Canada Gazette, Part I, Volume 156, Number 23: Order Issuing a Direction to the CRTC on a Renewed Approach to Telecommunications Policy

June 4, 2022

Statutory authority
Telecommunications Act

Sponsoring department
Department of Industry

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

Telecommunications services are critically important to Canadians. In order to serve Canadians with high-quality services at competitive rates, industry stakeholders need certainty from the legal and regulatory frameworks they operate within. Among other things, this certainty allows stakeholders to make strategic business decisions like capital investments or, more broadly, to consider areas of business focus and decisions regarding the sustainability of their business. Decisions made under these frameworks can impact stakeholders differently and views tend to be interest-driven and therefore do not always align. These differences need to be reconciled while also keeping pace with the needs of Canadians.

These issues are particularly acute with respect to decisions about the regulatory framework that mandates access to wholesale services for fixed Internet. This framework, established by the Canadian Radio-television and Telecommunications Commission (CRTC), is critical to supporting competition in the retail Internet services market. Without wholesale access services, most Canadians would have at most two options for their home Internet service. In a 2019 market study, the Competition Bureau found that Internet Service Providers (ISPs) making use of wholesale services had a positive impact on the market and that it remains important that the competition brought by the wholesale framework “be preserved and capitalized on going forward.”footnote 1 It further stated that “one of the best ways to ensure vigorous competition in broadband services is to maximize the independence of wholesale-based and facilities-based competitors, as well as working to minimize regulatory uncertainty.”footnote 1

The wholesale services framework and rates would benefit from clearer direction and more efficient decision making, promoting enhanced regulatory certainty. As an example, stakeholders and the public would benefit if mandated wholesale access to fibre-to-the-home networks were to be fully implemented. Further, decisions made on wholesale rates have had outcomes that varied substantially. There has also been further uncertainty due to ongoing plans to transition the wholesale framework from one model to another, while in parallel, there are ongoing processes and challenges regarding the underlying rate methodology.

A variety of data and evidence regarding competition in fixed Internet services has been taken into consideration in determining that further measures to improve the regulatory framework are required. For example, the CRTC reported that the share of residential Internet access subscriptions provided by wholesale-based ISPs declined for the first time, by one percentage point in 2020.footnote 2 Prices for select incumbent affiliated flanker brand plans in the market are below what a competitor ISP could reasonably charge based on the wholesale rates. At the same time, prices for typical plans have been increasing. A large number of service providers have identified that the lack of predictability with regard to the framework makes it difficult to take business decisions.

There are also currently two existing policy directions in place, and while they are complementary in nature, it is not always clear how they will be applied. The Government has made guiding statements over time, such as in response to past petitions to the Governor in Council, in its order to the CRTC on misleading and aggressive retail sales practices, and in Canada’s Connectivity Strategy, but stakeholders may not know to consult these sources or how to interpret them.

It is important to take action now as there is an important opportunity to clarify some of the prevailing uncertainty around the guiding policy for the regulatory framework and prevent some issues from continuing that could further harm the industry. This opportunity is in part driven by the Government’s obligation to respond to petitions regarding the CRTC’s 2021 wholesale Internet rates decision (Telecom Decision CRTC 2021-181). It is not appropriate to put in place rates the CRTC has determined are based on material errors across different cost factors, as the petitioners have requested. Nor will the Government set alternative rates. Therefore, the Government will let the decision stand. The Government, however, acknowledges concerns about competition in the Internet services market and the part that these rates have to play in driving these concerns. If the response to the petitions were issued on its own, it would misrepresent the Government’s broad policy, and risk sending the wrong message to stakeholders.

There are other areas of telecommunications regulation that would similarly benefit from actions to be taken now. For example, certain measures the CRTC identified in its “Report on Misleading or Aggressive Communications Retail Sales Practices” could be fully implemented. Consumers still face challenges with lack of clarity in pricing and understanding whether they are actually getting the service quality for which they are paying. For example, in the most recent annual report by the Commission for Complaints for Telecom-television Services (CCTS), “disclosure” was the leading issue raised (nearly 6,000 times), meaning consumers continue to have concerns about information not being fully or clearly provided.footnote 3 The long-standing issue of access and affordability in rural and remote areas remains and has been exacerbated by the COVID-19 pandemic. In 2020, a little over 99% of urban households had access to 50/10 Mbps per second versus only 54% of rural ones.footnote 2 While there are CRTC processes planned or underway on many of these issues, there is uncertainty as to how they will be dealt with.

Background

The Telecommunications Act (the “Act”) establishes Canada’s telecommunications policy objectives. The CRTC, which operates at arm’s length of government, is charged with implementation of those objectives.

Within this framework, the Government remains focused on three foundational priorities of quality, coverage and price – with competition as a key driver of all three. It is important that Canada’s telecommunications networks are able to support the latest applications; that they are available to all Canadians in the communities where they live and work; and that service prices are affordable. Competition between facilities-based providers to offer the best network speeds and coverage drives investment in high-quality telecommunications networks, and retail competition between service providers puts downward pressure on prices. While Canada’s telecommunications market performs well in certain respects, more needs to be done to lower the prices Canadians pay for Internet and mobile wireless service plans and to address consumers’ needs.

Section 8 of the Act provides the Governor in Council (GIC) with the authority to issue directions of general application to the CRTC on broad policy matters with regard to the telecommunications policy objectives set out in the Act.

There are currently two directions under section 8 in force. In December 2006, the GIC issued the first policy direction to the CRTC (the Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR/2006-355). This order directed the CRTC to rely on market-based solutions to the maximum extent feasible as a means of achieving the policy objectives, and regulate, where there is still a need to do so, in a manner that interferes with market forces to the minimum extent necessary, among other things. In June 2019, the GIC issued a second policy direction (the Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives to Promote Competition, Affordability, Consumer Interests and Innovation, SOR/2019-227). This order directed the CRTC to consider promotion of competition, affordability, consumer interests and innovation in its decisions. This direction was to guide the CRTC in making decisions, including how the 2006 Policy Direction is to be interpreted with regard to achieving the telecommunications policy objectives.

Objective

The proposed order issuing the Policy Direction would set out the Government’s priorities for telecommunications policy and provide clear direction and guidance on a number of important matters to the CRTC, as well as offer more regulatory certainty for the marketplace. The Direction would require the CRTC to put in place or maintain rules to improve competition, leading to lower prices and better telecommunication services for Canadian consumers. This new approach sets out to enhance wholesale Internet access, increase wireless competition, improve consumer rights, speed up broadband service deployment and universal access, and build better regulations for a world where telecommunications is essential.

Description

The purpose of this proposed order is to issue a new Policy Direction which would repeal the 2006 and 2019 directions as well as direct and guide the CRTC in several broad telecommunications policy areas, summarized below.

Key objectives

This section would maintain the requirement from the 2019 Policy Direction that the CRTC consider how its decisions can promote competition, affordability, consumers interests and innovation, and would also retain the more specific guidance on those goals from that direction.

Principles of effective regulation

This section would set out several principles for the CRTC to consider in its work such as the importance of evidence, market monitoring and strategic foresight; transparency and timely decision-making; and ensuring any economic regulations balance important objectives. It would also include the instruction that regulatory measures should be proportionate to their purpose and efficient; which is maintained from the 2006 Policy Direction.

Considerations for fixed Internet competition

This section would direct the CRTC to maintain its regulatory framework mandating access to wholesale services for fixed Internet on an indefinite basis. The Government considers that the market structure and circumstances of competition in the fixed retail Internet market require this framework for sufficient competition while balancing investment incentives. Some stakeholders have argued that the wholesale framework is not needed. This section clarifies that it is essential for competition and must be maintained.

It would also require the CRTC to maintain the existing (aggregated) model alongside the new (disaggregated) model it is seeking to implement.footnote 4 The Government considers that, while disaggregated high-speed access holds promise as a new model, access to an aggregated wholesale high-speed access service continues to be needed to ensure sustainable competition. For example, there is limited access to competitive transport facilities in certain areas of Canada at this time, and many potential competitors will not be able to enter the market without this infrastructure.

The section would also ensure that the framework provides adequate options for competitors on a timely basis, and is applied equitably across carriers.

Considerations for mobile wireless competition

This section would direct the CRTC to continue with its facilities-based approach to mandated mobile virtual network operator (MVNO) access to promote wireless competition, as set out in Telecom Regulatory Policy CRTC 2021-130. This approach requires that service providers own their own network or plan to build out their network in the future in the regions where MVNO access is granted. However, it also sets out an expectation that the CRTC should adjust the facilities-based approach, including by extending its duration, if challenges arise deploying in certain remote areas. Further, the CRTC should revise its policy to encourage broader competition if the current approach does not achieve the desired result. Currently, Canada has a number of regional wireless competitors that have been effective in improving competition. If that market structure should change, the CRTC should be prepared to expand MVNO access.

Additionally, this section would require the CRTC to monitor and periodically review the broader mobile wireless services regulatory framework and make any necessary adjustments, taking into consideration factors that could harm competition, including coordinated conduct between wireless carriers.

Approach to consumer matters

This section would direct the CRTC to continue to enhance and protect the rights of consumers in the telecommunications market. The section would direct the CRTC to strengthen the telecommunications complaints resolution organization, the CCTS, by increasing its capacity, improving compliance with its rules, ensuring it reflects consumer perspectives and by increasing the public’s awareness of its complaints resolution process. Additionally, this section directs the CRTC to: implement additional measures to protect consumers from unacceptable sales practices; promote clarity of pricing information for telecommunications services; ensure consumers can easily cancel, transfer or downgrade their services; and harmonize consumer protections across the CRTC’s codes of conduct when it benefits consumers. Furthermore, it would direct the CRTC to improve the accessibility of telecommunications services for Canadians with disabilities and to conduct performance testing with broadband providers to verify the performance of the services that Canadians receive.

Measures supporting deployment and universal access

This section would direct the CRTC to continue with its approach of supporting universal access in concert with other government measures, but to consider prioritizing operating costs and mobile services for the use of funding drawn from the National Contribution Fundfootnote 5 for this objective. It would also direct the CRTC to mandate improved access to support structures, such as telephone poles.

Regulatory development

Consultation

Telecommunications policy is an area with frequent ongoing consultation and communication with stakeholders. As a matter of course, Innovation, Science and Economic Development Canada (ISED) closely monitors CRTC proceedings for stakeholder views. ISED officials regularly meet with key stakeholders such as incumbent and competitive telecommunications service providers as well as CRTC officials. The proposed Policy Direction took into consideration ongoing concerns from these stakeholders, in particular, related to competition in fixed Internet services, consumer rights and timeliness of CRTC decisions.

The CRTC’s regular proceedings welcome views from all interested stakeholders, and it also holds proceedings targeted to pro-consumer measures, such as the Internet and Wireless codes of conduct for service providers, measures to address unsolicited telecommunications and actions to advance accessibility. Recently, the CRTC was also required to report on misleading and aggressive retail sales practices. The proposed Direction addresses a number of concerns raised during these proceedings.

A Canada Gazette consultation on the petitions to the GIC of Telecom Decision CRTC 2021-181 was conducted. Fourteen submissions were received and forty-six emails from individuals. Submissions were received from six large incumbents (Bell and the cable carriers), five wholesale-based ISPs, two consumer groups, two business associations, one association of municipalities and one consultant. The proposed order balances these viewpoints, principally for the section on fixed Internet competition.

As required under the Act, the Minister has consulted with the CRTC on the proposed Policy Direction. The CRTC responded expressing support for the measures and expectations contained within it. There were no substantial changes made as a result of this consultation. The Minister will consult with the CRTC again on the final order before it is in force.

Publication in the Canada Gazette, Part I, to seek public comment on the proposed order is also a requirement under subsection 10(1) of the Act.

In accordance with the Act, the Minister will have the proposed order laid before both Houses of Parliament for a period of 40 sitting days during which it will stand referred to committees designated by each House.

The Minister will also have consulted with the provinces and territories before making a recommendation to the GIC, as required under section 13 of the Act.

Modern treaty obligations and Indigenous engagement and consultations

The proposal has been assessed for modern treaty implications as per the Cabinet Directive on the Federal Approach to Modern Treaty Implementation. The Initial Assessment examined the geographical scope and subject matter of the proposal in relation to modern treaties in effect and did not identify any potential modern treaty impacts.

Instrument choice

A Policy Direction is the appropriate instrument to address the issues cited above.

In recent years, the Government has received multiple petitions to intervene on technical matters. The Government’s view is that it is more appropriate for the CRTC to adjudicate and implement these matters in consultation with industry based on policy guidance provided by the Government. The current policy guidance in the form of the Act and the two policy directions in force may not be sufficiently clear and may contribute to the debates leading to these petitions to the Government.

The Government has provided guidance on its intent using other tools, such as in response to petitions to the GIC, through non-binding statements, and in Canada’s Connectivity Strategy. However, these approaches have not fully addressed the underlying issues that have been accumulating over time. The duration of regulatory proceedings has grown, as has the lack of clarity among stakeholders. For example, some argue that the wholesale framework should be repealed in its entirety, while others argue that rates can be set very low without any consequence. There is also confusion on the interpretation of the two existing policy directions.

These issues of delay and uncertainty have been present over the past five years and have only grown more acute. Non-regulatory mechanisms have not been successful in addressing them. There is a risk that, without taking action, these issues will continue and possibly worsen. There is also a risk of delays continuing to spill into other telecommunications regulatory areas.

The use of this regulatory instrument would permit the Government to repeal the existing directions and replace them with a new and clear one to address the above cited challenges and concerns. It would also bring together guidance from other sources, such as responses to past petitions to the GIC, to enhance clarity.

The proposed Policy Direction has been designed as an outcome-based regulation. In this sense, its measures are direct but give considerable discretion to the CRTC, which will be responsible for elaborating any changes to its own activities or any compliance actions by industry. The proposed “Key objectives” and “Principles of effective regulation” sections would help guide the CRTC as it implements the Direction.

Legislation is another instrument that could be used to address the issues cited above; however, the CRTC already has the legislative tools to implement the measures in the proposed order and achieve the intended outcomes. Further legislative measures are therefore not required, and may not be as timely.

Regulatory analysis

Benefits and costs

The proposed Policy Direction may result in low incremental costs to the CRTC.footnote 6 The majority of the provisions affect the CRTC’s implementation decisions regarding existing policies or initiatives or those already under consideration, rather than initiating new policies or initiatives. In some cases, the CRTC may incur low costs by prioritizing allocation of resources to implement some measures rather than other elements of its ongoing work.

Depending on the implementation of certain measures by the CRTC following their public proceedings, there could be additional compliance actions for industry resulting in additional cost. However, these would be assessed when they are proposed and are not directly attributable to this proposal. Further, the proposed sections related to fixed Internet competition and mobile wireless competition have been assessed to not have any material incremental costs, given that they do not contain new regulatory compliance activities and activities implicated are already ongoing by providers. Industry may face incremental costs in supporting the CCTS, as the proposal to strengthen its ability to better fulfill its mandate may require additional resources. These resources are provided by telecommunications service providers proportionate to their revenues and/or by the number of complaints received from their customers. Industry would also face some degree of incremental costs to implement measures related to broadband testing requirements. Any new costs associated with this proposal would be less than $1 million annually.

The proposal would indirectly result in incremental benefits to consumers of telecommunications services. The Competition Bureau has stated that “competition brought about by the wholesale access regime delivers choice and lowers prices to consumers; it remains important that this competition be preserved and capitalized on going forward.”footnote 1 By directing the CRTC to ensure that effective fixed Internet wholesale regulations and tariffs are in force, monitored for effectiveness and adjusted as necessary, the proposed Direction would ensure the competition brought about by the wholesale access regime is preserved and enhanced. This would provide greater choice for consumers and may lead to lower prices and/or improved services. The CRTC reported there were 14.4 million home Internet subscriptions in Canada in 2020, representing 94.6% of Canadian households.footnote 2

Industry stakeholders have identified that the prolonged consideration of wholesale Internet rates decisions has impacted investment and other business decisions. It is expected that the proposal would foster greater clarity and regulatory certainty that would lead to greater competition in the market and positive outcomes for consumers, including more affordable telecommunications services, continued investment in telecommunications networks, innovative services, and choice of providers.

It is further expected that the proposal would lead to the CRTC prioritizing additional developments in consumer-focused regulatory measures that would lead to benefits of a fairer marketplace for consumers realized in a timely manner.

Small business lens

Analysis under the small business lens concluded that the proposal will not impact Canadian small businesses.

One-for-one rule

The proposal has no impact on administrative burden on business. The proposal repeals two existing regulatory titles and replaces them with one new regulatory title; as a result, a net of one title out is counted under the rule.

Regulatory cooperation and alignment

The proposal is not related to a work plan or commitment under a formal regulatory cooperation forum.

The proposed order issues a Direction to the CRTC, which is solely within federal jurisdiction. Federal jurisdiction in telecommunications promotes an interconnected Canadian telecommunications market that facilitates interprovincial commerce.

One area where provinces and territories are more active is in relation to funding to expand high-speed Internet infrastructure. The proposed order respects this area of cooperation. Further, it is aligned with Canada’s Connectivity Strategy, which recognizes ISED’s federal-provincial-territorial coordination role. One of the goals of this role is to ensure that projects are funded through the most appropriate vehicle while respecting the independence of arm’s length bodies such as the CRTC.

Internationally, telecommunications policy and regulation is widely an area of primarily domestic responsibility. ISED closely follows the identification of best practices and recommendations by policy research organizations, such as the Organisation for Economic Co-operation and Development (OECD). The proposed Policy Direction is highly consistent with the OECD’s 2021 Recommendation of the Council on Broadband Connectivity. Prior to the preparation of this proposal, ISED also sought out expertise and advice on international best practices on wholesale rate-setting processes.

This proposal is not expected to have any implications for Canada’s commitments and obligations related to trade agreements.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

The proposal has been assessed for the gender-based analysis plus (GBA+) implications. The proposal involves issuing a direction to the CRTC, and as a result, the direct impacts are on that organization and there are no direct impacts on any particular demographics of Canadians. However, the new Policy Direction would impact future CRTC decisions which may have indirect impacts on various demographics.

Implementation, compliance and enforcement, and service standards

Implementation

The proposed Order would come into force on the day on which it is registered, and would be binding on the CRTC beginning on that day. As per subsection 11(2) of the Act, the Order would apply in respect of matters pending before the CRTC on the day on which the order comes into force, subject to subsection 11(3) of the Act. Subsection 11(3) of the Act states that the Order does not apply in respect of a matter pending before the Commission on the day on which the order comes into force if final submissions have been filed in respect of that matter and less than one year has expired since the period for filing final submissions ended.

Compliance and enforcement

The CRTC is bound to exercise its powers and perform its duties under the Act in accordance with the terms of any order made under section 8 of the Act. CRTC decisions can also be reviewed by the GIC on the basis of a petition in writing presented to it or on its own motion, which therefore provides another means to ensure compliance.

Contact

Andre Arbour
Director General
Telecommunications and Internet Policy Branch
Innovation, Science and Economic Development
235 Queen Street, 10th Floor
Ottawa, Ontario
K1A 0H5
Email: telecomsubmission-soumissiontelecom@ised-isde.gc.ca

PROPOSED REGULATORY TEXT

Notice is given, under subsection 10(1) of the Telecommunications Act footnote a, that the Governor in Council proposes to make the annexed Order Issuing a Direction to the CRTC on a Renewed Approach to Telecommunications Policy under section 8 of that Act.

Interested persons may make representations concerning the proposed Order within 45 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Director General, Telecommunications and Internet Policy Branch, Innovation, Science and Economic Development Canada, 235 Queen Street, 10th Floor, Ottawa, Ontario K1A 0H5 (email: telecomsubmission-soumissiontelecom@ised-isde.gc.ca).

Ottawa, May 24, 2022

Wendy Nixon
Assistant Clerk of the Privy Council

Order Issuing a Direction to the CRTC on a Renewed Approach to Telecommunications Policy

Direction

Direction and Key Objectives

Direction

1 In exercising its powers and performing its duties under the Telecommunications Act, the Commission must implement the Canadian telecommunications policy objectives set out in section 7 of that Act in accordance with this Order.

Key objectives

2 The Commission should consider how its decisions can promote competition, affordability, consumer interests and innovation, in particular the extent to which they

Principles of Effective Regulation

Transparency, predictability and coherence

3 The Commission should ensure that its proceedings and decisions are transparent, predictable and coherent.

Efficiency and proportionality

4 The Commission should ensure that the measures that it imposes through its decisions are efficient and proportionate to their purpose.

Market monitoring, research and strategic foresight

5 The Commission should further develop strong and timely market monitoring, research and strategic foresight skills and use the results that it obtains from these activities in the exercise of its powers and the performance of its duties.

Decisions based on sound and recent evidence

6 The Commission should base its decisions on sound and recent evidence and should exercise its powers to obtain necessary evidence.

Timely proceedings and decisions

7 The Commission should conduct proceedings and issue decisions in a timely manner, in recognition of the need for market clarity. The Commission should consider whether adopting new processes or engaging external experts would help reach this objective.

Decisions of an economic nature

8 In making decisions of an economic nature, the Commission should balance the objectives of

Considerations for Fixed Internet Competition

Regulatory framework

9 In order to foster fixed Internet competition, the Commission must

Aggregated wholesale high-speed access service

10 The Commission must mandate the provision of an aggregated wholesale high-speed access service until it determines that broad, sustainable and meaningful competition will persist if the service is no longer mandated.

Variety of access speeds and costs

11 The Commission must mandate the provision of wholesale high-speed access services with a variety of speeds, including low-cost options in all regions, and should not allow the discontinuance of such services if this would eliminate affordable options for consumers.

Tariff setting

12 The Commission should set interim and final tariffs more expediently, including by reforming the tariff-setting process and considering external expertise or international best practices.

Equitable application of regulatory framework

13 The Commission should ensure that its regulatory framework mandating wholesale high-speed access services applies equitably to carriers that are subject to the framework.

Considerations for Mobile Wireless Competition

Mobile wireless competition

14 In order to foster mobile wireless competition, the Commission must

Revision to approach

15 The Commission should revise its approach to encourage broader service-based competition if the effectiveness of the approach in fostering mobile wireless competition is lessened due to changes in the mobile wireless market structure or circumstances of competition.

Periodic review and adjustments

16 The Commission should

Approach to Consumer Matters

Consumer rights

17 The Commission must enhance and protect the rights of consumers in telecommunications markets by

Measures Supporting Deployment and Universal Access

Universal access

18 The Commission should continue to take measures, in concert with other government measures, to support the objective of universal access to high-quality fixed Internet and mobile wireless services, including:

Funding mechanism

19 When the Commission reviews its funding mechanism, it must consider whether to prioritize funding for mobile wireless services and operating costs of telecommunications networks in order to promote

Considerations

20 In considering measures to take under sections 18 and 19, the Commission must take into account evolving

Effect of Order

Effect

21 This Order is binding on the Commission beginning on the day on which it comes into force and applies in respect of matters pending before the Commission on that day.

Repeals

22 The following Orders are repealed:

Coming into Force

Registration

23 This Order comes into force on the day on which it is registered.