Chatham, Ont. telecom TekSavvy says upcoming rate increase due to ISP court challenge, not COVID-19

Chatham, Ont.-based telecom service provider TekSavvy is informing customers about an upcoming rate increase that would see the price of all customers' residential internet plans increase by $5 starting in May. TekSavvy representatives, however, clarified that the rate increases have little to do with increased network capacity brought on by customers sheltering in place or self-isolating at home. 

TekSavvy says a $5 rate increase set for May was going to happen regardless of COVID-19

Though the upcoming rate increase has little to do with COVID-19, TekSavvy has taken steps — like waiving internet overage fees until April 5 — as a result of the pandemic caused by coronavirus. (Cole Bennetts/Bloomberg)

Chatham, Ont.-based telecom service provider TekSavvy is informing customers about an upcoming rate increase that will see the price of all customers' residential internet plans increase by $5 starting in May.

TekSavvy representatives, however, clarified that the May 1 rate increases have little to do with increased network activity brought on by customers sheltering in place or self-isolating at home due to COVID-19.

Instead, the upcoming price hike is the result of an increased financial burden placed on TekSavvy, due to the Federal Court of Appeal issuing last year a temporary stay on a CRTC decision that would have seen TekSavvy pay lower fees for access to incumbent carrier networks. 

TekSavvy's business model

As a wholesale-network-access-based service provider, TekSavvy doesn't maintain telecommunications networks in the conventional sense. Excluding certain areas, TekSavvy doesn't maintain its own network infrastructure.

Instead, the company pays larger Canadian internet service providers — including Rogers, Bell and Telus — for access to their networks, offering customers an often lower-cost alternative to what incumbent telecom players sell. 

In August 2019, the Canadian Radio-television and Telecommunications Commission (CRTC) — the federal body responsible for governing the country's telecommunications systems — issued a decision setting final wholesale access rates that lowered the overall costs that service providers like TekSavvy would have to pay the incumbents

TekSavvy even celebrated the CRTC's decision in part in September by reducing the cost of internet for hundreds of thousands of its customers. At the time, TekSavvy said approximately 85 per cent of its customers would benefit from "reduced prices or upgraded, unlimited data plans on their next monthly bill."

In response, however, some of the country's largest telecom service providers filed petitions and appeals contesting the CRTC's decision. The Federal Court of Appeal's temporary stay on the CRTC's ruling was the result of some of those filings. 

Mike Stanford, vice-president of marketing for TekSavvy, said the company has been "operating at a loss for months," hence the need to increase the cost of its residential internet plans.

"The incumbents … launched eight different types of appeals on that and have received a stay of implementation through the courts," he said. "We haven't been able to realize those cost-savings on our side."

COVID-19 has been a 'catalyst,' says TekSavvy

Though the ongoing pandemic caused by coronavirus isn't the reason for the upcoming price increase, Stanford acknowledged the COVID-9 has been a "catalyst" of sorts, in part because the Federal Court is currently only open to the public for urgent case-related matters.

"We don't have clarity now on when the courts are going to convene in order to decide these appeals," Stanford said. "And so without that, and with that uncertainty in place, we didn't feel like we could continue without making some immediate corrections."

Nonetheless, Stanford acknowledged that the "timing is horrible" regarding news of the price increase. 

"But it's not about us protecting a profit margin in the face of a virus pandemic," he said. "It's about us reducing the quantum of loss that we are incurring every single month, in order to continue to live until such time as we can get rate relief."

Stanford said that TekSavvy has closed its offices in response to COVID-19 and is transitioning all employees to work from home until it's safe to return to work. 

The company has also implemented a freeze on overage fees for residential internet customers until at least April 5. 

Additionally, the company is temporarily not accepting new customer orders as staff transition to a work-from-home arrangement. 

Stanford said that higher usage stemming from people staying at home has necessitated that the company purchase approximately 20 per cent additional capacity from the incumbents who provide TekSavvy with network access. He added that the additional capacity sought out by TekSavvy won't mean added costs for subscribers.

Price increase shows a lack of humanity, says Ottawa customer

Despite TekSavvy's assurances, Trevor Milford — an Ottawa-based subscriber with an unlimited TekSavvy home internet plan — said he was shocked by the announcement's "lack of humanity."

"I've been very aware in the past month of how much hardship Canadians are going through, and it was awful to me the insensitivity," Milford said, pointing to recent statistics cited by Prime Minister Justin Trudeau that the federal government has received more than 500,000 applications for employment insurance due to COVID-19-related layoffs and work disruptions.

"Canadians are clearly hurting, and it just seems hugely insensitive to put through a fee hike at this time," Milford said. 

Every single Canadian right now is experiencing intense hardship.- Trevor Milford, Ottawa-based TekSavvy subscriber

He added that knowledge of the Federal Court of Appeal's stay doesn't change his opinion of TekSavvy's announcement. 

"I understand from a business standpoint where TekSavvy is coming from," Milford, adding that he acknowledges that the company is going to be shouldering additional costs.

He said that he wouldn't typically have a problem with price increases "if we were living our normal lives."

"Every single Canadian right now is experiencing intense hardship," Milford said. "In my own family, my mother, my father and my brother — they're all blue-collar workers — all of their jobs are threatened right now."

In regards to the freeze on internet overage fees, Milford said he'd be interested to know precisely how many TekSavvy customers are already subscribed to unlimited plans.

"Because if a majority of clients already have unlimited plans, that's not really helping anyone out," he said. "I think it's very easy to claim that that's a large gesture. I haven't seen numbers backing that up one way or the other, so I don't know the reality of that situation."