Melting Northwestel: Winners, Losers in CRTC Net Ruling

Let’s start by getting the disclosure out of the way: under the terms of the CRTC’s ruling this week on Northwestel’s internet rates, I am one of the winners.

The commission ruled Wednesday that Northwestel must reduce the cost of its DSL internet service by 10 to 30 percent, depending on the package. It also requires Northwestel to cut its widely-loathed bandwidth overage fees by at least 50 cents per gigabyte, and now allows customers to subscribe to internet services without having to pay for a landline or, alternatively, an extra fee. The new rates must be in place by May 4 and Northwestel can’t raise these rates until 2017.

The CRTC has traditionally shied away from regulating internet rates, even in the North, where there is at least nominal competition. But it is now reckoning that there isn’t enough competition to justify leaving prices to the market, even as it acknowledges that the new prices actually serve to discourage competition outside the urban North.

Here’s what the CRTC wrote in its decision:

The Commission considers that these changes will not have a significant detrimental impact on Northwestel’s revenues or ability to pursue initiatives such as its ongoing network modernization plan. The Commission acknowledges that these changes may have a negative effect on competition for these particular services, but considers that it must take exceptional measures in this case to ensure that residential Internet service is provided at reasonable rates across all of Northwestel’s operating territory.

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Good for country bumpkins; not great for city slickers

Those of us who live off the main fibre optic lines will benefit most from this ruling. Here in Dawson City, for example, we make out like bandits. The cost of my internet package is going to drop by 27 dollars per month.

Not only that, I no longer have to pay for a landline I don’t need, in order get an internet package from Northwestel. In DSL communities, new customers are faced with an unsavoury choice: get a landline at around 35 bucks a month, or pay a 20-dollar monthly fee on top of your internet service. When we moved here, we figured we’d get a landline, instead paying for nothing at all. I think that phone has rung half a dozen times since August. Like most adults in communities with cell service, we use cell phones. In most of the developed world, the landline is nearing obsolescence. We’ll be getting rid of ours as soon possible.

All this means that my household’s monthly internet bill has been cut in half. Spread out over a year, our cost of living just dropped by about 700 dollars a year. While that’s not enough to justify lighting a cigar with a 20-dollar bill, it is a significant reduction in our cost of living.

If you suspected there’s a “but” in all this, you are correct. In a dissenting opinion, CRTC commissioner Candice Molnar, points out that some DSL packages are already sold below cost. Northwestel loses money on them.

It’s also why Northwestel charges a fee on standalone internet, or forces you to get a landline subscription. Because local phone service is still considered an essential service, the CRTC collects a small levy on every southern phone bill which it passes on to Northwestel to subsidize northern landlines. When you opt out of a land line, Northwestel has to provide you internet without getting that subsidy.

All of this also means that internet users in the North’s larger centres are effectively underwriting lower internet rates for us country bumpkins. Cutting DSL prices only amplifies this situation. Molnar writes that Northwestel will likely pass on these new costs to urban customers, jack prices for other services, or put off capital investments. “The revenue impact of the price reductions is not insignificant and is recurring,” she writes. “There is no reason to expect this impact to be borne by Northwestel’s shareholders.” (Northwestel spokesman Mark Koepke declined to comment before deadline, saying the company needed time to examine the decision before responding.)

It’s an interesting time for Northern telco-watchers. The CRTC will soon launch a nationwide review of telecommunications services, including the digital divide between north and south. It must still rule on satellite bandwidth pricing and on the wholesale bandwidth rates Northwestel charges competitors. Because Northwestel owns the fibre optic lines coming North (long story), they’re in control of the bandwidth rival ISPs need to offer service. Those rates drive companies like SSi Micro nuts, because, it’s argued, they’re so high as to make it impossible to offer competing internet service.

This drama has been dragging on for almost four full years. The CRTC does nothing quickly. Northerners, meanwhile, just want internet that works and doesn’t break the bank. So far neither the CRTC, nor the free market, have been able to provide that.



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