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Canadians happier with indie internet providers, Competition Bureau finds

Toronto Star logo Toronto Star 2019-08-07 Michael Lewis - Business Reporter
More than one million households have chosen an independent provider for their high-speed Internet connection, according to a Competition Bureau report. © Adrian Wyld More than one million households have chosen an independent provider for their high-speed Internet connection, according to a Competition Bureau report.

The share of Canadian internet subscribers served by small, independent providers has more than doubled over the past decade, and those who use the smaller providers are happier with the service, according to a new report issued Wednesday by the Competition Bureau.

The agency, which gathered public opinion from thousands of people through surveys and focus groups over the course of a year-long study, says that it found 90 per cent of Canadian consumers surveyed were “satisfied” or “very satisfied” with their internet service provider.

Customers of the independents, however, were significantly more likely to say they were “very satisfied” than customers of the large telecommunication companies that account for about 90 per cent of the total market.

Additionally, the presence of an alternative allowed them to negotiate lower prices or other inducements from phone and cable companies such as Bell Canada, Rogers, Telus, Shaw, Sasktel, Videotron, Cogeco and Eastlink, the 77-page report said.

The study said that more than one million households have chosen an independent provider for their high-speed Internet connection, with third-party providers such as TekSavvy and Distributel now claiming a 15 per cent to 20 per cent total market share.

More than 550 companies are offering an alternative to traditional telephone and cable companies, according to the competition watchdog, with the share of the market served by the independents increasing dramatically from just 5.5 per cent in 2008.

The study of competition in the broadband Internet market that was launched in 2018 says while third-party independent providers tend to be most active in populous areas, some have taken steps to become competitors in smaller centres including Ontario cities Chatham and London.

It also notes that competition from smaller providers pressures the incumbents including Bell, Rogers and Telus to improve their pricing and service, and to launch their own discount Internet brands.

“The bureau’s research tends to indicate that this regime is working to deliver increased choice and competition to consumers,” the study says. “These marketplace alternatives exist, at least in part, as a result of industry regulation.”

Under the Canadian Radio-television and Telecommunications Commission’s wholesale access regime — in place since the late 1990s — traditional telephone and cable companies are required to sell access to their networks to independent Internet providers at regulated rates.

The CRTC is considering a similar regime for the wireless sector that could mandate that established providers allow mobile virtual network operators (MVNOs), which don’t have their own network infrastructure, to access the national networks to offer cheaper plans “until they are able to establish themselves in the market.”

The CRTC has indicated that its “preliminary view” is that there should be more opportunity for MVNOs.

The Competition Bureau study did not make recommendations to policymakers on ways to foster more price competition in the Internet market. Instead, it offers questions for consideration that “arise from the discussions and analyses set out therein.”

The questions are intended to guide future reviews and regulators’ considerations, said bureau spokesperson Jean-Philippe Lepage.

“The study is designed to inform future regulatory reviews in the industry, such as the CRTC’s upcoming review of wireline wholesale services. We want policymakers and regulators to be well-equipped to help Canadians benefit from competitive high-speed internet options.”

Public Interest Advocacy Centre executive director John Lawford, however, said the study represents a “missed opportunity.”

He said he would have liked to see the bureau weigh in on the arguments from smaller providers, who say the tariffs for network access are unfair, and the view of the incumbents who argue that allowing MVNOs to pay for wholesale access to networks where they haven’t installed their own is a disincentive to investment in underlying communications infrastructure, especially in rural areas.

Michael Lewis is a Toronto-based reporter covering business. Follow him on Twitter: @MLewisStar

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