Some Canadian ISPs more hopeful about their future

Many of Canada’s independent Internet service providers are feeling a little more confident these days as they challenge bigger incumbent telephone and cable carriers.

Eight months ago some members of the Canadian Network Operators Consortium (CNOC) were uncertain about their future following a ruling by the federal telecommunications regulator.

At the time CNOC president Bill Sandiford said the decision by the Canadian Radio Television and Telecommunications Commission (CRTC) to raise residential wholesale rates cable companies charge ISPs “looks like the death of the industry.”

On Tuesday as CNOC’s annual conference, the ISP Summit, officially opened in Toronto he was in a different mood.

The ISP landscape across the country is “good,” he said in an interview. He said he doesn’t know of any in financial trouble.

That may be because a closer reading of the regulator’s decision by ISPs found while it didn’t get them everything they wanted there were some nuggets for those ISPs who buy their connectivity from BCE Inc.’s Bell Canada.

They were eligible for credit from Bell – in some cases substantial – when the CRTC chopped the carrier’s wholesale residential rate in half. And the commission said it wanted to look at why residential and business wholesale rates weren’t equal. In August it concluded they should be the same.

The commission regulates the wholesale rates ISPs pay carriers for connectivity, but not the rates charged to customers.

ISPs, who have been losing customers for the last decade to Bell, Telus Communications, Rogers Communications and Shaw Communications, are starting to believe that the CRTC’s new capacity-based wholesale billing regime and the decisions made this year could be an aid to stability as they diversify their products.

Certainly some at the conference see it that way.

Mel Cohen, president of Diversitel Communications, which has residential customers in several provinces, said in an interview the February decision “wasn’t a game changer” for his company, although he acknowledged it did lower his costs of buying access from Bell. On the other hand costs went up for service from cable companies, which account for half his residential subscribers.

Michael Garbe, president of Toronto-based Accelerated Connections, which serves businesses across the country, said in an interview the CRTC has been partly helpful in his company’s busy year.

Savings he expects to see from the wholesale business rate decision have been invested in building a second data centre for offering cloud and co-location services to businesses.
“The CRTC decisions reduced our costs to allow us to grow our business in other ways,” he said, like offering infrastructure-as-a-service and business telephone service, adding an aggregation point in Vancouver and a point of presence in Calgary.

In fact, the year was so good for Garbe – who said new customers included a restaurant chain and a bank — the company nearly couldn’t cope with the demand for installation services.

Joel Verreault, president of Montreal-based AEI Internet, which has some 10,000 residential subscribers an about 1,000 business customers in Quebec and Ontario, said the CRTC wholesale residential ruling “as turned things around for us.”

The credit he received from Bell meant he didn’t have to pay for connectivity for three months, he said.

He credits several commission decisions – including the 2011 ruling backing off on the controversial user-based billing – with helping the provider stage a revival. Up until that year AEI had been losing 10 per cent of its subscribers a year, he said. But in the last two years business was up about 11 per cent each year.

Matt Stein, chief technology officer at Primus Canada, the country’s biggest ISP, said that in certain parts of the country the wholesale rate decisions helped More important, he added, is that the commission got it right when – under pressure from the Harper government – it abandoned its planned usage based-billing scheme in favour of capacity-based billing.
ISPs continue to try to move away from relying on residential customers, who have been defecting to bigger telco and carrier providers who can offer Internet, TV and home phone bundles. For example, Verreault said this year AEI will offer e-business services, while Primus has installed a fibre optic loop in Ottawa to offer carrier-based Ethernet services to organizations.

Things aren’t rosy for all ISPs. “I believe there are a lot of ISPs out there treading water,” Garbe said. “Even though there’s been (wholesale) price reductions they still not growing their business and don’t have the economics to update their infrastructure.”

His company is looking for acquisitions. “We’ve got a plan to grow 250 per cent in the next five years, and there’s no way we can do that organically.”

Meanwhile, the ISPs will be back before CRTC next fall when the commission holds a scheduled review of the wholesale rate framework.

A key fight will be over whether ISPs should be given the ability to access the new high-speed fibre optic to the home/business links that big carriers have been installing in the past three years.

The last time this was before the commission, in 2011, major carriers like Bell, Rogers, Telus and Shaw persuaded the regulator to stay out.

But that means ISPs buying wholesale access over the copper lines of telcos can’t match the fastest speeds the big carriers offer.

Sandiford said some lawyers are already calling the upcoming hearing “the CRTC case of the decade.”

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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