ISPs explain why they raised prices in an economic downturn


TORONTO – In the midst of disruptions in the workplace, household distractions and widespread unemployment caused by the COVID-19 crisis, consumers could not be in a worse moment as prices rise on the Internet.

But some of Canada’s Internet service providers, and their national industry association, say they have reluctantly decided to raise prices or cancel the price cuts announced at that time due to a battle unresolved with cable companies and telephone companies.

“And it’s a huge problem, especially in the middle of a global pandemic,” says Matt Stein, president of the Canadian Network Operators Association, which represents 31 independent ISPs – sometimes called wholesale resellers – who access their customers through leased cables and telephone lines.

The most striking example is TekSavvy, which announced last week that it would increase the prices of each of its Internet plans by $ 5 per month, which represents an increase of between 6% for more expensive plans and 20%. for cheaper packages. plans.

The company, which has customers across Canada, has also announced layoffs – primarily at its main office in Chatham, Ontario.

TekSavvy argues – although its position is flatly rejected by Canada’s major telecommunications providers – that its biggest problem is the high wholesale Internet rates it continues to pay despite a regulatory decision in August 2019 that would have reduced some ISP rates of almost 80%.

“The only reason we are in this position is that the incumbents have appealed (the rate reduction) and the court (has frozen) these rates in the meantime,” said Andy Kaplan-Myrth, vice president of TekSavvy responsible for regulation and the carrier. problems.

With 300,000 customers, TekSavvy is the largest medium and small Internet service provider in Canada who collectively argue, through CNOC and individually, that the lower rates ordered by the CRTC in August 2019 were fair and followed established regulatory practices.

Virtually all telephone and cable companies that provide wholesale Internet services to small ISPs disagree and argue in a number of filings that the Canadian Radio-television and Telecommunications Commission has used an erroneous analysis which has resulted in setting wholesale rates below their own costs.

The licensees, which include Bell, Rogers, Telus and the smaller regional carriers such as Eastlink, Videotron, SaskTel and Shaw, made several calls. As a result, the Federal Court of Appeal froze wholesale Internet rates at the higher levels of 2016 – at least until the problem is resolved.

TekSavvy and CNOC say independent ISPs have a strong case and will ultimately get the wholesale discount rates ordered by the CRTC, but the unexpected arrival of the COVID-19 pandemic has made them ill-equipped to weather the crisis.

Stein, who is the general manager of Distributel, a member of the CNOC, says that this is a bad time to increase retail subscription rates, but may be inevitable, as they have recently seen an increase in usage, as more people work from home and the consumption of entertainment content has increased.

He says spending on wholesale service accounts for 80 to 90 percent of the cost of a typical ISP.

“We have to add a whole bunch of costs to our businesses, all of which go straight into the pockets of the big incumbent telephone and cable companies,” said Stein.

Shelley Robinson, who runs a non-profit Internet service provider in the Ottawa area, says her group couldn’t risk lowering their prices last year because they knew it would take time to resolve the calls.

“So we kept our prices firm, just hoping that the decision would be in our favor as soon as possible. And now who knows how long it will last, “said Robinson, who is executive director of National Capital Freenet, which pays Bell Canada for wholesale Internet service.

NCF – which has members rather than customers – informed them earlier this month that it is expected to increase its retail rates on April 1.

“We announced it on March 4, before the lockdown, before COVID was what it is now. It existed in the world, but we didn’t know what it was going to become, “says Robinson.

NCF’s wholesale internet costs have soared to unprecedented levels in recent weeks because its members have started staying at home for work and school.

In addition, like other businesses, NCF has another set of additional COVID-related expenses necessary to maintain operations while protecting the health of employees and members.

TekSavvy, one of the most outspoken and politically active ISPs, took a different approach after the August 2019 decision and considered lowering wholesale prices to adjust marketing activities and lower its rates for retail customers.

Now it has announced a $ 5 a month price increase and layoffs, but Kaplan-Myrth said the decision was only made after asking most of its 10 wholesale suppliers to voluntarily lower their prices. tariffs – until the crisis subsides – then resume tariffs from 2016 until the calls have been concluded.

“And they wouldn’t. (It was) one of the dead ends that ultimately led to higher prices for customers.

This report from The Canadian Press was first published on April 3, 2020.

David Paddon, The Canadian Press


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