GATINEAU – Increased network costs, significant growth in bandwidth usage and outdated cost studies are three of the main reasons Shaw Communications has had to raise its Third Party Internet Access rates, the company said in a filing to the CRTC last week.
In response to questions from the Commission on Tariff Notice 22 (TN 22) as well as comments from a number of independent ISPs, the Calgary-based media and communications company offered additional details on the costs behind its TPIA services. In the February 19 submission, Shaw said it only stands to reason that wholesale broadband rates would increase as a result of huge traffic growth and higher network investments.
“For the past several years, Shaw has experienced 50% compound annual traffic growth per year on our network. Therefore, the costs associated with providing reliable, high-quality Internet services have changed significantly since Shaw’s wholesale rates were last reviewed by the Commission over five years ago,” the company said.
Much of the specific data involved in Shaw’s TPIA rates was redacted for confidentiality reasons. The company did, however, provide some colour. For example, it changed the total end-user demand growth to 4% annually and TPIA share of total demand of 5% by 2020. As well, annual growth in bandwidth increases by an unidentified amount (this figure was redacted) in years one and two and then is constant at 20% annually for the remaining 8 years of the cost study. The annual capital cost unit changes to minus 10% for equipment.
In a second document that goes through many of the services and specific network elements required to provide TPIA, Shaw explained where costs have been added. In many cases, these costs weren’t included in the previous model.
Previous comments from Vmedia Inc., the Canadian Network Operators Consortium (CNOC), Juce Communications and others claimed that Shaw’s proposed tariff rate increases were out of line with economic reality (see Cartt.ca story HERE). They noted that the significant wholesale broadband cost hikes, some of more than 125%, don’t make sense particularly since the margin between TPIA and retail rates is quite small. They added that other cable companies haven’t proposed such high TPIA rates.
Shaw countered that comparing its TPIA service prices with those of others is misguided.
“Simply comparing Shaw’s proposed monthly rates… with those of a service provider using capacity-based billing based on current usage levels, as VMedia has done, is inappropriate and misleading.” – Shaw Communications
“Simply comparing Shaw’s proposed monthly rates in TN 22 with those of a service provider using capacity-based billing based on current usage levels, as VMedia has done, is inappropriate and misleading. Comparisons between flat rate services and those with variable usage components are ‘apples to oranges’ comparisons, particularly if one looks only at current usage levels,” the company said.
Shaw added that whereas some wholesale broadband providers have both access and usage components in their rates, the company employs a flat rate approach. This means that while the rates may be higher in the near term, they will stay the same over the life of the tariff.
“The Shaw flat rates are set to recover both access and usage costs over a ten year study period, and therefore incorporate the costs of meeting the significant growth in usage over that period. The rate will remain constant, i.e., the proposed flat rate per month will apply to today’s current usage levels, as well as those next year, and those the year after, and so on,” the company explained.
As an interim step to provide time to assess Shaw’s costing methodology, CNOC has suggested that the commission set the Internet 30 TPIA rate at the same level as the existing Extreme Speed 25 service. Shaw responded by noting that the 25 Mbps tier was actually set according to a cost study for the 15 Mbps service. This was recognized in Telecom Order CRTC 2012-298.
“The rate did not compensate Shaw for providing the existing 25 Mbps service at that time. It follows, therefore, that this rate would not be compensatory to Shaw for providing the new 30 Mbps service,” countered Shaw.
The communications firm also took issue with competitor ISP suggestions that rates proposed in TN 22 are somehow anti-competitive or run amok of the Commission’s Phase II costing methodology.
“If the Commission were to adopt the arguments of the interveners, it would confer an unfair competitive advantage on independent ISPs, while denying Shaw the ability to recover its costs of providing the wholesale service. This would contradict well-established costing and regulatory principles, as set out in the Telecommunications Act (the “Act”) and the Policy Direction,” argued Shaw.
Parties can file comments on Shaw’s responses to the CRTC’s interrogatories by March 11. Shaw can file reply comments by March 23. Last week, Shaw also filed a tariff for Internet 120.
