Cogeco, Eastlink seek to appeal CRTC decision on wholesale rules

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Two telecommunications companies are seeking to appeal a recent CRTC decision that reaffirmed the ability of Canada’s Big Three internet companies to resell internet over rivals’ networks.

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In a legal challenge filed at the Federal Court of Appeal on Friday, Cogeco Inc. and Halifax-based Eastlink said the regulator’s June decision should be quashed.

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They alleged that the CRTC rendered an “effectively arbitrary decision” that ignored key arguments and evidence, while also erring in law and jurisdiction.

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“Based on the incorrect conclusion that the Big Three are ‘new’ service providers, the CRTC allowed the Big Three to co-opt a regulatory framework … to instead compete against each other and against these truly new, regional, and smaller providers,” the court filing states.

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Last month, the CRTC ruled that Rogers Communications Inc., BCE Inc. and Telus Corp. can provide internet service to customers using networks built by one another — as long as they are doing so outside their core serving regions.

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Telus has defended that policy as a way to boost competition in regions where it doesn’t have its own network infrastructure, which then improves affordability for customers. Bell and Rogers oppose it, saying the rules discourage the major providers from investing in their own infrastructure.

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Many regional and independent carriers have raised concerns that it could make it more difficult for them to compete against larger players. They point out the Big Three are able to offer bundled internet, cellphone and TV packages for a discount, while some standalone internet providers cannot.

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“The CRTC is stubbornly maintaining a broken … resale regime that has completely failed to meet its original objective to help new entrants get into the market,” Cogeco president and CEO Frederic Perron said earlier this week on his company’s latest earnings call.

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“The CRTC is misusing its power and is favouring telecom giants at the expense of regional players such as Cogeco. It’s like forcing regional airlines to let national airlines use their planes. It just doesn’t make any sense.”

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The CRTC said its rules effectively balance the need for both competition and investment, while only having a “modest” near-term effect on the market share of regional carriers.

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It said it plans to continue evaluating the effect on the industry, noting there have been “early indicators of improved competitive intensity” but that the extent to which the new rules “will ultimately be successful is still unknown.”

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But Cogeco and Eastlink say the CRTC erred in law “in a way that irremediably tainted the rest of its analysis.”

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It said the regulator’s decision “treats the country’s largest and most powerful telecommunications service providers as ‘new’ and reduces barriers to competition for the largest players in the telecommunications market, while increasing these barriers _ with potentially fatal effect — for everyone else.”