Indie provider Teksavvy to build its own fibre network in rural region
Lower wholesale access rates puts firm in ‘better position’ to invest, CEO says
TORONTO In 20 years of operations, Teksavvy Solutions Inc. has never built its own network entirely from scratch, instead leasing facilities from telecom and cable giants in order to provide internet and telephone service.
But its strategy took a major shift this week with the announcement that it will build a fibre-to-thepremises network in the mostly rural Chatham-kent region in southern Ontario, the type of ultra-fast network on which BCE Inc. and Telus Corp. have spent billions building mainly in urban centres across Canada.
Teksavvy, which has its headquarters in Chatham, Ont., said it will invest $26 million to directly connect 38,000 homes and businesses to the network over 18 months, starting in the centres of Chatham, then expanding to Blenheim, Ridgetown, Tilbury and Wallaceburg. The Municipality of Chatham-kent will spend an additional $6.5 million on an openaccess fibre backbone network that will connect communities in the region.
It’s an unusual move for an independent internet provider — Teksavvy has about 30,000 customers across Canada — as these players typically don’t have the cash to lay fibre at a competitive scale. To save money and avoid building potentially redundant networks, they tend to buy wholesale access to incumbents’ networks at rates set by the telecom regulator.
On a conference call with media this week, Teksavvy chief executive Marc Gaudrault pinpointed the strategic shift on a Canadian Radio-television and Telecommunications decision to significantly lower the wholesale access rates.
“Our costs went down. As a result, we’re now in a better position to be able to do these kinds of investments,” Gaudrault said.
In 2016, the CRTC slashed interim wholesale rates for highspeed internet by up to 89 per cent after ruling the bigger players were charging too much. Bell fought against opening up the networks for resale in the first place, unsuccessfully arguing wholesale access would hurt fibre deployment by dampening the return on investment. The final rates haven’t yet been set, but the process continues.
“This is a fairly large project, and in the absence of properly set wholesale rates that allow us to compete nationally, these local initiatives would certainly be put in jeopardy,” Gaudrault said.
He touted the benefits of highspeed internet for a region with a population of about 107,000 that’s spread over almost 2,500 square kilometres. Residents and businesses need access to “the fastest on ramp there is” to encourage sustainable growth in the area, Gaudrault said.
“It’s critical, we need it, this is where the world is going,” he said.
Yet Teksavvy ’s fibre network will be going up against one that’s under construction by the country’s largest telecom. Just two months ago, Bell announced plans to build a fibre-to-the-premises network of the same size in the region that appears to overlap directly with Teksavvy’s plans. Bell will fully fund its network without public money.
Gaudrault said he doesn’t know the details of Bell’s plans, adding that Teksavvy’s plan has been in the works for more than a year and that it will be digging up the streets to lay its own fibre. It will also allow other providers to buy access to its network, whether it’s one of the big players or another indie provider.
“That’s in the spirit of the internet itself. But I think it’s also in the spirit of properly functioning communities,” he said.
Don Shropshire, the chief administrative officer of Chathamkent, said the region “couldn’t be more pleased” by the investments from both Bell and Teksavvy after years of “modest levels” of service from the providers.
“For us, it’s critical infrastructure,” Shropshire said in an interview, noting that high-speed internet is increasingly needed for advanced manufacturing and agriculture.
The region originally applied for federal funding to build high-speed internet, but was denied. Council voted earlier this year to spend the money earmarked for that fund in concert with Teksavvy’s project.
Shropshire wasn’t surprised to see investments from Bell and Teksavvy given the pent up demand for high-speed internet. Yet he said it’s necessary to invest public money on top of the private sector investments to help sparsely populated areas.
“It’s very difficult to make a business case for why you’re going to connect 1,000 to 4,000 people,” he said. “If you don’t have that type of investment in rural areas, you’ll always be lagging behind popular centres.”
Bell and Teksavvy’s fibre builds come after the Competition Bureau launched a market study in May to determine whether there’s enough competition in the broadband industry. It noted that most homes are only served by two providers and that only 13 per cent of Canadians buy services from resellers such as Teksavvy.
Telecom consultant Mark Goldberg said it’s good to see facilitiesbased competition in a region like Chatham-kent. But he said residents should ask a lot of questions to ensure the public funds are used in a way that doesn’t discourage private investments.
“What you want to do is save public funds for only those places where no service provider will invest money,” Goldberg said.
Regardless, he said it’s good to see Teksavvy taking on the costs of building and operating a largescale fibre-to-the-premises network.
“They’re the hometown team for that region, so that’s certainly something that’s going to make them a serious competitor and serious player in that market,” he said.