I’m sure by now everyone who reads this is aware of the upgrade Northwestel has just done to their Internet Packages. I know I was excited even though I am unable to use it where I currently am. They are now offering faster speeds and high bandwidth caps the same as their old packages, which for a heavy user such as myself wonderful news. No longer will I need to continuously check my usage, always in fear of going over.
So that brings us to today and to the article in the Yellowknifer about how SSi considers what NWTel is doing unfair towards them. You see NWTel owns all the cable transporting Internet in to the Northwest Territories and so what SSi does is purchases bandwidth (Internet) as a wholesaler. Now you would think if your are purchasing it in bulk they would be getting the better deal or a more discounted price so that they can afford to resell it to the public. Well that does not seem to be the case SSi says. They believe they are paying 5 times more than what NWTel is offering their Internet Packages for to the public and small businesses. NWTel stated in their advertisements that the rates for small businesses will be going down by 40% and also says that over the last year they lowered wholesaler rates by 35%.
Now personally I have always used NWTel because of a couple reasons. One being it is easy to bundle with cable and second being they offer higher limits and faster speeds. The one thing I do like about SSi though is that portability of their modems. I would also like to point out that the average user does not need more than what SSi offers therefore still making it a semi level playing field. A suggestion would be if you can not match NWTel’s prices would be to focus strongly on something like customer service.
Now as everyone who reads this most likely uses one or the other I would love to get your take on the matter and which provider you use. I can see pros and cons with both and that is the case with most things, how do they affect you?
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What we have is a government granted monopoly, given to Northwestel. That being the case, we can’t presume or hope that market effects will allow the best ISP to rise. SSI is simply outmatched. Northwestel should be required to offer bandwidth at the same price that its own internal accounting system uses to calculate the cost of bandwidth; that is to say: Northwestel and their competitors should pay the same price for bandwidth, even if Northwestel is selling bandwidth to its competitors. Either that, or the government granted monopoly should be rescinded, and real telco/cableco competition should be allowed in the north.
Later today or early tomorrow, SSi will be posting a detailed analysis of the pricing discrepancy mentioned in the article. It will be posted on the SSi facebook page, and it will contain a detailed overview of the pricing gaps.
Here’s a sneak peek of the analysis, just for all the folks at ykonline.ca.
In Yellowknife, retail clients have access to southern-like services (cable) for a 50% cost premium. So, your Yellowknife cable connection would cost you $40.00 in a southern market. In the North, it costs you $60.00. That’s a 50% premium. If you factor in the higher costs of business up here, it’s somewhat reasonable.
I took a look at the same issue, but with wholesale services instead of retail cable. I won’t spoil the surprise just now, but I will say this: it is mathematically inarguable that wholesalers are being charged a significantly larger premium than retail clients. In almost any other market, it is a given that wholesalers will have lower pricing. Here, not only are wholesalers not getting lower pricing, they are paying premiums which are MUCH higher than what you see at the retail level. “Much” is a very gentle euphemism, as you will soon see.
For further clarification, please have a read:
http://www.facebook.com/topic.php?uid=32841190967&topic=10092
Pierre says “the government granted monopoly should be rescinded, and real telco/cableco competition should be allowed in the north”. Check the Industry Canada and CRTC websites – the only “monopoly” that Northwestel has is to provide local access (dial-tone in your home). That’s it. There is no monopoly for long distance, or cellular service or internet. Any service provider is free to invest their money and build a network to provide any kind of internet service they choose. Why do you think they haven’t? Do you think it would have anything to do with the small overall population and huge distances between population centres?
My thanks to Michele for the reply – challenges serve to keep me sharp and force me to dig deeper to separate fact from ideology.
I’ll direct you to the Wikipedia page on Northwestel, which states that “Northwestel Inc. is the incumbent local exchange carrier (ILEC) and long distance carrier in Northern Canada.”
Secondly, I’ll direct you to the Wikipedia page on ILECs:
“ILECs have the same duties of an LEC and in addition:[...]
Resale – The duty
*To offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers
*Not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on, the resale of such telecommunications service,[...]”
I’ll note that the Wikipedia ILEC page appears to discuss only US ILECs, but I couldn’t find any similar documentation outlining Canadian ILEC obligations. Until shown otherwise, I find it reasonable to assume that Canadian and American ILEC requirements are going to be substantially similar.
As I’m sure you are aware, SSI Micro published yesterday that they are paying a 963% premium when comparing their Yellowknife cost to their Ottawa cost. Retail consumers, such as you and I, pay only around a 50% premium. I wonder what the justification is for this massive discrepancy between the two rates. It certainly could appear to one that Northwestel is engaging in predatory pricing.
Now I don’t know what conclusions you draw from this, but it appears to me as though Northwestel’s incentives may be mis-aligned with what is needed to provide outcomes that maximize the public good. I don’t *know* what the solutions are, but I believe that markets can be used to drive innovation and lower costs, and this is where I made my last comment from.
There are certainly more options available to us than a monopoly providing all services (and charging the rents that come with that territory) or nobody providing any service. I believe we should be trying to find ways to enable competition, and I believe the way to do this is by reducing barriers to market entry for new players.