Independent internet providers prepare to raise prices in wake of CRTC decision
Networking cables and circuit boards are shown in Toronto on Wednesday, November 8, 2017. THE CANADIAN PRESS/Nathan Denette
David Paddon, The Canadian Press
Published Friday, May 28, 2021 6:59PM EDT
TORONTO - Several independent internet providers said Friday they will raise prices or eliminate some services after an unexpected regulator setback this week, with at least one company calling for the head of the CRTC to resign.
The telecommunications regulator on Thursday reversed a 2019 decision that lowered the rates smaller providers like TekSavvy pay to piggyback on the networks of larger cable and phone companies. Now, the higher rates set in 2016 will apply.
VMedia Inc., another independent ISP, expressed “disbelief” at the about-face from the earlier ruling, which was reached after years of review initiated by former CRTC chairman Jean-Pierre Blais.
The company's CEO said current CRTC chairman Ian Scott, who was appointed in 2017, should resign because the regulator's authority is undermined by CRTC's sharp reversal on Thursday.
“The decision raises serious doubts about the leadership and competence of the CRTC, and the integrity of its process, and sells out Canadians to benefit the dominant players,” Alexei Tchernobrivets said in a statement.
“CRTC chairman Ian Scott should resign, and Parliament should launch an immediate investigation into â€¦ whether political and corporate influence impacted this decision.”
The company said it planned to pursue legal means to reinstate the 2019 decision.
Scott's five-year term runs until Sept. 4, 2022. The CRTC did not comment on VMedia's response to the ruling.
In an interview on Thursday after the decision was released, Scott said the CRTC did its job by reviewing its 2019 finding - as required under its mandate.
“What we did (during the review) was an extensive re-examination of the costing models, and the application of the costing principles to those carriers rates, and the results speaks for itself, they're laid out in the decision,” Scott said.
The CRTC's decision on Thursday said it found some errors, which Scott said were generally the result of calculations by staff who applied their judgment to fill in missing information.
He added that in the “vast majority” of cases, the CRTC's 2019 decisions were deemed correct - including some that were appealed by the phone and cable companies.
Other ISPs said they were adjusting pricing and expansion plans in light of the CRTC announcement.
TekSavvy Solutions Inc. said it has shelved plans to add wireless services and may exit some internet markets as a result of Thursday's CRTC decision on wholesale internet rates.
But vice-president Andy Kaplan-Myrth says it was too soon to determine whether it will also raise prices.
“The fact is it takes some time to figure out what the impact is going to be on our rate,” Kaplan-Myrth said in an interview Friday.
Kaplan-Myrth estimated it will take a month or more for TekSavvy to decide what to do after Canada's major phone and cable companies successfully got the CRTC to scrap the 2019 changes.
Independent ISPs - often called internet resellers by the phone and cable companies that sell them internet capacity - held about 10 per cent of the total market a few years ago.
They had anticipated the 2019 ruling, which took three years of CRTC research and analysis, would be upheld and that they would get money back from what they paid for network access since 2016.
Distributel, another independent ISP that operates in several provinces, will likely inform customers in a few weeks of price increases linked to the CRTC's decision
“There are certain speeds where the CRTC actually raised our costs by as much as 40 per cent,” Distributel chief executive Matt Stein wrote in an email Friday.
“We have already stopped selling services at those speeds while we make the necessary changes to raise the price for new customers.”
In addition, he said, Distributel's rates are generally lower than before the 2019 rate reductions. It was quick to drop rates because it thought the CRTC decision would withstand reviews.
“Now knowing that those reductions are not coming, we're forced to make adjustments,” Stein wrote.
Steve Cole, president of Kingston Online Services, said in an email that the CRTC decision will result in higher prices for his customers.
“Doing so will likely make us not as competitive, but we can no longer continue to offer services without some margin of profit,” Cole wrote.
Because of the way rates are structured now, he said, the bigger carriers are able to charge their own retail customers less than they charge wholesale customers like Kingston Online.
Kaplan-Myrth said the CRTC also changed some rate structures in a way that will push up some of TekSavvy's wholesale costs.
TekSavvy may decide to raise prices to reflect those higher costs or put usage caps on some plans that provide unlimited data for a fixed monthly price, Kaplan-Myrth said.
“Maybe we take those out of the market all together if we decide that those prices are, you know, not competitive, and we focus on other prices that are more competitive.”
But Kaplan-Myrth said “there's no way” that TekSavvy will lower its prices, as it did after the 2019 decision - a move that it later reversed during the pandemic because its costs went up.
Instead, the company is reviewing potential expense cuts, including a retreat from some markets and less investment business growth.
TekSavvy had planned to use some of the rebated money to buy wireless spectrum that would eventually allow it to offer mobile phone service to its customers.
But the company, based in Chatham, Ont., no longer has the confidence to bid in the wireless spectrum auction that begins in June.
This report by The Canadian Press was first published May 28, 2021.