Wholesale and fibre explained
Wholesale rates and fibre connection play an integral role in our telecom industry. Here's what you need to know.
From now until April 23, we have the unique opportunity to change the wholesale system for good. The CRTC has FINALLY opened up a consultation on forcing monopolies to open their fibre networks to independent competitors. We need your voice now. Not sure what this has to do with your connectivity? Keep reading to find out!
You may have heard the term “wholesale rates” before; maybe in an article about independent ISPs, or when we’ve talked about a recent decision from our federal regulator the Canadian Radio-television Telecommunications Commission (CRTC) — or even Rogers’ buyout of Shaw. But what are wholesale rates? And what role do they play in our sky-high prices for Internet and mobile service? We’ll break it down for you.
What are wholesale rates?
Wholesale rates are the fees that independent ISPs pay to Big Telecom to access Internet networks to provide you choice and variety of internet services. These small ISPs buy Internet bandwidth in bulk, to be able to provide you with services at your home, without having to duplicate the existing infrastructure build an extra network from scratch, where one already exists.
In theory, this means you aren’t limited by which company owns the wires running into your house, because other providers can also offer service through that connection. And it also should help keep internet prices down, because we’re efficiently using the infrastructure that we have. Everyone competes to offer great plans, customer support, fair prices and extra features, and you benefit from it!
But despite being a valuable setup to help provide choice of service, the actual rules that govern the system greatly limit these small providers. The high rates they’re forced to pay Big Telecom for access are a huge barrier. And the regulations to access top-speed fibre connections is so unworkable, it hasn’t even been put to use 8 years after being implemented.
Thankfully, the CRTC will be reviewing the system this year, and we have a chance to change all of this. More on that below!
How does the wholesale system work?
To ensure fair access to the internet infrastructure at your home or business, the CRTC determines what a fair rate is for small providers to pay to access these networks. It’s a complicated and lengthy process, but ultimately should ensure that we have fair access, with choice of providers, at affordable prices for us – the end users.
Back in 2016, the CRTC set the rates that small providers pay Big Telecom to access their connections at an interim level that was never meant to be permanent. In fact, they were initially set in 2016 as intentionally high while the CRTC performed a larger study of permanent rates that would be fair for the industry. After the study was completed, the CRTC lowered wholesale rates in 2019, which immediately sparked lower Internet prices across the country. Several small providers passed these savings on to us, and big providers faced pressure from their smaller competitors’ lower costs (benefiting all of us!).
But in 2021, the CRTC astonishingly reversed its own decision and raised the rates again –- back up to the extraordinarily high 2016 interim levels! Last summer, a report commissioned by ISED clearly demonstrated that Internet prices have gotten more expensive since the 2021 rate price hike.
Until further change is made, this is where things stand now: extraordinarily high rates that are putting small providers out of business. In fact, in the last year alone, over a dozen independent ISPs have been bought out by Big Telecom: Oxio was purchased by Cogeco, Start.ca was purchased by Telus, and Ebox was acquired by Bell, to name a few. And with less choice, Rogers, Bell, and Telus can gouge us with some of the highest prices in the world for connectivity.
But it gets worse: In 2015, the CRTC set out separate rules for accessing fibre, which have been so unworkable that 8 years later we STILL don’t have wholesale access to fibre. This has left fibre customers with absolutely no choice of their service provider; it’s a complete monopoly.
If the CRTC doesn’t urgently set fair rates, and provide wholesale access to fibre, independent providers just don’t stand a chance. Smaller providers need the rates to be low enough to pay their bills and offer their customers competitive prices. Without fair rates, they just can’t afford to compete.
The history of wholesale rates has clearly undermined the needs of independent providers and made it difficult for them to compete. Right now in Spring 2023, the system is STILL broken.
But hopefully, change is just around the corner.
What is it that’s so special about fibre? What even is fibre?
Fibre refers to fibre-optic cables, which are just a different type of connection that provides extraordinarily high speeds compared to cable, or DSL (phone) connections you may be used to. The thing that makes it so special is that it can carry loads of data long distances without degrading, making it much faster and reliable than older technologies.
In 2015, the CRTC ruled that wholesale access should be extended to fibre technologies too, to continue to ensure choice of providers on all internet technologies. But it just hasn’t worked out that way in practice. The specific rules of how it would be implemented were simply unworkable, meaning that even if you do have the option of a fibre connection at your home or business, you most likely don’t actually have a choice of who provides that service. It’s led to extremely high prices for fibre internet, and a complete monopoly on plans and services.
If smaller providers cannot access fibre services, they’re effectively locked out of the newest and fastest way to provide home Internet to their customers. And they continue to lose customers to Big Telecom’s fibre monopoly, as our demand for faster and more reliable internet only increases.
The fact that indie providers are disappearing at an alarming rate AND they don’t have access to fibre is not a coincidence. Because these providers only have access to older technology, they cannot provide the competitive services to their customers that Big Telecom can. It essentially ensures their extinction. And we can’t afford any more monopolies in Canada. The longer that the Big Three are the only ones with access to fibre, the more they rake in record profits while smaller competitors are left in the dust.
Is there any opportunity for change?
YES! After pressure from the OpenMedia community and others, the CRTC has launched a consultation to reassess the wholesale system on an expedited timeline. And, most urgently, look at if they should grant emergency access to fibre for small providers, to help address the current crisis.
The CRTC has acknowledged that its current approach to wholesale is not encouraging more competition, and is actually making things worse. What’s more is that the CRTC is also imposing an immediate 10% reduction on some wholesale rates, to try to keep small ISPs alive until a more permanent change can be made to make the system work again.
What the CRTC will actually do under this review remains to be seen. However, the fact that they are opening a review at all — and applying an interim rate decrease — is a huge win. Under a new Chair with a history of pro-competition experience, we’re hopeful that the CRTC will continue to prioritize the needs of people in Canada. The very fact that the CRTC is taking action on something we have been pushing for for years is a good early sign.
You can use OpenMedia’s tool now to submit your comments on fibre access for independent providers. The CRTC is welcoming comments until April 24, 2023 on the question of mandating access to fibre-to-the-home networks. For all other issues within the scope of the review, comments are accepted until June 22, 2023.