Thank you.
Good evening, Madam Chair, vice-chairs and committee members.
Thanks for the opportunity to speak with you.
My name is Andy Kaplan-Myrth. I am VP, Regulatory and Carrier Affairs at TekSavvy.
TekSavvy is an independent Canadian Internet and phone service provider based in southwestern Ontario and Gatineau. We've been serving customers for 20 years and now provide service to over 300,000 customers in every province. We have consistently defended some very simple values concerning the Internet. We believe in affordable, competitive access to the Internet, and we have consistently defended network neutrality and our customers' privacy rights.
TekSavvy invests in building broadband networks in southwestern Ontario, as well as delivering services across Canada, using wholesale services that we buy from incumbent carriers. Wholesale-based competitors like TekSavvy serve more than one million Canadian households and businesses, and we act as a competitive alternative for countless more.
For more than 20 years, with mixed results, successive governments have worked to nurture telecom competition, but the entire framework is at a breaking point, and competitors are at risk of disappearing. If we don't act to protect broadband competition now, then we risk coming through this pandemic with a more expensive and a less competitive market for Internet services.
As you know, the CRTC sets the rates we pay for the last mile of broadband services. Those rates are required to be just and reasonable, fully compensating incumbents for the cost of their investments. In an important decision last year, based on years of study, the CRTC dramatically lowered wholesale broadband rates. The commission also ordered that incumbents pay back the difference between the inflated rates and the final rates going back to early 2016, an amount that's estimated to be around $350 million that competitors collectively overpaid to incumbents.
We knew the incumbents might appeal that decision, but we decided that Canadians deserved the benefit of those lower rates, and we immediately reduced our prices. Other competitors did as well. Of course, phone and cable companies have launched multiple appeals of those final rates and, meanwhile, they're charging us the old inflated rates. As a result, going into 2020, we were already losing money, but rather than raising prices on our subscribers, we decided that we were in a strong enough position that we could stay the course and lose money for the next year while we defend the appeals.
With COVID-19 and the move to work from home, a reliable residential Internet connection is more important than ever. To support our subscribers, we immediately suspended any charges associated with exceeding bandwidth limits, but the main impact of COVID-19 has been to exacerbate those pre-existing rate problems. In particular, to address the increased traffic generated by people working from home, we have significantly increased the capacity we buy from incumbents, all at the old inflated rates. Revenues are essentially flat while our costs continue to mushroom.
We had expected to carry financial losses for up to a year while the incumbent appeals played out, but the impact of COVID-19 effectively put us where we had expected to be at the end of this year. To manage those costs, TekSavvy has taken drastic and painful steps, laying off almost 30% of our workforce and increasing service prices by $5 a month. We have also had to delay planned investments in rural networks. This is a perverse outcome. Those underserved areas ought to get service more quickly because of COVID-19, but instead their service will be delayed unless the government steps in to fill in the funding gaps.
TekSavvy strongly encourages the government to take a long-term view even while addressing the immediate pressures of the COVID-19 public health crisis. This must be a competitive market that serves the needs of all Canadians and should not be replaced with monopoly markets.
From TekSavvy's perspective, the COVID-19 pandemic has not, on its own, created problems for competitors; rather, the foundations of the regulatory regime that support wholesale-based competition were already crumbling, and COVID-19 is adding stress and exposing just how dire the situation is.
Thank you for your time.
I look forward to your questions.