Canadian Internet Is Possibly Getting More Expensive and Slower

A whistleblowing employee in a Canadian telco is sounding the alarm on Reddit.

Dec 19 2014, 12:00pm

​Image: Mack Male/​Flickr

A Canadian reddit poster claiming to be a Shaw employee—one of Canada's premier telcos—with news about new internet rates created a stir online this week by posting what looked like advance details of upcoming rate plans.

The rate plans appeared to change the pricing schemes so that new customers would pay equal money for slower service. Existing customers, whose rates will be going up anyway, would be grandfathered on their old plans—with updated prices showing an obvious path for upsell to the new rate tiers.

Shaw Communications spokesman and VP External Affairs Chethan Lakshman denied that customers would be getting a bad deal, but did confirm the existence of new rate packages. He insisted that Shaw was upgrading all their plans, but couldn't speak to pricing details or comment about the accuracy of the leaked figures.

Some customers immediately took to rage-posting on the company's community forums,

pointing to a domain, which has been the subject of a DMCA complaint by—you guessed it—Shaw.


Customers are angry because they say phone reps initially indicated that the leaked rate plans may resemble what a reddit poster pointed to in a chart below:

If this chart bears any resemblance to reality, it's easy to see where the outrage comes from. A user with a fixed $60 budget for internet service, for example, would receive 25Mbps service today (before being swiftly brought up to $67 per month by the impending rate hike).

But take that same $60 in January, and it only buys you a 15Mbps plan. Dollar for dollar, this means that the same budget now buys you a 40 percent slower service.

This speculation is all hypothetical, since no pricing details exist for the new packages, which are almost all faster than current ones. "We're actually going to be upgrading service for our customers, so this is a good news story for us," said Lakshman, who also confirmed that a new 120 Mbps service will be coming online to take the top spot.

Regardless of what shakes out—or any response Shaw may take to the backlash—this news reaffirms the poverty of choice in Canada's broadband market. In most markets, there are two or three options at most. Independent providers control about eight percent of the market but largely find their customer bases in urban areas. Experts aren't sure whether competition is doing enough to check monopolistic price-gouging, but bill-payers could probably come up with an answer.

While Shaw is introducing a new plan at the bottom for 5 Mbps connections, the US FCC just mandated 10 Mbps as the minimum for new rural broadband speeds. For the average subscriber, a bump from 25 to 30 Mbps, while being a 20 per cent increase, is still going from one small number to the next by world standards.

ISPs in leading countries like Sweden and Korea offer 1 Gbps download connections on wired connections, or 300 Mbps download on mobile connections. For reference, 1 Gbps is 33 times faster than 30 Mbps, and often, those Swedes and Koreans are paying about the same as your average Canadian for a much faster service.

Like other Canadian ISPs, Shaw justifies price hikes by invoking a need to "support continued investment in building and supporting the Internet experience you need now and in the future."

I'll be the first to agree that more investment in infrastructure is a good idea. But there's a messaging challenge here. Company profits are up 64 percent, executive compensation has been described as "excessively generous," and pension benefits to the top 15 execs are worth $487 million.

In the face of these numbers, it's a difficult public relations job to say with a straight face that customers should bear the brunt of the investment costs for service upgrades, especially when those upgrades just aren't too impressive by industrialized world standards.

It's also perplexing as to why prices for internet services keep outpacing inflation when the cost of transporting data on the internet keeps going down every year. Perhaps there's a giant buildout of very fast fiber-to-the-home technology in the works, but I wouldn't bet on it anytime soon as that's exactly the type of thing an ISP would want to point to.

Lakshman's statement about a service upgrade for customers may be true, but those on the receiving end may not feel that way. Objective calculations aside, it just doesn't feel good to be pushed into paying more for a 5 Mbps upgrade you never really asked for. In the words of an angry poster in the Shaw community forum,

"Shaw markets its product as having fast internet speeds to allow customers to handle the kind of traffic that a modern family has. But when those customers actually use the service as advertised, suddenly that becomes a drain on your infrastructure. Your company sells a product, apparently expecting that few people will actually use it. And when they do use it, Shaw has the gall to want to charge more for servicing what should have been covered in the original pricing."

As Canadian digital policy expert Michael Geist points out, the overall media landscape here has always been approached by governments and regulators as distinct silos: telephone, broadcast, internet, and "content creation." But now that so much of these roles are filled by the same large, vertically-integrated media conglomerates, it's time to look at them in a more holistic way.

Canada emerged as one of the top 10 most expensive nations for broadband

Under this approach, we might speculate that Canada's giant ISPs, themselves just divisions in larger companies, have been tasked with picking up the slack from falling cable TV subscription numbers. After all, shareholders want profits growing, not static.

In addition, with new content providers like Netflix growing by the day, the conglomerates behind ISPs understandably want to extract as much revenue as they can from transporting this data to increasingly bandwidth-hungry Canadians.

Perhaps the most damning evidence for why Canadian broadband internet needs a shot in the arm comes from a 2013 report from the OECD, the economic club for rich countries. Canada emerged as one of the top 10 most expensive nations for broadband.

What's more, 18 out of 30 countries on the list saw internet speeds go up and prices go down since 2005. In one extreme example, Czech internet speeds grew by 20 times from a pathetic 1Mbps to 20Mbps, while the consumer cost dropped 80 percent.

Canadian internet users did benefit from 3 times speedier service (15Mbps), but that came at a slightly increased price, along with bandwidth caps.

The government's digital economy plan doesn't inspire much confidence for those who are concerned about download (and upload) speeds lagging behind. Apart from a few good deals in urban areas, the broadband market also seems to be failing to deliver value comparable to countries that were busy kicking the Russians out only 25 years ago.

The considerable grief generated online by this week's "leak" isn't unique to Shaw—it's a product of a broadband market where too many customers feel trapped among a few disturbingly similar offerings, and where price growth outpaces satisfaction.

Nor is the problem unique to Canada. This year's Nobel prize for economics went to a researcher who's devoted his life to studying monopolies. With the conventional policy ammunition running dry, perhaps it's time Canada's consumer-focused government tried out a few new ideas in their long search to deliver some much-needed bill relief.

Christopher Malmo is a grassroots development coordinator at Follow him on Twitter: @chrismalmo