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New Internet pricing rules spark jump in customer bills by Rita Trichur

Jan 4, 2012

Source: Globe and Mail

TekSavvy Solutions Inc. has become the first independent Internet service provider to raise consumer prices following the CRTC’s recent compromise decision on usage-based billing.

Warning customers that 2012 would be another challenging year for the industry, the Chatham, Ont.-based company announced Wednesday that rates for most of its existing residential Internet service products would increase by between $3 and $4 on Feb. 2.

In announcing the price hike, TekSavvy’s top executive laid the blame squarely on the telecom regulator, arguing that aspects of Canadian Radio-television and Telecommunications Commission’s new wholesale pricing model are “deeply flawed” and bound to create even higher costs for consumers over the long term. He said the company will monitor its customers’ usage patterns for about six months to determine whether its new rates are “appropriate,” leaving the door open to even higher prices down the road.

“At this point we are increasing our prices as little as possible and providing innovative alternatives to help you mitigate those increases,” wrote chief executive officer Marc Gaudrault in a letter to customers.

“At the same time, we are actively pursuing remedies at all levels to head off the additional dramatic cost increases that this model will impose on Internet users over time.”

He also urged customers to “keep the issue alive” by raising awareness with friends and family. “Let’s join together to keep Canada from remaining one of the most expensive, uncompetitive Internet markets in the world,” added Mr. Gaudrault.

In addition to the coming price increase, TekSavvy is also planning other key changes to keep its costs in check. It unveiled a revamped product lineup that includes new high-speed packages (including those offering unlimited usage) and will introduce unlimited “off-peak hour usage” for all users between 2 a.m. and 8 a.m. also starting next month.

TekSavvy’s announcement comes about a month and a half after the CRTC handed down a compromise solution on the thorny issue of usage-based billing.

In mid-November, the telecom regulator introduced a new pricing model that would see smaller Internet service providers, which lease space on the networks of larger providers like BCE Inc. (BCE-T42.420.140.33%), pay for the total capacity they need rather than the volume of data downloaded.

BCE had originally wanted to charge those smaller ISPs by how much each customer downloads, to help stem network congestion. It later approached the CRTC with a revised proposal to charge those smaller ISPs for the aggregate total of data used by all their customers.

TekSavvy’s price increase is expected to be the first of many across the industry. Bill Sandiford, president of the Canadian Network Operators Consortium, which represents smaller providers, says other companies are contemplating similar moves.

“Whether those price increases come this month or next month or six months from now, if the current pricing stays in the current CRTC decision, there will be no choice for this to come,” Mr. Sandiford said in an interview on Wednesday.

© Globe and Mail