As last remaining large wholesaler, TekSavvy faces tough market conditions

Santa Claus holds in one hand an inflated bag full of presents. The label says head for Bell, Rogers and Terrace. On the other hand, he has a crumbling lump of coal. The tag says “For Canadian Consumers”.

TekSavvy Solutions Inc. has never hesitated to make political statements about the telecommunications industry. Internet Service Provider Christmas The aforementioned satirical poem that accompanied his blog post read: Telecom Nightmare Before Christmasyet another example.

All written with good humor, this post comes as TekSavvy, one of the few large internet wholesalers left in Canada today, prepares to celebrate its 25th anniversary. It shows a tough situation. It also underscores how difficult the battle has been for the country’s independent internet service provider.

Andy Kaplan-Myrth, the company’s head of regulatory affairs, said: “TekSavvy is in a very difficult position right now.”

As an Internet wholesaler, TekSavvy buys space on the networks of incumbent companies such as Bell and Rogers and resells their services to consumers. But a series of recent regulatory decisions and push for incumbents to expand their fiber optic networks have made it difficult to turn a profit.

For years, TekSavvy lost customers to incumbents and had to raise prices during the pandemic to stem losses. Rising internet wholesale prices forced the company to pull out of a spectrum bid last year and were unable to expand its small physical network as planned, Kaplan-Myrth said. We continue to operate as a going concern.”

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The industry is still divided on how facility-based providers (telcos with their own infrastructure) and wholesalers should coexist. Some argue that wholesalers should only fill professional gaps not served by incumbents. Others argue that it plays a bigger role in putting downward price pressure on the giant. RCI-BT Acquired Shaw Communications Inc. SJR-BT.

But, according to independent providers, telecommunications policy is increasingly leaning towards supporting big companies that have built their own infrastructure. As a result, businesses that do not own their own networks face an increasingly difficult situation.

Despite a bleak business outlook, TekSavvy has doubled down on what it sees as a major role: consumer advocate and the last large wholesaler to challenge the incumbent. And Kaplan-Maas said he has two reasons for the company’s optimism. new CRTC chair and finalizing future policy directives from Innovation, Science and Economic Development Canada.

“Don’t think we lost,” he said. “We keep moving forward because we know we’re doing the right thing.”

A few years ago, TekSavvy was booming. In 2016, the CRTC significantly reduced the fees wholesalers must pay incumbents to sell services through their network. TekSavvy chief executive Marc Gaudrault said the company will use the saved funds to begin building its own fiber optic network in the Chatham Kent area of ​​southern Ontario. In 2019, the CRTC cut interest rates further.

but, Controversial 2021 rulingCRTC Reversed my 2019 This will push prices back to 2016 levels and make it more difficult for wholesalers to turn a profit. TekSavvy has appealed the decision and is awaiting a hearing date.

Smaller provider organizations such as Consumer Advocate and Canada’s competitive network operators have argued that higher rates directly led to a series of acquisitions by large incumbents. In 2022, Bell Canada acquired independent telecommunications companies EBOX and Distributel, as well as Quebecor Inc. QBR-BT I purchased VMedia. It is unknown whether TekSavvy itself received the offer.

In his speech at the Canadian Telecom Summit in November, CRTC Chairman Ian Scott said that the market has evolved since the framework was developed in a way that was “not entirely foreseen” and that the CRTC will be “fixed.” I admit that I am working on it.

However, the CRTC is unlikely to change its mind again. Telecommunications consultant Mark Goldberg said he doesn’t believe Ottawa’s penchant for facility-based competition, an approach dating back more than three decades, will change.

“Canada needs billions of dollars each year in private sector investment to extend network reach into unserved areas,” Goldberg said. “Some of the more successful independent ISPs don’t just offer cheap service, they also offer added value.”

Providing added value may mean offering bundles with mobile services. But for TekSavvy, expanding the business in that way has become more difficult this year.

As with the Internet, wholesalers can purchase space on existing mobile networks and offer their own cell services. Last year, the CRTC set that criteria in October, saying incumbents must sell space on their network to resellers who meet certain criteria for seven years. TekSavvy does not qualify under the new framework, limiting its ability to secure favorable pricing and expand its mobile offerings.

The situation is further complicated by the fees that must be paid to connect to existing fiber optic networks. Kaplan-Myrth said TekSavvy would have to charge twice as much as he did to provide similar internet service. As a result, the company lost most of its wholesale product customers through Bell’s network, he said.

“When Bell offers a cheaper price to switch to faster fiber optic along with TVs and phones, what rational consumer wouldn’t accept the deal?” he said.

Despite the challenges, Kaplan-Myrth said the company will continue to offer customers an independent and competitive alternative to Internet services. And two new developments are expected to bring good news.

Innovation, Science and Economic Development Canada will release the final draft of a new policy directive, calling on the CRTC to take action to enhance competition in Canada. As part of its policy agenda, it directed regulators to “make more timely and improved wholesale rates available” and to improve the hybrid mobile virtual network operator model.

And in December, Heritage Canada announced the long-awaited appointment of a new CRTC leader. The small, independent telecommunications company is pleased that lawyer and former Competition Commissioner Vicky Eatrides has taken the job, which she will take up on January 5.

“I don’t think anything is certain here, but it feels like a move in the right direction,” Kaplan-Maas said.