SOMBA K'E/YELLOWKNIFE
Northern telecommunications giant Northwestel Inc. is contesting the rates the Canadian Radio-television and Telecommunications Commission (CRTC) has set for its wholesale connect service.
Northwestel Inc. has filed an application for the Canadian Radio-television and Telecommunications Commission to review rates set for its Wholesale Connect Service, which is used by competitors to transport telecommunications data between communities and to the south. - Thandiwe Vela/NNSL photo
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Last Friday, the company filed an application to review and vary a recent decision by the CRTC which significantly reduced the rates and charges that Northwestel, the owner of all fibre and microwave connectivity to the south, could charge its competitors for the backbone service.
In fibre-fed communities such as Yellowknife, the commission took Northwestel's proposed rates down by 70 per cent.
In rate comparison documents filed in confidence to the commission for competitive reasons, Northwestel argues that the rates set for the wholesale connect service from Whitehorse to Yellowknife for example, is slightly lower than a rate Northwestel recently got for a comparable service from Edmonton to Vancouver.
"And we're talking about communities in the case of Dawson where we've got a couple thousand people maximum," said Northwestel president and CEO Paul Flaherty. "So we have no problem understanding that competitors want reasonable rates but when all of a sudden we have rates that are equal or slightly lower than a Vancouver to Edmonton? It makes no sense given the difference in cost operating here versus southern Canada."
As a result of the rates set in the CRTC's ruling, Northwestel is removing all fibre-optic line expansion plans in the North, Flaherty said.
"After we've gone and looked at it we've come to the conclusion that there's no longer any business case for us to build fibre to any community with these rates in place," Flaherty said.
With the rates set by the commission, Northwestel would recover just 10 per cent in the long run on fibre link expansion investments the company had planned to include in its $233 million dollar modernization plan, Flaherty added. "So at this point for the modernization plan we're going to remove all of our fibre projects from the plan until such time as the commission comes up with rates that are more suitable to encourage that kind of investment."
While the fibre technology provides the opportunity for the most bandwidth and has a slightly better signal quality, Northwestel will expand its high-capacity microwave technology in communities where it otherwise would have invested in fibre links if the rates it can charge for fibre are not increased, Flaherty said.
"In setting the rates the commission should be trying to strike a balance between making them low enough to encourage competitors but not making them so low that it discourages investment," he said.
Dean Proctor, chief development officer for Yellowknife-based competitor SSI Micro Inc., said the CRTC would not be striking a balance if it increased the rates based on Northwestel's appeal.
"I wouldn't call that striking a balance. I'd call that backtracking and actually hurting competition," Proctor said. "That's giving in to Northwestel."
In response to the CRTC's significant reduction on the rates Northwestel could charge its competitors, SSI recently doubled the monthly usage cap of all Yellowknife wireless customers at no additional cost.
Proctor called Northwestel's application to review the prices set "regulatory gaming."
"Rate certainty is very important. The longer this thing stays in a state of flux - which is exactly what they're trying to do - the longer consumers will have to wait before proper competition, innovative new services and increases of usage capacity are able to be delivered," Proctor said.
In its application, Northwestel is not asking for a complete reinstatement of the rates it originally proposed, but is proposing a price that would be 45 per cent lower than what the company proposed originally, Flaherty said.
SSI Micro submitted a response to Northwestel's submission to the CRTC on Monday.
