Canadians benefit from independent ISPs competing with big internet networks: study

Smaller internet service providers play an important, positive role in Canada’s telecom market even though only a minority of consumers chose one of them over a major phone or cable company, the Competition Bureau concluded in a report issued Wednesday.

The federal governmental 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 facilities-based carriers 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 federal agency found that one million Canadian households get their internet or broadband service from dozens of independent ISPs that it calls “wholesale-based competitors.” These providers, such as TekSavvy, Distibutel and VMedia, buy capacity on another telecommunications company’s network at regulated rates.

“Under this wholesale access regime, independent competitors gain access to parts of existing telephone, cable, and fibre optic networks at regulated wholesale rates, and in turn use these connections to serve consumers in direct competition with network owners,” the report says.

“In these respects, the wholesale access regime appears to be fulfilling its promise to bring about greater consumer choice and increased levels of competition for Canadian consumers.”

The report concedes, however, there’s a “significant exception” in remote and rural areas of Canada, where consumers typically have “fewer, and less modern, options for internet services.”

For example, it said, about 99 per cent of Canadian homes in large population centres have access to internet transfer speeds of at least 50,000 bits per second (50 Mbps), only 37 per cent of rural and remote homes have such access.

The Competition Bureau’s report on broadband services — primarily delivered over copper and fibre optic land lines — comes as the telecom industry, consumers, politicians and regulators grapple with significant technology changes.

The wider deployment of fibre optics into residences, for instance, has tremendously increased the potential speeds of home internet to one gigabit per second or higher.

Similarly, the arrival of fifth-generation wireless networks and low earth orbit satellites (LEOs) have been seen as potential conduits for internet speeds comparable to or faster than older copper landlines.

In addition, the Canadian Radio-television and Telecommunications Commission is studying the possibility of requiring facilities-based wireless networks — also owned by phone and cable companies — to provide wholesale access.

The Competition Bureau’s report, however, says it remains to be seen how 5G wireless networks will be deployed, given that nine-in-ten Canadian households get their internet over telephone wires, coaxial cable or fibre optics.

Given the expense of building and maintaining landline networks, the bureau report “underscores the importance” of setting wholesale rates at the correct level for both the phone and cable carriers and the independents.

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