I took a fresh look at the Statistics Canada Internet Use Survey results and it seems to support my oft expressed view that we need to consider a way to support internet use based on affordability.

Statistics Canada is reporting that the urban / rural divide describes a difference of 83% use of the Internet in communities of 10,000 or larger, versus 73% use in smaller communities. The national average is 80%.

On the other hand, 94% of people from households in the top quartile of annual income (those over $85,000) use the internet versus just 56% of those from household in the lowest quartile (less than $30,000). The income-based digital divide includes users from rural and urban communities and represents even more consumers that need to be brought on-line.

Since the opening remarks of The 2008 Canadian Telecom Summit, I have been suggesting a needs-based direct user subsidy as a better approach to expand broadband adoption.

We propose that the government establish a sustainable program that helps lower income Canadians to pay what it costs to provide service, regardless of means. Our tax system is already structured to be able to offer such subsidies and there are even mechanisms to differentiate based on geography.

This kind of approach would use the AWS auction windfall to stimulate economic investment in broadband infrastructure by regional and niche service providers. It represents a way for the government to re-invest money generated from the telecommunications industry, back into the industry to help bridge the digital divide and render broadband affordability a non-issue.

I have long felt that it is patronizing (although clearly politically expedient) to target subsidies based solely on geography. Just because the cost is higher in some regions doesn’t mean that all residents need or deserve public subsidy for their communications services.

Should  the government anoint a defacto “official supplier” in high cost serving areas, with taxpayer grants to the winning service provider that effectively prevent competition from ever bringing benefits to these areas?

We need to find a way to bring internet into the homes of the Canadians who need help the most, regardless of their geographic location.

Harvard’s Berkman Centre was commissioned last year by the FCC to produce a report on international broadband deployment and usage. Its report was widely reported as being damning to the broadband industry structure in Canada and criticisms of the report were ridiculed based on the interests of funders of contradicting studies.

We pointed out numerous times that the report re-hashed flawed OECD studies [for example: here, here, here, here, here].

It turns out that Harvard’s researchers got it wrong when looking at one of the fundamental inputs that led them to conclude that American and Canadian regulatory frameworks need to be overhauled to support for European-styled open access, rather than the facilities-based platform competition enjoyed in North America. 

Yesterday, Bell Canada was asked by the CRTC to place on the public record a letter it sent to the Berkman study author, Yochai Benkler. The Berkman study had been made part of the record of a CRTC proceeding looking at mandating wholesale access to high speed services.

Two of the central themes of the Berkman study have come under question during the CRTC proceeding. First is the assertion that Canadian speeds and prices are too high. The CRTC commissioned its own study that appears to contradict this point.

But a more fundamental assertion of the Berkman study used erroneous pricing data to support its conclusion that Canada’s entire regulatory framework was flawed. Berkman said:

During the first generation transition and to this day, Canada has had some of the highest regulated rates for unbundling anywhere in the OECD.

And later, Berkman said:

Indeed, Canada has the highest monthly charge for access to an unbundled local loop of any OECD country.

Bell Canada has been trying to replicate the data that led Berkman to its conclusions. And according to the letter sent to the author and filed by Bell, Berkman didn’t look at the underlying data properly.

Bell Canada’s territory is divided up into seven (7) rate bands, specifically Bands A through G. Although Rate Band D is the middle rate band it represents only two percent (2%) of Bell Canada’s ULL, and is mostly associated with small towns and rural areas. Ninety percent (90%) of Bell Canada’s ULLs fall into Rate Bands A and B, the two least expensive rate bands for ULL.

So the Harvard study appears to have used Band D as a proxy for the average Canadian unbundled loop price, not knowing that it was actually completely unrepresentative of the Canadian marketplace.

As can be seen from the tables above, Bell Canada’s weighted average monthly ULL rate is among the least expensive in the OECD data set, with only five countries having lower ULL rates.

This critique seems to echo problems identified by NTT last fall which said that Berkman misrepresented the Japanese situation, a problem that could have been cleared up with a simple phone call.

As NCTA said in its criticism of the Berkman study, the authors abused their academic standing:

The Berkman Report, in short, is an advocacy piece, not the work of dispassionate scholarship that the Commission requested.

As I indicated yesterday, Len Waverman, Dean of University of Calgary’s Haskayne School of Business and author of the Nokia Siemens Networks Connectivity Scorecard will be speaking at The 2010 Canadian Telecom Summit next week. On June 8, we will host a number of sessions helping to develop strategies for Canada’s digital economic future.

Over the past couple weeks, I have had a couple occasions to dust off my old college statistics books because of sampling methodologies that lead to questionable results being published.

In the first instance, there was the result from a Harris/Decima survey published in a May 20 press release from Rogers. At the bottom of the release, there was language that may have been missed by many because it reads like boilerplate:

The data was gathered between May 6th through May 9th, 2010 through Harris/Decima’s weekly teleVox, the company’s national omnibus survey. A representative sample of 1,000 Canadians were surveyed, of which 653 own a mobile phone and 283 send at least one text message a month on average. The corresponding margin of error for mobile phone owners is +/-3.8%

Rogers was trying to look at how text messaging enthusiasts use the service and whether these types of customers want to do more with SMS messaging. Harris / Decima thought that they could get a representative sample from their weekly Televox poll. Problem is that their pool of candidates for sampling only includes listed phone numbers and the company has acknowledged that this would exclude the pool of Canadians that have gone wireless only. I would think that wireless only households are different than the average – in use of features, volume of minutes, demographics. All sorts of ways that make it clear that the Harris / Decima study was not a representative sample when it was wireless phone behaviour being studied. 

The other study that caught my eye was a recent release of a Net Index from Ookla.  The usual folks are again bemoaning Canada’s ranking in the study – 32^nd. The statistician in me said to look at the numbers.

When you click on the country name, you get additional details. Canada shows up with an average download speed of 7.92 Mbps. The tests were drawn from a pretty sizable pool: 

Tests from 4,801,628 unique IPs have been taken in this country and of 25,424,152 total tests, 959,172 are being used for the current Index.

That is an impressive result. Nearly 5 million unique IP addresses have used Speedtest to create a pretty good dataset to examine. That is in the order of half of all internet connections in this country.

For the United States (ranked 28), nearly 31M unique IPs are in the pool, a smaller proportion of all of their connections, but still pretty good size – in fact, a pretty awesome pool. But look at number 1 ranked South Korea. Only 201,000 unique IP addresses in the sample – one 25^th of the number for Canada, despite having 50% more total broadband subscribers. Just 33,000 were used for the index.

Number 4 Japan has only 336,000 unique IPs in the sample pool, one 20^th of the representation for Canada despite Japan having 3 times the number of broadband subscribers. Only 67,000 were used.

Why?

Why is the pool of tests so much broader in Canada? Does the breadth of the sample skew the data? 

Unfortunately, there don’t seem to be enough people who bother to look behind the numbers.

The Digital Economy consultation recognized the limitations of many of the international studies when it said “international comparisons should be treated with caution.” But that appropriate caveat was unfairly ridiculed in a recent opinion piece in Telemanagement.

It’s already a tough job to figure out which way you want to go when we develop our digital strategy; it is especially hard if we’re being given questionable data as to a starting point.

Len Waverman, Dean of University of Calgary’s Haskayne School of Business and author of the Nokia Siemens Networks Connectivity Scorecard will be speaking at The 2010 Canadian Telecom Summit next week.

For the past 6 months, Rogers has been beta trialing Rogers on-demand online (RODO) video platform.

Earlier this week, the beta tag came off and the service was fully productized with a few innovations. First off, Rogers will now make some of the videos open to the general public, while restricting other content, such as live streaming capabilities – sporting events and concerts – exclusively to Rogers customers.

I noticed a media advisory yesterday that hints at what this could mean for World Cup fans. Last week, Blue Coat issued an advisory, asking if companies were ready for the impact on network performance from next month’s football championships. How will internet service providers manage the loads on their networks? Will corporations be able to preserve network integrity while employees keep video streaming windows open in the corner of their desktop?

As I observed last fall when RODO launched its beta:

RODO brings quality video (contrasted with user generated) to Canadians, with full licensing of the content. It is a different business model from the many of the popular US services – such as Hulu – but it recognizes the need to provide value to all the players in the food chain, while giving customers access to the content they want.
…
By authenticating the user and using ad support, there is tremendous knowledge about the viewer available for improved targeting of consumers – increasing the potential for higher rate ads.

On June 7, David Purdy, Rogers VP Video Product Management will be speaking on a panel at The 2010 Canadian Telecom Summit, examining next generation business models for the communications industry. Other sessions will explore managing customer experience in a broadband connected world.

Have you registered yet?

The CRTC is holding an oral hearing next week, “Proceeding to consider the appropriateness of mandating certain wholesale high-speed access services.”

In other words, which facilities will the CRTC require phone companies and cable companies to unbundle and offer to competitors on a wholesale basis. Some competitors have suggested that the competitive industry is at stake in these hearings. I don’t think so. There are at least two options available to smaller ISPs should the CRTC rule against their proposals – and I would be happy to discuss these with my clients.

Is mandated access to wholesale high speed service in the public interest? I was the facilitator for an executive development session at University of Toronto yesterday. One of the presenters referenced a quote from Professor Emeritus Theodore Levitt of Harvard Business School:

People do not want quarter-inch drills. They want quarter-inch holes.

Having hundreds of competitors is not (or at least should not be) the objective of government policy. Rather, it is the competitive marketplace that delivers benefits for consumers.

To paraphrase Professor Levitt, consumers don’t want lots of competitors; they want advanced, innovative services at a price they consider to be fair value. The policy and the regulatory framework needs to examine what is the right framework that encourages innovation and investment by various market participants.

Next week’s hearings will explore these issues and there needs to be focus on the what the proposals mean to consumers: residential and business. 

These issues are among many to be hotly debated and discussed at The 2010 Canadian Telecom Summit, opening in just 10 days, June 7-9 at the Toronto Congress Centre.

Your colleagues, clients and competitors will be there. Have you registered yet?