companies or “incumbents” charge too much, ISPs can’t offer Internet access at competitive rates. This is why most of us are still only turning to a handful of major ISPs to get online.

What the CRTC decided was to cut the rates for wholesale services from telecom providers like Telus but increased the rates the cable companies like Videotron can charge. That was hugely disappointing to Bill Sandiford, president of the Canadian Network Operators Consortium which is made up of smaller ISPs.

“We’re still scratching our heads,” he said. “What they announced far exceeded what they should have been set to.”

What’s perhaps even more disappointing, according to Sandiford, was that the rationale behind the decision is largely unknown to the ISPs it affects.

“The CRTC did a very good thing last year,” he said. “They announced a set of rules to follow on transparency and costing exercises. They were opening it up so a lot of the costing information and how the costs were derived from the cable companies would be open and transparent so competitors could critique it. This process (around wholesale pricing) started prior to those new rules coming out.”

So better luck next time, perhaps? Sandiford said it’s too early to tell whether CNOC will try to appeal in some way, because the CRTC’s written decisions are incredibly complex to understand, even for experienced professionals, so they’ll need time to digest the implications.

If the cable rates stand as-is, however, he said some ISPs may have to consider passing on the increases to their customers, changing packages to take out some options, introducing a more tiered system of usage or just abandoning plans to offer access via cable. “The CRTC really wanted both technologies, cable and DSL, to flourish,” he said. It may not play out that way.

You could argue, of course, that the regulator met the industry half-way, but that’s not going to mean much if Canadians lack adequate choices or end up being penalized for a process that remains cloaked in mystery. "Large and small independent service providers now have the certainty they need to continue offering Canadians a choice of innovative and competitive services," CRTC chairman Jean-Pierre Blais said in a statement. "We are pleased to finally close this chapter.”

Not so fast, Mr. Chairman. If smaller ISPs get priced out of the cable market, this story may have a nasty epilogue.