Posted by Eva Prkachin on Tuesday, January 13, 2015 – 12:20

As you may have heard, Shaw is trying toabuse their control of key Internet infrastructure to increase Internet prices for Canadians who subscribe to independent ISPs. Not only are Shaw taking advantage of their own customersby cranking up prices for their Internet, they’re also trying to force competing ISPs who rely on access to Shaw’s networks to artificially raise their prices as well.

To give you a detailed account of what this means for independent ISPs, we turn to Ning Yan, the CEO of a new start-up indie ISP called Juce. You can learn more about their soon to launch service at http://www.juce.ca/.

As you’ll see in the Q&A below, the pricing changes could be dire for smaller ISPs, and come as a result of rules that favor our legacy Big Telecom providers, allowing them to block Canadians from independent and affordable alternatives.

To find out what this means for small and start-up ISPs like Juce, we encourage you to take a deep dive into the Q&A below. Now, over to Ning with more on this!

–Josh (@jdtabish)

Shaw Price Hike Q&A with Ning Yan, CEO of indie ISP Juce:

What are these access rates? How do they work and why do Indie ISPs have to pay them?

To sell Internet services as an independent ISP, we have to purchase access from large telecom providers like Shaw. Now, the access rates Shaw is threatening to change only represent costs for what’s called the “last mile”, from the end-user’s house to a Shaw’s interconnection point. This portion of the network by itself includes no internet connectivity. And, as a result, we need to stress that these access costs only represent a fraction of the total cost that indie ISPs need to pay to deliver internet to customers. So these changes to rates are a big deal.

In addition to these “last mile” costs, Indie ISPs need to pay incumbents separately – or lease/buy our own fiber – for data transport from that Shaw interconnection point to an Indie ISP’s central location where network equipment is located. If we want to cover a large area, we need to connect to many such interconnection points.

Finally to have broader Internet connectivity, we need to pay additional access costs to connect to the global Internet backbone. Indie ISPs are often labeled as “resellers” of incumbents which is very inaccurate. We need to build and maintain our own network and we use incumbents’ network only for the “last-mile” access to the end-user’s house.

So the more money incumbents charge us for the “last mile” access, the less money we have to pay for data transport, Internet connectivity, equipment investment & maintenance, customer service and everything else. Take the Internet 60 for example. Shaw is proposing to charge us $73.70 for last mile access while it is selling the same service to its retail customers for $90.

So even if we charge our customers the same price as Shaw for Internet 60, that will only leave us only $16.30 to pay for all the other costs mentioned above. 82% of the revenue went directly to pay for last-mile access, leaving only 18% to pay for the rest of hundreds of miles of reach global internet. Our costs to deliver Internet 60 far exceed $16.30 and we typically have to offer prices lower than incumbents to compete so in reality, we cannot offer this service at all.

The same can be said about all other rates Shaw proposed with exception of maybe the new 5 Mbps service. But how can indie ISPs be expected to compete armed with only a 5Mbps service offering? To put this in perspective, you can get 1 Gbps internet that is 1000Mb/s in Hong Kong, Singapore for about $50, about same price we pay for the new 5Mb/s plan here in Canada.

For reference, here are some examples of Shaw’s access cost hike for independent ISPs:

How much impact will this have on independent ISPs?

Speaking from the perspective of a new start-up independent ISP (we plan to launch in March 2015), if this new tariff gets approved as-is, we will be forced to shut down business. Simple as that.

These new tariffs are prohibitively high at every service level, there is no way for us to operate at all. It will be very difficult for indie ISPs to provide service to anyone other than existing customers on grandfathered plans – as they will be unable to sell any of the new plans to customers due to the prohibitively high tariffs. One  exception could be the new 5Mb/s plan, but who would want to buy that?

To put this in perspective, you can get 1 Gbps internet (that is 1000Mbps) in Hong Kong, Singapore for about $50, about same price we pay for the new 5Mbps plan.

Will indie ISPs be killed? Will we be stuck with a duopoly between Shaw and Telus in western Canada?

The consequence of these new rates getting approved is in my opinion even more disastrous to independent ISPs than the controversial “metered Internet” (or “Usage Based Billing”) controversy in 2011, which saw over half a million Canadians participate in the largest online campaign in Canadian history, Stop The Meter, led by OpenMedia.

Last time our ability to offer unlimited usage was challenged, this time our very existence is being challenged.

Why introduce new plans? Why not just hike rates for existing plans?

The existing access rates for indie ISPs to access Shaw’s network were approved and finalized by CRTC at the end of the 2011 Usage Based Billing process which received much public attention.

Some of the existing access rates are also horrible, for example the last-mile access cost for Broadband 100 is $91.25 (last mile access only, no data transport from interconnection point, no internet connectivity), while Shaw themselves sell the full service BB100 to retail customers for $90. So indie ISPs would actually be better off buying from Shaw retail than through CRTC tariffed rate for BB100 – which is ridiculous.

But some existing access rates are more reasonable and could allow indie ISPs room to offer Canadians alternatives. Take the example of the existing access rate for 25Mb/s for example is $22.45 (access only, no data transport from interconnection point, no internet connectivity). Teksavvy for example is able to offer this speed at $39.99, and Juce can also offer this speed at similar price once we launch.

Those old access rates were already approved and finalized by CRTC, and those are pretty hard to challenge. One way for Shaw to get around this is to introduce new plans with slightly modified speeds (with much higher prices of course) and discontinue the old plans. This will allow them to start a new proceeding to try get rates approved, which is what is happening right now.

The new plans Shaw rolled out turned out to be very unpopular to Shaw’s own users as well and caused some major discontent. It is really sad to see the Canadian Internet landscape turn out this way. Just a mere three years ago, Shaw was still on the leading edge of innovation. It was the first cable operator in North America to deploy 100Mb/s in 2011, fastest in North America at the time. This was followed shortly after by introduction of the 250Mb/s. Then we went from 250Mb/s to 100Mb/s to 60 Mb/s, and indie ISPs are essentially forced to only offer 5Mb/s.

Why you started Juce and what are you going to do?

I missed the awesome internet I had in college. Stanford University Network (SUN) is one of the best run in the world. It was run by the guys who later founded Cisco (Cisco’s first router actually used replica of a router being used at SUN and the router software was written by some other guy at Stanford medical school which later formed basis of Cisco IOS). The network was really really fast. SUN powered the Larry’s original Google web crawler project until it was using up almost 80% of network resources and the university kicked them off the network. Anyways, the same network is available in our dorms as well, so I “sometimes” would play online games and my ping was unreal (let’s just not talk about my grades or what I learned in college). 500MB file downloads would complete in blazing seconds, and this was 2005.

After I came back to Canada, I had hard time adjusting the internet we have. Pings were horrible and I quit gaming entirely (good thing?), and the speeds were nowhere near what I had before. This led me to idea of starting an ISP and try do better.

I was also very much inspired by Teksavvy and their CEO Marc Gaudrault. Their honest and transparent approach is breath of fresh air compared to large incumbents. However, they are based in Ontario where much of their focus is on. I’m from Victoria, BC and BC is home for me. I wanted to start a similarly friendly ISP here in BC and we will be focusing exclusively on BC.

Juce has been in the works for about little over a year now. Up until this Tuesday, I was still working with our technical teams on our network implementation, finding ways to improve redundancy and reliability of our network, getting our back-end billing engine to integrate with user portal and getting whole website ready for launch in March, etc, etc. Then this tariff notice I got from Shaw on Tuesday kind of forced me to shift gear immediately and focus on this. We will definitely be fighting this. How this tariff process unfolds at CRTC is a matter of life and death for us.

Right now, the CRTC is deciding rules that will determine the future of indie ISPs in Canada. In December, we brought the perspectives of over 30,000 Canadians, straight to decision-makers at the CRTC. You can learn more about how that went here, and can speak out against efforts by Big Telecom to block Canadians from new services athttps://UnblockCanada.ca/