Teksavvy and other small ISPs to raise internet rates in response to cabinet decision last week

Several independent internet service providers are raising their prices, blaming a recent federal cabinet decision that suggested the country’s telecom regulator erred when it ordered lower wholesale broadband rates last year.

Customers of Teksavvy Solutions Inc., Distributel Communications Ltd. and Start.ca can expect to see their monthly internet bills rise between $5 and $10. The increases come after the federal cabinet signalled to the Canadian Radio-television and Telecommunications Commission (CRTC) last week that it should allow Canada’s large phone and cable companies to charge independent ISPs more for access to their networks so as not to stifle investment in telecom infrastructure.

“Unfortunately we just had no choice,” said Matt Stein, chief executive of Distributel, of the company’s decision to raise its prices by $5 to $10 a month, at least until a final decision is reached. The CRTC is in the midst of reviewing the wholesale rates.

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“Well over a half a million Canadians have suffered a rate increase this week, all as a result of the uncertainty created by the [cabinet decision],” added Mr. Stein, who also serves as chairman of the Competitive Network Operators of Canada (CNOC), an industry group for independent ISPs.

To encourage competition, Canada’s large phone and cable companies are required to sell access to their broadband networks to independent ISPs at rates set by Canada’s telecom regulator. These ISPs then sell internet services to their own customers.

In August, 2019, the CRTC lowered the rates that the large telecoms are able to charge and ordered them to make retroactive payments to third-party operators to compensate for the higher prices that have been charged since the commission set interim rates in 2016.

BCE Inc., Telus Corp. and a group of five cable operators – Rogers Communications Inc., Shaw Communications Inc., Quebecor Inc.‘s Videotron Ltd., Cogeco Communications Inc. and Eastlink Inc.‘s owner Bragg Communications Inc. – appealed to the regulator and the federal cabinet to have the decision reviewed. They said the new rates do not reflect the cost of building networks and would have hampered investments, particularly in rural and remote areas where the costs of building telecom infrastructure are higher.

Last Saturday, cabinet declined to overturn the CRTC’s ruling or to send it back for reconsideration, citing the fact that the regulator is already reviewing the rates. However, cabinet did say that the new rates are so low that they could undermine network investments.

Consumer advocates and third-party operators have said that cabinet has effectively sided with the large telecoms by signalling to the regulator that it should allow the phone and cable companies to charge more for access to their networks.

“The government bowed to pressure from the large carriers who used their investment threat to keep prices high and competition low,” Andy Kaplan-Myrth, Teksavvy’s vice-president of regulatory and carrier affairs said in a statement.

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Representatives of BCE, Rogers and Telus either declined to comment or did not respond to requests for comment on Thursday.

Some independent ISPs cut their prices in 2019 after the CRTC reduced wholesale broadband rates and ordered the large telecoms to make retroactive payments totalling an estimated $325-million. But the old rates have remained in place, as the CRTC decision was stayed on appeals by the large telecoms to the Federal Court of Appeal. (The court case was heard in June and a decision is pending.)

That has created financial pressures for the ISPs, some of whom are now raising their prices back up. Teksavvy customers with download speeds of 15 Mbps or less will see their bills go up by $5 per month, while those with higher-speed service will see a $10 a month increase. It’s the second time this year that the Chatham, Ont.-based company has raised its rates; TekSavvy announced in March that it was laying off 130 of its staff and hiking its prices by $5 a month because of rising operating costs.

London, Ont.-based Start.ca said most of its 75,000 customers will see price increases of $5 to $10 per month.

“We recognize that the timing is terrible but we’re still optimistic that the adjusted rates will eventually be deployed and that this price increase will be temporary,” Start.ca’s chief executive Peter Rocca said in a statement.

A spokesperson for the office of Navdeep Bains, Minister of Innovation, Science and Industry, said the government is encouraging all parties to participate in the CRTC’s review.

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“We will continue to monitor the CRTC proceedings closely to ensure our frameworks have the right incentives for investment and competitive choice,” Michael Power said in an e-mail.

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