Small ISPs adjust customer plans to accommodate usage-based billing decision

Small Internet service providers (ISPs) are hoping to remain competitive against incumbents as they begin to unveil their revised service plans under the CRTC's usage-based billing policy—but they acknowledge that losing customers is a “definite possibility.” “We are trying our best to be as competitive as we possibly can given these new constraints,” Kate do Forno, director of corporate communications at ISP TekSavvy Solutions Inc., said in an interview. On Saturday, TekSavvy distributed an email to its DSL customers in Ontario saying it has to eliminate its unlimited service plans to reflect the commission's usage-based billing policy. “We hope that between our own efforts and our ability to be able to continue offering superior customer service to our clients, we'll be able to stay on top of that consumer satisfaction trend ... and that will continue to keep our customers with us,” do Forno said. Last May, the CRTC approved an application by Bell Canada to introduce usage-based billing rates for its wholesale residential services. The decision means the incumbents can charge usage-based rates of Internet resellers that lease access to the incumbents' networks. Some aspects of the ruling will come into force March 1. Prior to the decision, many resellers differentiated their products from the incumbents by offering unlimited monthly Internet usage plans, but the new policy means resellers will move towards monthly bit caps. As of March 1, TekSavvy users with the company's 5 Mbps broadband package will have a monthly usage cap of 25 GB, down from the 200 GB or unlimited usage plans previously offered. The cap for users in Quebec will be 60 GB. “We encourage you to monitor your usage carefully, as the CRTC has imposed a very high overage rate, above your new monthly limit, of $1.90 per gigabyte ($2.35 per gigabyte in Quebec),” TekSavvy wrote in the message to customers. “Content and data like Netflix, YouTube, IPTV , large file downloads or other streaming services can consume large amounts of bandwidth and place your cap limits in jeopardy very quickly.” TekSavvy will now offer users an “insurance policy” through which they can buy additional blocks of bandwidth for graduated prices. For example, 40 GB of extra usage will cost an additional $4.75, while 275 GB will cost an additional $55 on top of the base price. Still, TekSavvy's prices remain comparable to those of Bell and Rogers Communications Inc. For $86.95 a month, TekSavvy customers can use up to 300 GB. Bell users downloading the same amount would pay about $80.88 a month. Rogers' plan with the highest usage cap offers 175 GB for $100 per month. Under a 175-GB-per-month Internet plan, users could download approximately 88 high-definition movies, watch 537 hours of high-definition videos and download 35,840 songs. Do Forno said TekSavvy's pricing changes will mean more expensive bills for customers. “A large percentage of our customers are heavy users who exceed the 25 GB monthly cap,” she said. She added that losing customers over the new prices is a “definite possibility,” and said TekSavvy will have to review its services as the full impact of usage-based billing unfolds. In early January, ISP Primus Telecommunications Canada Inc. also said it is revising its prices due to the usage-based billing decision. “The newly associated costs to Primus make the unlimited Internet service you are now enjoying no longer financially viable,” the company wrote in a message to customers. Prior to the CRTC ruling, Primus did not apply usage caps, but as of March 1, the company will offer a monthly cap of 25 GB for $34.95 per month. Users can acquire extra usage under plans ranging from $5 for an additional 40 GB to $15 for 120 GB. In Ontario, additional usage exceeding 300 GB above the cap will cost users $2 per gigabyte to a maximum of $60 per month. Excess usage above $60 will cost an additional $1.10 per gigabyte. Primus' plan remains comparable to Bell's $32-per-month price for the same usage cap, while Rogers offers a 15 GB usage plan for for $36. Matt Stein, vice-president of network services at Primus and vice-president of communications at the Canadian Network Operators Consortium (CNOC), said customers have been “quite upset” over the change. “But they are quick to understand the nature of this is that additional costs are being levied upon Primus,” he said. “They're accepting of it, at least for now.” Stein said the average consumption of a Primus customer is 30 GB per month, adding that the company may lose some of the higher-usage customers because of the new plans and bit caps. “Obviously, we're hoping we don't lose anybody, but unfortunately, realistically, customers that are upset will look elsewhere,” he said. Stein said Primus intends to compete by offering consumers a high-value product. “We're going to compete and still offer a very high-value product. We're going to offer a very good bundle,” he said. Primus' offerings may change as the full effect of usage-based billing takes hold, he added. “We'll keep very close tabs on it. We'll make the changes as times goes. But, at least for now, we're comfortable that our pricing hits the mark,” he said. Stein said the usage-based billing decision will give incumbents a clear advantage over small ISPs because profits from usage-based charges will be directed to them. “As the market shifts, and Internet usage becomes less costly at a basic cost level, but the usage component becomes very expensive, it means more dollars of the consumer's Internet budget will end up in the coffers of big telephone and cable companies,” he said. But Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP) and president of small ISP Eagle.ca, said in an interview that many resellers' clients will see little change after usage-based billing takes effect. Resellers provide services to about four per cent of Canadian Internet users. The most affected, Copeland said, will be the heavy users. “What we're looking at in our own customer base is we're seeing clients that will incur, on average, anywhere from a $5-to-$20-a-month increase in their costs. A lot of people are going to have that charged every month because it's their typical usage,” he said. Copeland said the new caps may threaten some small ISPs' ability to retain customers, adding that Cogeco, which competes in the same territory as Eagle.ca, offers a 60 GB cap. “The idea of local service, small business, and small town, will keep some people from making that move, but there's only so much the pocketbook will stand,” he said. Copeland said ISPs need to educate customers to ensure they understand why they have to pay new prices and conform to usage caps. The incumbent Internet providers argue that usage-based billing is a necessary measure to alleviate growing network congestion. But John Lawford, counsel with consumer group the Public Interest Advocacy Centre (PIAC), said in an interview that a move towards heavier usage is irreversible and that a growing number of consumers will be affected. “People are forgetting that their usage habits are changing ... Everybody's a bandwidth hog now,” he said. “Everyone is going to discover Netflix. Everyone is going to discover that you can get video working on your computer if you have a decent speed.” kfournier@thewirereport.ca

Small ISPs adjust customer plans to accommodate usage-based billing decision

News | February 1, 2011

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