YG concerned over Northwestel’s deregulation application

The Yukon government is concerned that Northwestel’s attempt to deregulate internet pricing in some Northwest Territories communities could apply to the Yukon.

The Yukon government is concerned that Northwestel’s attempt to deregulate internet pricing in some Northwest Territories communities could apply to the Yukon.

On Feb. 6 Northwestel applied to be able to set its own prices for the Wholesale Connect service it provides in six communities in the N.W.T.

Internet providers have to follow pricing guidelines set by the CRTC unless there’s enough competition. Those guidelines are intended to protect customers by keeping prices from being too high.

In major cities like Toronto or Montreal, because there’s enough market competition, the CRTC lets the market decide, a principle called forbearance.

But now Northwestel claims that the N.W.T.’s Mackenzie Valley Fibre Link is competing with its own microwave network to Fort Simpson, Wrigley, Tulita, Norman Wells, Fort Good Hope and Inuvik.

To be competitive, it wants to lower its prices, but doing so would require the CRTC’s authorization.

But Northwestel is competing with itself, its opponents argue.

While the MVFL is owned by the Government of the Northwest Territories, Northwestel is part of the consortium that built and is operating the line.

“The company plans to provide services on both the MVFL and its existing microwave network,” wrote Rob McMahon, coordinator for the First Mile Connectivity Consortium in a filing to the CRTC. The FMCC represents First Nation internet service providers.

“Further Northwestel is a partner in the MVFL and has a 20-year contract to operate and maintain the MVFL,” he wrote.

And to use the government-owned MVFL, potential service providers have to agree to retail prices set by the GNWT, says the Yukon government’s filing to the CRTC, written by Steve Sorochan, director of technology and telecommunications development for the Department of Economic Development.

“Given this, and given that the MVFL communities are also small, the extent of competitive loss in the company’s Wholesale Connect business may be questionable,” he wrote.

For YG, Northwestel doesn’t pass the test for forbearance.

“The test for when forbearance is appropriate, we think it’s more about impact to market share and because … there is no competition yet we don’t feel that passes the test,” Sorochan told the News.

If Northwestel is granted forbearance in the six communities, it could potentially get the same for the Yukon.

“The reason we’re commenting on something outside our territory is that the test would potentially apply more broadly in the future if it’s accepted,” Sorochan said.

Many of the filings for the application agree with YG’s position.

“They’re putting the cart before the horse,” said Dean Proctor, the chief development officer for SSi Group, a Yellowknife-based internet service provider and one of Northwestel’s competitors. SSi also asked the CRTC to deny the application.

“They’re assuming there will be competition.”

But for Northwestel, the reason the line was built was to foster competition.

“There’s a small number of customers using the Wholesale Connect service, and even those customers have indicated to us they’re going to see the MVFL rates as more attractive,” said Joel Witten, Northwestel’s director of product management.

“The competitive landscape exists.”

When asked about the revenue Northwestel generates from operating the MVFL, Witten instead said the line is owned by the GNWT. That, he said, means Northwestel doesn’t control the rates the GNWT set for the line.

But the rates already factor in Northwestel’s costs, the First Mile consortium said.

“These rates would have to be designed to cover the costs of Northwestel’s operation and maintenance contract,” McMahon wrote.

“Therefore, Northwestel’s revenues for these services must necessarily be included in the prices set by the GNWT.”

Contact Pierre Chauvin at pierre.chauvin@yukon-news.com

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