The CRTC originally ruled that smaller ISPs could have faster speeds in late 2008, but its decision was appealed to cabinet by Bell and Telus. (CBC)

The CRTC is sticking to its guns and ordering big phone network owners such as Bell and Telus to offer smaller wholesale companies higher internet speeds, despite previous disagreement from the government.

Network owners will be required to offer whatever internet speeds they themselves sell to retail customers to smaller companies that rent portions of their networks, the Canadian Radio-television and Telecommunications Commission affirmed Monday. The requirement is necessary to maintain competition and reasonable prices for broadband services, the regulator said.

"Access to broadband internet services is a key foundation for the digital economy," CRTC chairman Konrad von Finckenstein stated. "The large telephone and cable companies are bringing their fibre networks closer to Canadian homes and businesses, which allows for faster internet connections. Requiring these companies to provide access to their networks will lead to more opportunities for competition in retail internet services and better serve consumers."

The decision reaffirms a December 2008 CRTC ruling, which was remanded for reconsideration a year later by Industry Minister Tony Clement. The government acceded to lobbying from the big phone companies and ordered the CRTC to review its decision on the grounds that it had failed to consider a number of issues:

• How the matching speeds would diminish the phone companies' incentives to invest in new infrastructure.
• Whether there is sufficient competition to protect consumers without the requirement of matching speeds.
• Whether the regulatory requirements on phone and cable companies are equal.
• How the matching-speeds requirement would affect phone companies' abilities to offer services such as television over an internet connection.

Smaller internet providers such as Teksavvy and Execulink had argued that without requirements to offer matching speeds, the big companies would put them out of business. Bell and Telus are selling internet connections of up to 25 and 15 megabits per second respectively over newer fibre-based networks, but smaller providers can typically offer speeds of no more than five megabits per second over older copper-based infrastructure.

After holding a public hearing earlier this year, the CRTC now says it will allow phone companies to charge smaller providers an extra 10-per-cent mark-up to use their newer infrastructure in order to recoup the costs of their investments.

The regulator also said it would require cable companies to modify their existing internet access services to make it easier for smaller, "alternative" providers to connect to them. Cable companies are already required to offer matching speeds.

Small providers were denied their request to require phone and cable companies to reconfigure their networks to offer additional services, such as television. The CRTC said forcing such a reconfiguration "would constitute a disincentive to network investments without necessarily enhancing innovation or competition."

Commissioner Timothy Denton attached a dissenting opinion, which agreed with most of the ruling but chided the reconfiguration denial. The denial prevents smaller internet providers from getting around the download limits or throttling imposed on certain uses, such as peer-to-peer software, by network owners, he said.

"The current ambivalence about the role and legitimacy of smaller carriers continues. They are allowed to exist but denied the means to innovate," he said. "In a business with as much uncertainty as this, turning down the possibility for technical and business innovation seems a riskier move than letting it go ahead.

Ruling evokes mixed reaction

Some smaller internet providers were pleased with the majority of the decision, but agreed with Denton.

"The CRTC’s approach will entrench the duopolistic nature of the communications wireline services industry in many important markets and stifle the ability of competitors to provide new and innovative services," said Teksavvy's chief technology officer Marc Gaudrault in a statement.

"In this environment, it will be very difficult for competitors to attract the capital necessary to innovate, grow and contribute to the greatest extent possible to the competitive landscape and increase consumer choice."

Bell said the decision discourages investment in its networks and shows there is a lack of clarity in public policy.

The allowed 10-per-cent mark-up "is mere tinkering and does not create an environment which allows us to maximize the returns on our very significant fibre network investments," said Mirko Bibic, senior vice-president of regulatory and government affairs.

"We need to know, which is it? Do we want as much network investment in Canada as possible, or not? Last year, cabinet sent this issue back to the CRTC for reconsideration. Clearly, this isn’t the decision cabinet was looking for."

Ken Engelhart, vice-president of regulatory affairs for Rogers, said that although the decision went about as expected, some issues remain. Phone companies, for example, can charge 10 per cent more for access to their higher-speed infrastructure, but cable companies cannot.

"They seem pretty concerned about symmetry between phone and cable, which is fair enough, I think, but they seem to have introduced a couple of asymmetries in this decision," he said. "So much for the level playing field."

Network owners will have 90 days to propose to the CRTC the fees they intend to charge smaller internet providers for faster speeds.

The regulator said it will consider the phase-out of mandated internet access when alternatives such as wireless and satellite become more accepted as substitutes.

Monday's decision is likely to put pressure back on the federal government, which will have to decide whether to overrule the regulator or let the CRTC's requirement stand. The cabinet has 90 days to make a decision.

A spokesperson for Clement said it would be inappropriate to comment because the CRTC decision can be reviewed by the Governor in Council.