Small ISPs raise fuss over new Shaw wholesale price proposal

Small ISPs are speaking out against an “egregious” new pricing proposal from Shaw Communications Inc. for wholesale access to its Internet lines. The Calgary-based incumbent introduced new prices for a new set of retail Internet plans on Jan. 6, and filed a CRTC application on the same day to update its rates for third-party Internet access. George Burger, director of third-party Internet and television provider VMedia Inc., said Shaw is trying to impose new prices to access its network before the CRTC rules in its wholesale Internet review, for which a hearing was held in December. “This is a really egregious grab,” he said in an interview on Tuesday. “They may think that the CRTC is going to take measures that require them to take this step now rather than wait for the outcome of the hearing.” According to a document filed with the CRTC on Jan. 12 by the Canadian Network Operators’ Consortium (CNOC), a trade group of small ISPs, Shaw’s pricing proposal for third-party Internet access (TPIA) approximately doubles the wholesale cost for some of its plan tiers as well as increasing the speed. The CNOC data shows that Shaw is proposing a wholesale cost of $38.63 per month for a 15 Mbps monthly plan, up from $20.97 per month for a 10 Mbps plan under the previous pricing agreement; $51.11 per month for a 30 Mbps plan, up from $22.45 for a 25 Mbps plan; and $73.70 for its highest-tier 60 Mbps monthly plan, up from $54.24 for the older 50 Mbps plan. For the 20 Mbps plan, the only one for which the speed remains unchanged, Shaw now wants to charge $42.59 per month for third-party access, up from $29.83, according to CNOC. “CNOC is very concerned that approval of the interim rates at the levels proposed by Shaw will have a chilling effect on competition in the provision of Internet services throughout Shaw’s operating territory,” the group said in its filing. For comparison, the advertised retail rates for Internet plans shown on Shaw's website, not including introductory discounts, are $60 a month for the 15 Mbps package, $70 for 30 Mbps and $90 for 60 Mbps. No retail 20 Mbps plan is listed for Shaw. Burger said Shaw’s proposed third-party access rates, which still have to be approved by the CRTC, would put wholesale buyers out of business. “It completely neutralizes independent ISPs as a potential alternative,” he said. “We'll simply be non-competitive. The swing is gigantic. Right now we're able to charge 20, 30 percent less than the incumbents and still make our margin. We simply can't live for less than that.” Burger said his company does not currently offer services in Shaw’s operating territory, and if the proposed prices are approved there is “no chance” VMedia will launch its services there. Shaw spokesperson Chethan Lakshman said in an email that the company’s proposed rates are consistent with its new retail prices. “All of Shaw’s proposed TPIA rates are based on Shaw’s actual costs and determined using CRTC-approved methodologies,” he said. “The new TPIA rates reflect the significant traffic growth that we have seen since the last review of TPIA rates, which was based on CRTC filings made in 2010. For the past several years, we have experienced 50 per cent compound annual traffic growth per year on our network.” Lakshman also noted that none of the changes affect the rates paid by current customers, only those who get new plans or upgrade their service. Canaccord Genuity analyst Dvai Ghose said in an interview on Wednesday that Shaw could be looking to diversify its business as online platforms become more prominent for content delivery. “The traditional TV revenue stream is shrinking, not because you and I are watching less video on average but because we're watching it over the Internet,” he said. “So therefore the broadband pipe becomes more and more important to them as a hedge against a declining TV revenue base.Obviously sharing that with third parties, especially at a low margin, is not something that they want.” Burger said if the prices are approved, third-party Internet providers will be forced to charge customers rates higher than Shaw, despite having discounted access to the network. “By the time we wait and see what their financial statements are going to show in a year or two, by the time this has worked its way through the system, by that time every ISP in the West will be out of business or gone and consumers will be stuck paying in the three digits as an ordinary course for their Internet service,” he said. Shaw competes with Telus Corp. for customers across Alberta and B.C., and Burger said up until now, that competition has served customers well. “In certain respects, the Western market has been more difficult for small ISPs because it's more competitive,” he said. “Consumers are probably not quite as hungry for an alternative as they might otherwise be. But I can assure you, if this is a harbinger of the future, that's clearly going out the window.” Interventions on Shaw’s pricing proposal are due to the CRTC Feb. 6. —With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Small ISPs raise fuss over new Shaw wholesale price proposal

News | January 14, 2015

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Small ISPs raise fuss over new Shaw wholesale price proposal

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