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Independent ISP TekSavvy blames large carriers, cabinet for a planned price hike

TORONTO — One of Canada's largest independent internet companies is raising prices for the second time this year amid an ongoing battle over the wholesale prices charged by network owners.

Ontario-based TekSavvy notified its customers by email this week that its residential internet prices will go up by as much as $10 per month, starting Oct. 1.

That's on top of a $5-per-month increase TekSavvy made this spring, when carriers experienced extremely high demand for internet service due to stay-at-home orders issued across Canada to combat the COVID-19 pandemic.

The company says it has little choice but to raise prices because the federal cabinet has "caved to pressure" from the large carriers by failing to show clear support for a controversial CRTC decision to lower wholesale prices that the big carriers charge the independent ISPs.

Canada's large phone and cable companies, on the other hand, say the wholesale rates they've been charging were approved by the CRTC in 2016 and the CRTC's proposed 2019 rates would be too low to cover the cost of investing in service improvements in rural and remote areas. 

However, the so-called final wholesale rates announced by the CRTC on Aug. 15, 2019 have never actually gone into effect and are stayed by court order at the big carriers' request that has maintained 2016 prices.

TekSavvy told customers by email that a statement issued Saturday by Innovation, Science and Industry Minister Navdeep Bains on the anniversary of the decision shows "an expectation from the government that retail prices should be raised, specifically to protect incumbent investments."

"This is obviously not the news we wish to be delivering to you at a time of increased uncertainty and concern."

BCE's Bell Canada and Rogers Communications Inc. have said in recent days that they supported the position taken by Bains.

They and most of Canada's other large phone and cable companies have also filed appeals with both the Federal Court of Appeal and the CRTC itself.

The CRTC is an administrative tribunal with some of the powers of a court, some power to set industry rules and a degree of independence from government, although the federal cabinet can overrule the CRTC.

A email statement issued Thursday on behalf of the government says, in part, that it recognizes that affordable high-speed internet is a necessity for all Canadians no matter where they live.

"We encourage all parties to engage in the CRTC's ongoing review of the rates decision to support a timely conclusion which will provide more certainty for all involved parties," Bains spokesman Michael Power said.

"We will continue to monitor the CRTC proceedings closely to ensure our frameworks have the right incentives for investment and competitive choice, while preserving our policy flexibility for the forthcoming CRTC decision to ensure these important objectives are met.

Matt Stein, chief executive of Toronto-based Distributel Inc. and chair of an association representing about 30 independent ISPs, said Thursday that his company hasn't decided what to do about the rates it charges its internet customers.

He said the government's statement included ambiguous wording that creates opportunities for delay within the process, while keeping in place rates that the big carriers favour.

"The new rates, that are fair ... are not yet implemented and we no longer have any idea of when that implementation will occur. And, as a result, something has to give," Stein said. "Something has to be done. We haven't decided exactly what."

Last fall, Distributel and TekSavvy were among the independent ISPs that lowered retail prices in the wake of the CRTC decision, expecting they'd ultimately prevail with lower wholesale rates and a rebate on what they'd already paid.

After the Federal Court of Appeal decided the original rates should stay in place during appeal, Stein's company returned its prices to the original levels for new customers and imposed a surcharge for customers who joined while reduced rates were in effect.

"So the rates are where they were before," Stein said.

TekSavvy, which has about 300,000 customers and is considered the largest of the independent ISPs, waited until late March to raise its rates by $5 per month across the board — backtracking on some of its fall price cuts.

Stein said other members of the Canadian Network Operators Consortium have also raised their rates because of the impasse over wholesale rates — affecting about half a million customers in total.

This report by The Canadian Press was first published Aug. 20, 2020.

Companies in this story: (TSX:BCE, TSX:RCI.B, TSX:T, TSX:SJR.B, TSX:QBR:B, TSX:CCA)

David Paddon, The Canadian Press