Technology & Science

Internet pricing ruling may mean better options for consumers

Independent internet providers say a new internet pricing ruling from Canada's telecommunications regulator may result in better packages for some consumers — especially businesses.

Some independent internet providers getting lower wholesale rates

Independent internet providers say a new internet pricing ruling from Canada's telecommunications regulator may result in better packages for some consumers — especially businesses.

On Thursday, the Canadian Radio-television and Telecommunications Commission set the final rates that larger internet providers can charge small internet providers for "wholesale" access that small ISPs buy from companies such as Bell and Rogers to connect their networks directly to customers' homes and businesses.

"As a result of certain adjustments, some independent service providers will see significant reductions in the wholesale rates they pay," the CRTC said in a news release.

In particular:

  • Rates for business internet services will be the same as residential, rather than higher as originally proposed.
  • Bell's wholesale customers in Ontario and Quebec and Telus's wholesale customers in Alberta and B.C., who use an internet technology called DSL, will get rates "significantly lower" than those originally approved after costing errors were discovered in the studies they submitted to the CRTC.
  • Cogeco's wholesale customers will also get a lower rate.

However, rates are now higher for customers of Rogers, Shaw and Videotron, who use cable internet technology, "due to the correction of certain cost methodology assumptions," the CRTC ruled.

"Large and small independent service providers now have the certainty they need to continue offering Canadians a choice of innovative and competitive services," said CRTC chair Jean-Pierre Blais in a statement. "We are pleased to finally close this chapter."

Tom Copeland, chair of the Canadian Association of Internet Providers and president of the small ISP, said the decision means that independent ISPs will be able to continue to compete in the marketplace.

"We're happy that they realized that some of the markups they were allowing in general weren't appropriate," he said.

Now that independent internet providers can know, as best they can, what their wholesale costs will be, he added, "it'll allow us to be able to focus on providing a better level of service at a reasonable price."

Good for DSL, bad for cable customers

Marc Gaudrault, CEO of the independent internet provider Teksavvy Solutions, which offers both DSL and cable internet packages, said the ruling means residential and especially business consumers may see better DSL internet packages from independent internet providers.

"I don't know if rates will go down, but perhaps value for your money will go up," he said.

However, he added, "on the cable side, either rates will go up or value for your money will go down."

Gaudrault said his company, which has more cable than DSL customers, will have to reassess what to do in the weeks ahead.

He added that his company will probably continue to offer unlimited internet packages, but may have to reassess its rates.

Meanwhile, Rogers expressed some dissatisfaction with the ruling, despite the increase in its wholesale rate.

In a statement, the company said it asked the CRTC for higher rates "and while not all of our concerns were addressed, the rates have been adjusted." However, it noted that its rates remain lower than those of its competitors Bell, Videotron and Cogeco.

Bell said the ruling was "a complex set of decisions" and the company was assessing the impact on Bell and its wholesale partners.

Ruling ends usage-based billing saga

The CRTC pricing ruling is the final step in a process that started years ago, when Bell asked the CRTC to allow it to impose usage caps and extra charges for each gigabyte over the cap on its wholesale customers — something it described as usage-based billing and said was necessary to make heavy users pay their fair share. 

The CRTC agreed with Bell in 2009.

Independent service providers, which had previously offered options such as unlimited internet packages, protested that the decision would force them to provide exactly the same packages to customers as the large internet providers and therefore make it impossible for them to compete.

Consumers, opposed to usage-based caps, also protested. Around half a million of them signed a petition organized by Vancouver-based Open Media, which advocates on behalf of consumers for an open internet.

In early 2011, before the new pricing went into effect, the federal government asked the CRTC to review its decision. The review resulted in a new pricing scheme that did not include caps, but was based on internet capacity rather than a flat rate. However, independent internet providers protested that the wholesale rates set initially were far too high and would force them to dramatically hike the price of their internet packages.

The CRTC reviewed and revised the rates, resulting in Thursday's decision.

Copeland cautioned that the price of internet service won't necessarily go down, as internet usage and network costs, which include far more than just wholesale pricing, have gone up overall for small internet providers.

The wholesale internet rates themselves, while lower than those originally set by the CRTC a year ago, are also higher than they were under the original wholesale pricing scheme five or six years ago, Copeland noted.

But he added that that is to be expected.

"They were prices from a different era," he said — an era before bandwidth-heavy applications such as streaming movies to people's televisions was commonplace. "They were based on an era where email was king."