ISPs hesitate to add faster speeds

The federal telecommunications regulator believes it is bending over backwards to help independent Internet service providers offer speeds to customers that are at least equal to the blazing service incumbent telephone and cable companies give their own retail customers.

After years of watching their market share drop and in many cases only being able to offer download speeds of 5 megabits per second, you might have thought the ISPs would have moved fast.

However, they’ve been slow to show their thanks.

Last week interim rates set by the Canadian Radio-television and Telecommunications Commission (CRTC) came into force so ISPs could start offering higher speeds than they’ve been able Final rates are expected near the end of the year, so the commission set temporary rates so ISPs could get going.

However, few have signed up.

The problem, says Mel Cohen, president of Ottawa-based Distributel Communications Ltd., is that not only are the rates too high, they’re temporary.

Not only that, he’ll have to charge subscribers $8 a month for the only approved high speed modem.

Distributel and other ISPs it owns across Ontario, Quebec, British Columbia and Alberta have a combined 97,000 subscribers.

“We’re going to order a couple (of high speed ADSL services) and see what happens,” he said in an interview. But it was without enthusiasm.

Similarly, Patrick Lehoux, chief business development office of Teksavvy Solutions, a Chatham, Ont.-based provider with 130,000 residential subscribers in four provinces is dipping its toes, signing up with BCE Inc.’s Bell Canada to offer two new speeds of about 12 Mbps and 25 Mbps, but only in Ontario and Quebec.

“The (interim) deal is not that great,” he said.

“When we looked at it we decided we had to do something because we have a large customer base on DSL [the high speed data technology offered by phone companies] who’ve been waiting for us to offer higher speeds.”

But he has great reservations. Not only are the rates interim, the CRTC has said the final rates will be retroactive, he said, even if they are higher than the temporary ones. In addition, he’ll have to pass on a CRTC-mandated $99 set up charge for every new customer.

It was a year ago that Distributel, TekSavvy and other independent Internet providers were complaining to the CRTC they were being denied the ability to lease access to the net high-speed networks of incumbent telephone and cable companies.

Those ISPs tied to phone companies for their wholesale connectivity were particularly grieved because they were stuck offering residential subscribers download speeds of around 5 megabits per second while BCE Inc.’s Bell Canada [TSX, NYSE: BCE] and Telus Communications Co. [TSX: T, T.A; NYSE: TU] were offering their retail customers speeds at least twice over new fibre optic networks.

Last August the CRTC over-rode objections of telcos to give ISPs access to the new phone company networks, and told cablecos they had to reduce the number of points of access so ISPs could have easier access to their networks.

Over the winter the commission was trying to hammer out a new rate schedule for the new services when it was forced to open up its entire wholesale pricing regime after the Harper government told it go back to the table over its decision to allow telcos to impose usage-based billing (UBB) on ISPs.

Realizing that the July UBB hearing – which is expected to wrap up Tuesday – had to encompass the new high-speed rates, the commission did what it thought was generous: Create an interim high-speed rate schedule so ISPs could at least start to catch up in the speed race with the incumbents.

It hasn’t worked out that way so far.

The consumer market is very price-sensitive, Cohen said, so he doesn’t want to start new high-speed services and find Distributel can’t make a profit on them.

In addition to DSL service, the company also offers faster cable packages in certain areas.

Of the company’s 97,000 subscribers, 75,000 are on DSL.

So both companies, and many other ISPs, are waiting for the final rates to be set before doing battled with incumbent carriers.