Last week, I looked at “The evolution of broadband services” and I thought it would be worthwhile to examine some of the implications of those trends.

As we saw in the subscriber growth figures, the overall market is maturing as broadband penetration rates approach saturation. That has important implications for industry participants. Recent investment analyst reports have highlighted the challenges for some carriers facing slowing growth, such as BMO Capital Markets February 23 report (Soft Q4 Reflects Mature Market) and Scotiabank’s February 24 report (Quebecor – Expansion Strategy Is Needed To Return To Growth). BMO wrote

Quebec market mature and competitive. Quebecor’s results over the past six quarters reflected a slowing growth profile based on two dynamics; 1) the maturation of its wireless franchise (which has reached its natural level of 25% share in a four player market); and 2) increased wireline competitive intensity as BCE is aggressively capturing share (reflecting its scale in its FTTH fibre footprint).

How can service providers grow their businesses in such an environment?

Let’s take a look at the CRTC data showing the evolution of consumer broadband services.

Consumers are choosing to subscribe to higher speed services, with three quarters of Canadians subscribing to broadband services delivering download speeds of more than 50 Mbps in the third quarter of 2022; sixty percent subscribe to speeds over 100 Mbps, up 10 percentage points from a year and a half earlier, when only half of Canadian households subscribed to broadband services over 100 Mbps.

Consumers have demonstrated a willingness to pay for faster broadband. That requires investment, but it is investment that pays off with higher revenues. Therein is one of the common sophomoric errors made by some telecom industry critics who confuse price with ARPU (Average Revenue Per User). In fact, the price of higher speed services has declined over time, which is one of the reasons that more consumers are electing to upgrade their connection to a faster service. Between third quarter of 2019 and third quarter 2022, average monthly downloads nearly doubled (from 204.8 GB to 394.4 GB). In the same three year period, average monthly uploads increased nearly 50% (from 25 GB to 34 GB).

The mix of customers at each product tier has changed for many carriers, transitioning toward higher speed premium services as consumers select a connection that delivers the best value for their steadily increasing connectivity needs. The Scotiabank report observed that Bell is spending close to $20B on its FTTH (Fibre to the Home) strategy, to bring FTTH to 9 million premises by 2025.

One way a carrier can grow its business is by investing, perhaps to be able to offer more advanced services, or to expand networks to underserved areas.

Another approach is by acquisition. As some industry participants look at the capital investment required to upgrade their services portfolio, some choose to exit, which may be a driver for many of the recent acquisition in the Canadian broadband market. Faced with the increased competitive intensity described by BMO, some ISPs have been acquired over the past year by bigger, facilities-based carriers. A Scotiabank report dated March 6 suggests that third party internet access (TPIA) and fixed wireless access (FWA) are tools that may enable mobile wireless carriers to offer bundled services beyond their traditional home territory.

Videotron is looking to expand the geographic reach of its mobile and internet services into Ontario and Western Canada by acquiring Freedom Mobile and leveraging the expertise of recent acquisition, VMedia. As BMO wrote, “The reality likely is, not only does Quebecor want the Freedom transaction, it NEEDS the Freedom transaction.”

It is a natural evolution of a maturing market.

Businesses operating in maturing markets need to find ways to differentiate themselves from their competitors, through innovation, improving customer service, or creating unique products or services that meet the evolving needs of consumers.

These continue to be interesting times in Canadian telecom.

Last month, in “Net neutrality 20 years later”, I wrote “Canada’s policy framework for net neutrality is among the most prescriptive and restrictive.”

That led me to wonder: Is it time for that framework to be reviewed?

After all, the United States has operated without such regulations for more than half a decade and the sky has not fallen.

The UK regulator, Ofcom, has been reviewing submissions to its recent consultation on the subject, seeking a more nuanced approach. In its call for comments, the regulator observed:

because the net neutrality rules constrain the activities of the ISPs, they may be seen as restricting their ability to innovate, develop new services and manage their networks. This could lead to poor consumer outcomes, including consumers not benefiting from new services as quickly as they should, or at all. These potential downsides might become more pronounced in the future, as people’s use of online services expands, traffic increases, and more demands are placed on networks.

As Ofcom has noted, as technology evolves and we continue to move even more activities online, it is important for net neutrality regulations “to support innovation, investment and growth, by both content providers and ISPs. Getting this balance right will improve consumers’ experiences online, including through innovative new services and increased choice.”

I noted last fall that Ofcom was proposing:

• most zero-rating offers will be allowed;
• ISPs have flexibility to offer retail packages with different levels of quality;
• ISPs can use traffic management measures to manage networks;
• ISPs have more scope to develop specialised services, such as network slicing;
• Ofcom will not prioritise enforcement action where there is clear public benefit, in relation to:
  • the prioritisation and zero-rating of all communications with the emergency services;
  • traffic management of internet services provided on transport;
  • the use of parental controls and other content filters involving the blocking of traffic; and
  • blocking access to fraudulent or scam content.

Last week, I thought it was interesting that the CRTC itself chose a more nuanced approach to zero-rating in its determinations in TRP CRTC 2023-41: Mobile wireless service plans that meet the needs of Canadians with various disabilities. In that policy determination, the question of permitting (and even mandating) zero-rating was at issue for Video Relay Service (VRS). The CRTC found that “zero-rating VRS clearly benefits the public interest, with minimal associated harm, and would be consistent with the DPP (Differential Pricing Practices) framework”. Still, the CRTC did not consider it to be necessary to mandate zero-rating of VRS by all of the service providers, finding that consumers have access to competitive choice of providers that offer zero-rated VRS services and other suitable solutions.

Competitive choice, freedom to innovate and develop new services. Those might be clues that the CRTC should reassess its overly prescriptive approach to net neutrality.

Last week also saw President Biden renominate (for the third time) long-time net neutrality advocate Gigi Sohn to fill a seat on the Federal Communications Commission that has been open for 2 years. David McGarry writes “Should she gain the Senate’s approval, she will break the agency’s current 2–2 Democrat-Republican logjam and allow the agency to re-enact Obama-era net neutrality regulations, which are economically nonsensical and largely unnecessary.”

According to McGarry, “Mandated net neutrality was the worst sort of technocratic overreach. Bureaucrats dreamed up an overbroad market intervention to ameliorate an imagined crisis—to the detriment of innovation and consumers.”

In 2017, Ken Engelhart wrote about the natural experiment created when the the US got rid of its net neutrality regulations under previous FCC Chair Ajit Pai while Canada established its framework.

When Canada banned zero-rating, the United States didn’t. As a result, T-Mobile, an American cellphone company, started zero-rating video services. The other wireless carriers in the U.S. retaliated with unlimited data offers. Now, the U.S. has unlimited wireless offers and Canada doesn’t. Can I say definitively that this is a permanent difference or that it can be attributed to our zero-rating rules? No, but it is the kind of anti-consumer impact that happens when regulators regulate too much.

Two years later, he followed up saying, “You might have expected that as a result two very different internets would develop in the two countries.”

Of course, that didn’t happen. He noted that the US and Canada have similar internet services, with similar average speeds. Indeed, fixed broadband speeds in the US are now about 35% higher than Canada. The sky didn’t fall as predicted by US Senate Democrats.

As Engelhart wrote, “In the end, it seems that public interest groups and regulators were selling the public elephant repellant: a harmless, but useless spray, meant to defend against a threat that does not exist.”

In his 2017 primer on net neutrality, Professor Daniel Lyons wrote, “A small delay in packet delivery may be imperceptible to someone browsing the web but can erode the quality of a video stream or a telemedicine app. Prioritizing these packets could improve the experience for Netflix users or rural doctors, without adversely affecting users of congestion-insensitive services.”

I’ll give Professor Lyons the final word. “More generally, net neutrality discourages innovation by broadband providers. It assumes that the way broadband is currently delivered is the way it must always be, which limits providers’ ability to test new business models.”

Isn’t it time to review Canada’s net neutrality framework?

Figures from the CRTC show that the number of broadband subscriptions in Canada have only been growing at a rate of 3.3% per year on a base of 12 million.

Between 2018 and 2021, the number of households in Canada grew by about 440,000.

In other words, broadband subscription growth is largely attributable to growth in the total number of households (population growth and immigration) and new construction in rural and remote areas.

The overwhelming majority of households that have access to broadband already subscribe to a broadband service. Growth in the industry is fuelled by consumers choosing to subscribe to higher speed services, as can be seen in CRTC data:

In the first quarter of 2021, there were 3.6M broadband subscriptions with download speeds less than 50 Mbps, and 8.1M subscriptions over 50 Mbps, including 0.8M with speeds over 940 Mbps. In the third quarter of 2022, just a year and a half later, there were just 3.1M subscriptions with download speeds of less than 50 Mbps and 9.2M with speeds over 50 Mbps, including 1.7M with speeds over 940 Mbps.

Over an 18 month span, we saw market growth of 600,000, while nearly double than number went into service speeds of more than 50 Mbps. Half a million households migrated from slower speed services to services delivering speeds over 50 Mbps. More than a million subscribers migrated to gigabit speeds.

Consumers are choosing faster speed services as households change the way we use our connectivity, and as prices for premium connectivity have become more affordable.

Growth in the broadband market is being driven by investment in physical facilities: upgrading existing service areas to gigabit speeds, and expanding service territories.

The data demonstrates an interesting transition in the broadband marketplace as overall subscriber growth slows. I’ll take a deeper look at some implications of this market trend next week.

Canada’s future depends on connectivity; enhanced and advanced connectivity that depends on investment.

A recent study, published in the “Proceedings of the National Academy of Science”, found that most US citizens preferred quashing harmful misinformation over protecting free speech, despite measurable differences along political lines.

The study may be informative as Canada continues down the path of developing legislation in respect of “online harms”.

The scale and urgency of the problems around content moderation became particularly apparent when Donald Trump and political allies spread false information attacking the legitimacy of the 2020 presidential election, culminating in a violent attack on the US Capitol. Subsequently, most major social media platforms suspended Trump’s accounts. After a sustained period of prioritizing free speech and avoiding the role of “arbiters of truth”, social media platforms appear to be rethinking their approach to governing online speech. In 2020, Meta overturned its policy of allowing Holocaust denial and removed some white supremacists groups from Facebook; Twitter implemented a similar policy soon after. During the COVID-19 pandemic, most global social media platforms took an unusually interventionist approach to false information and vowed to remove or limit COVID-19 misinformation and conspiracies — an approach which might undergo another shift soon. In October 2021, Google announced a policy forbidding advertising content on its platforms that “mak[es] claims that are demonstrably false and could significantly undermine participation or trust in an electoral or democratic process” or that “contradict[s] authoritative, scientific consensus on climate change”. And most recently, Pinterest introduced a new policy against false or misleading climate change information across both content and ads.

Content moderation, and terminating or suspending accounts is described by the researchers as a moral dilemma: “Should freedom of expression be upheld even at the expense of allowing dangerous misinformation to spread, or should misinformation be removed or penalized, thereby limiting free speech?”

When choosing between removing a post and allowing a post to remain online, decision-makers face a choice between two values, public safety or freedom of expression, that cannot be honored simultaneously. “These cases are moral dilemmas: situations where an agent morally ought to adopt each of two alternatives but cannot adopt both”.

The researchers examined public support for these “moral dilemmas” in a survey experiment with 2,564 respondents in the United States. Respondents were asked to indicate whether they would remove problematic social media posts and whether they would take punitive action against the accounts in the case of posts with:

1. election denial,
2. antivaccination,
3. Holocaust denial, and
4. climate change denial.

Respondents were provided with key information about the user and their post as well as the consequences of the posted misinformation.

The majority of respondents preferred deleting harmful misinformation over protecting free speech. However, respondents were more reluctant to suspend accounts than to remove posts, and were more likely to do either if the harmful consequences of the misinformation were severe, or in the case of it being a repeated offense.

Information about the person behind the account, the posting party’s partisanship, and their number of followers had little to no effect on respondents’ decisions.

Although support for content moderation of harmful misinformation was widespread, it was still a partisan issue. “Across all four scenarios, Republicans were consistently less willing than Democrats or independents to remove posts or penalize the accounts that posted them.”

The type of misinformation was also a factor: Climate change denial was removed the least (58%), whereas Holocaust denial was removed the most (71%), closely followed by election denial (69%) and antivaccination content (66%).

According to the researchers, their “results can inform the design of transparent rules for content moderation of harmful misinformation.”

“Results such as those presented here can contribute to the process of establishing transparent and consistent rules for content moderation that are generally accepted by the public.”

Canada needs to invest in digital skills development, at all levels, for all ages, for all Canadians.

Easily said, and it might even make a good political slogan, but how do we get there, and why should we?

Let’s start with why the government should invest in programs that extend digital outreach to all sectors of society, with special focus on marginalized communities.

In today’s digital economy, digital skills are crucial for individuals to participate fully in the workforce and compete in the job market. Employers increasingly require workers who are comfortable with, if not proficient in, technology, data analysis, and digital communication. Digital skills are also needed to provide all members of society with equal access to information and opportunities. Without basic digital skills, certain individuals and communities may be left behind, facing difficulties accessing essential services, such as healthcare and government services.

Since digital skills enable individuals to take advantage of new technologies and to develop innovative solutions to problems, upgrading the skills of a disadvantaged community can help bring greater diversity to the marketplace, encouraging the creation of new businesses and jobs, and contributing to economic growth.

Finally, digital skills can improve quality of life by enabling individuals to access information, communicate with others, and participate in online communities. Digital skills can also help people manage their health and well-being, and make informed decisions about their finances and other important aspects of their lives.

There are many areas of the economy that seem to be crying out for improved efficiencies through a digital transition. When your pharmacy tells you that they are waiting for your doctor’s office to reply to their fax, don’t you feel like you entered a time warp and should be wearing a paisley shirt and bell bottoms? That is just the tip of the iceberg in possible digital-driven productivity improvements. As provinces and the federal government do battle over which politician will get credit for allocating taxpayer dollars to improve healthcare, almost all of us who have operated a modern era business can see opportunities to spend healthcare dollars smarter, using basic digital technologies.

But we would also need the stakeholders to buy in: Pharmacies, doctors, patients. There would be different learning curves for each group, and each member of each group.

Most logically, one would work with professional associations to reach the pharmacists and doctors. Develop focus groups to understand needs, let the associations interact with their members, reconvene, adjust the training, adjust the system interfaces, and test again. Keep that iterative cycle going as the systems evolve.

Perhaps there are lessons that we can apply from such an approach when we are looking at how to increase outreach for digital skills development to those Canadians who have not yet gotten connected.

We have learned from the various affordable broadband programs that low monthly fees simply aren’t enough to get many low income households online. We still need to help those households learn how to benefit, how to access the savings programs, how to get basic computer skills, where to go for help, and basic levels of online safety.

I have written before that we need to consider different approaches to affordable telecom service for vulnerable Canadians.

A recent podcast on Light Reading talked about the Benefits Data Trust, a nonprofit that helps people access more than $80 billion in unclaimed federal benefits in the United States. According to its CEO, Trooper Sanders,

Benefits Data Trust was founded in 2005, to both help people who are eligible for benefits, get screened, and help them apply for those benefits. And then also do what we can, working with public servants all across the country to improve these programs so that really, people can get the help they need with efficiency and dignity, and move on with their lives and make things better.
…
So imagine someone who has faced extraordinary difficulty navigating the SNAP program, or what used to be called food stamps, to buy a bag of groceries, or if you’re a mom, and you know, the rules that have you, dragging your child to a government office to physically prove that you are a parent, just to get a bit of help to buy some groceries to make sure that they are well fed. Imagine if that is your daily existence. And now you have a new program coming along around broadband, which is important, but it’s not the same as food, it’s not the same as as being able to go to the doctor… It’s important, but imagine that you live that type of busy life while you’re struggling to make ends meet and just get it through the day, you can imagine how applying for something like the affordable connectivity program would get squeezed out.

And that’s why it’s really important to make the eligibility and application process as easy as possible, to allow those, like benefits data trust, who can help people, make sure that those who can help, can do it. And it’s done in an ethical and responsible way. And then also, you know, to really make sure that we think about more broadly, how do we make our benefits system work efficiently and with dignity, so that it’s just the normal course of business that people can get the help, that we’ve, again, already gone through the hard political work of creating these programs. So why would we leave people without, just because of inefficiencies and indignities in the system?

There are a variety of digital connectivity programs and service available in different parts of the country, offered by telecommunications companies, and nonprofit agencies such as Computers for Success. In the US, the Benefits Data Trust sorts through the programs; how can we help those people who are eligible for benefits in Canada get screened, and actually apply? How can we help them understand the value of these benefits, in manner that respects their dignity?

Just as we might work with professional associations to reach out to doctors and pharmacists, can we look to associations, community centres, and agencies to help proselytize, winning over those who have not yet been convinced of the benefits of digital connectivity? Perhaps there is a model to be found with Connected Canadians, a non-profit organization helping older adults develop digital literacy skills.

Is there a need and an opportunity to create a Canadian version of the Benefits Data Trust?

Can we start by agreeing that Canada needs to invest in digital skills development, at all levels, for all ages, for all Canadians?