A Perfect Storm of Market Forces Affecting ISPs

A recent post at Seeking Alpha provides a good overview of the challenges that telecoms and ISPs face in Canada from an investor perspective. The picture it paints doesn't look very positive.

A recent post at Seeking Alpha provides a good overview of the challenges that telecoms and ISPs face in Canada from an investor perspective. The picture it paints doesn't look very positive.

It reveals how competition from new services such as Netflix has undercut the ISPs' own video subscription and rental services. In response, ISPs have chosen to lower caps on people's usage and meter their internet. In addition to this, they have lobbied the government for increased regulation of these newcomers to lock them out of the market.

In addition, the ISPs' closely-held monopoly on the distribution of content is increasingly being challenged by net-savvy users who circumvent broadcast restrictions and geofencing and find ways to access that content by other means.

These anti-competitive practices are alienating the ISPs' customers. Their efforts are resulting in internet that is far more expensive with far more limits on the content that their customers can access. The article mentions something that we all know - that Canadians are feeling gouged by the business practices of the ISPs and that they want the CRTC to step in and stop the meter. People are tired of being forced to pay more when the service they are getting has not improved.

It's clear that there isn't enough competition in the market to provide the range of services that people want. Some have called for the relaxation of foreign ownership rules to deal with this problem. Others, including OpenMedia.ca are calling for functional separation, the breaking up of vertically-integrated companies into their component parts.

Both have the potential to have far-reaching consequences for Canada's media ecology so it will be interesting to see what the government ultimately takes place.

Read the article here.