Regulator reins in NorthwesTel’s rates

For years NorthwesTel has been the only option for Yukoners when it comes to high-speed Internet services, but that's about to change.

For years NorthwesTel has been the only option for Yukoners when it comes to high-speed Internet services, but that’s about to change.

In a ruling this week the Canadian Radio-television and Telecommunications Commission put what may be the final nail in the coffin of NorthwesTel’s Internet monopoly when it ordered the telco to dramatically lower the rates it charges competitors for access to its fibre-optic network.

“It’s a good day for the North,” said Dean Proctor, the chief development officer for SSi Group, a Yellowknife-based Internet service provider. “The fact that we now have much more equitable pricing on that long haul, the backbone from the North down to the south, means that local competitors, not just SSi but all local competitors, will have a much more fair shot to compete with NorthwesTel in that local market.”

For SSi, which operates in both the Northwest Territories and Nunavut, this latest ruling may open the door for the company to expand to the Yukon, said Proctor.

“This now allows us to crunch the numbers and see what can be done,” he said. “That backbone has been a complete block on competition in the Yukon territory, and with that now opened up, folks in Whitehorse and beyond are going to start seeing more choices in services and certainly much more attractive pricing and innovation in the services being offered.”

Getting to this point has been a long and drawn-out process.

It was SSi that started the ball rolling in 2011 when it complained to the CRTC about the exorbitant rates NorthwesTel was charging for its V-Connect Service, which allows for access to the raw fibre-optic network.

NothwesTel did, and still does, own the only fibre-optic network in the North. SSi accused it of abusing its monopoly position in an effort to stifle potential competitors.

SSi claimed that NorthwesTel’s rates were 30 times higher than what telcos in the south charge for similar wholesale services.

After months of collecting comments and deliberations, the CRTC ordered NorthwesTel to do the cost study to prove that its rates were reasonable.

NorthwesTel appealed that decision, arguing that the commission had exempted data packet services like V-Connect from regulation in a previous ruling.

Instead of producing a cost study, NorthwesTel proposed a new wholesale Internet transport service as an alternative to V-Connect. That move was rebuked by SSi.

Unlike V-Connect, the new service was only available as a link from Yellowknife to Edmonton, and it didn’t offer any quality-of-service guarantees.

NorthwesTel went back to the drawing board, consulted with SSi and came up with a new service, Wholesale Connect.

“Wholesale Connect was basically V-Connect with fewer bells and whistles which suited us somewhat better,” said Proctor.

The commission told NorthwesTel to produce a cost study for the new service as well, which it did.

In filings with the commission, NorthwesTel claimed that the cost to lay fibre in the North was 60 times more expensive than it was in the south.

SSi had a consultant crunch those same numbers and found that the cost was only two times what it was in the south.

The commission sided with SSi and threw out NorthwesTel’s numbers.

The CRTC also took issue with what it found to be NorthwesTel’s inflated pricing for several items and threw out the telco’s argument that the subsidies that it receives to provide basic telephone service shouldn’t be factored into the cost study.

In the end the commission found that NorthwesTel’s costs, while high compared to the south, were much lower than what it was claiming.

“We’ve been expressing deep concerns that the cost for backbone that NorthwesTel has been proposing have been so highly inflated for so long,” said Proctor. “We certainly feel vindicated with what the commission determined.”

The commission’s ruling will allow NorthwesTel to charge 30 per cent over and above what it determined the actual costs to be.

But Proctor says that’s still too high and he plans on arguing that to the CRTC when the commission holds hearings as part of its holistic review of NorthwesTel’s services this summer.

“Given that this is an essential service, the markup should be as narrow as possible,” he said.

NorthwesTel is still in the process of reviewing the decision and exploring its options, said Eric Clement, a company spokesperson.

“It’s still too early to tell how it will affect us,” he said.

Contact Josh Kerr at

joshk@yukon-news.com