Internet providers explain why they've hiked prices

ISPs hike 'net prices

Amid the workplace disruptions, household distractions and widespread unemployment brought by the COVID-19 crisis, it couldn't be a worse time for consumers to face an internet price increase.

But some of Canada's internet service providers, and their national industry association, say they've reluctantly decided to hike prices or reverse previously announced price decreases at this time because of an unresolved battle with cable and phone companies.

"And that's a huge problem, especially right in the midst of a global pandemic," says Matt Stein, chairman of the Canadian Network Operators Association, which represents 31 independent ISPs — sometimes referred to as wholesale resellers — that access their customers through rented cable and phone lines.

The most prominent example is TekSavvy, which announced last week that it would raise the prices on each of its internet plans by $5 per month, which represents an increase of between six per cent for higher-priced plans to 20 per cent for lower-priced plans.

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

TekSavvy argues — although its position is resoundingly rejected by Canada's main telecommunications providers — that its biggest problem is high wholesale internet rates that it continues to pay despite an August 2019 regulatory ruling that would have slashed some ISP rates by nearly 80 per cent.

"The only reason that we're in this position is because the incumbents appealed (the rate reduction) and the court (froze) those rates in the meantime," says Andy Kaplan-Myrth, the TekSavvy vice-president responsible for regulatory and carrier issues.

With 300,000 customers, TekSavvy is the largest of Canada's mid-sized and small internet service providers who collectively argue, through CNOC and individually, that the lower rates ordered by the CRTC in August 2019 were fair and complied with established regulatory practices.

Virtually all the phone and cable companies that supply wholesale internet services to smaller ISPs disagree, and argue in a number of filings that the Canadian Radio-television and Telecommunications Commission used a flawed analysis that resulted in setting wholesale rates below their own costs.

The incumbents, which include Bell, Rogers, Telus as well as the smaller regional carriers such as Eastlink, Videotron, SaskTel and Shaw, have launched multiple appeals. As a result, the Federal Court of Appeal has frozen the wholesale internet rates at the higher 2016 levels — at least until the issue is resolved.

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

Stein, who is chief executive of CNOC member Distributel, says it's a bad time to raise retail subscriber rates but may be unavoidable because they've experienced a recent spike in usage as more people work from home and consumption of entertainment content has gone up.

He says that the expense of getting wholesale service accounts for 80-90 per cent of a typical ISP's costs.

"We need to add a bunch of costs to our businesses, all of which goes directly to lining the pockets of large incumbent phone and cable companies," Stein says.

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