A few years ago (ok, maybe 8 years ago), Scotiabank published a report: “Canadian Wireless Myths and Facts”, that gave rise to my blog post “Top 10 myths on Canadian wireless”.

With so much going on in area of telecom policy I figured this would be a good time to update the list and expand it to include more than just wireless.

Policy decisions should be evidence-based, but unfortunately there are a lot of myths that keep being repeated, so much so that some even show up in the media and elsewhere.

Let’s take a look at some of the most common myths. We’ll start with these five, and follow-up with some more sometime soon.

1. Myth: Canadians pay more for less

Whether it’s mortgage payments, the gas bill, or internet connectivity, nobody likes paying bills. The feeling is even worse when you think that someone is getting a better deal. So it’s understandable that Canadians get upset when repeatedly told that they pay more than others for the same or worse service. But like most folklore, it’s not true.

So why do people think this? There are number of international price comparison studies that purport to show that prices in Canada are higher than in most other countries. Unfortunately, most people just read the headlines and do not examine how the study was conducted, what data was used, or critically assess the conclusions. To quote a review of one such study, these price comparisons are often little more than “a careless mish-mash of data points from which no reliable conclusion can be drawn.”

To be clear, there are differences in prices between carriers and between countries. But in addition to using faulty methodology and outdated data, one-dimensional price comparisons make no effort to understand the differences or determine the underlying value that customers are receiving from country to country.

To give one hypothetical example, consider a mobile plan that provides 10GB of data per month with an average download speed of 60Mb/s for CA$60 versus a plan that offers 10GB of data with an average download speed of 3Mb/s for CA$40. Which is the better plan? Based on the methodology of some price comparison studies, consumers would be better off with the 3Mb/s plan because it costs less. That may be true for consumers who don’t use data intensive applications, but for those who do, the $60 plan provides better value.

Another factor to consider is the cost of providing the service. One study found that the cost of building wireless networks in Canada is 83% higher than the average of a group of benchmark countries (Japan, Germany, France, U.K., Italy and Australia) and 34% higher than the U.S.. This makes sense as Canadian network operators, among other challenges, must serve a much lower customer base spread over a wide area, purchase equipment in $U.S., and face much higher spectrum costs.

The point is, price comparisons are meaningless unless one takes into account the plan attributes, quality of service, country attributes and cost of providing the service. While they don’t generate the same headlines, there are studies which take these factors into consideration. For example, a U.S. industry association commissioned a study to compare the value received by wireless subscribers across 36 countries, including Canada. It concluded that Canadians receive more value for their dollar – or “more bang for their buck” – than all other G7 countries plus Australia.

2. Myth: Pricing equals Affordability

Similar to the previous myth, the term “affordability” gets thrown around without enough consideration of the facts. A couple of months ago, I wrote that the expression has been getting hijacked and applied to alternate agendas, such as ISPs seeking to bypass wholesale broadband access with taxpayers footing the bill for capital investment.

We all want lower prices for everything, but that doesn’t mean that current prices aren’t affordable. To look at affordability, we need to look at price relative to the ability to pay. As I wrote recently, Canadian communications pricing actually ranks pretty well using that metric.

That is certainly not saying that that all Canadians can afford the cost of connectivity, or the devices to connect. Unfortunately, there are Canadians who find it difficult, if not impossible, to purchase mobile devices or computers, and basic internet connectivity. As long time readers know, for nearly 15 years, I have been campaigning and advocating for solutions to this important social challenge.

When people can’t afford necessities such as housing, electricity, food, and dental care, we do not try to resolve the problem by forcing the repricing of these goods and services for the entire marketplace. Instead, governments provide targeted social assistance.

In the U.S., the government recently introduced the Emergency Broadband Benefit which provides a monthly subsidy of between $50-75 that can be used to acquire broadband connectivity. There are also efforts to make such programs permanent.

A similar government program may ultimately be required in Canada, but in the meantime, we applaud the efforts of service providers like Rogers with Connected for Success, TELUS with Internet for Good, and the various carrier partners delivering the Connecting Families initiative.

Meanwhile, prices are falling. Statistics Canada data shows that prices for wireless services are continuing to fall while the prices of other goods and services are rising.

3. Myth: MVNOs aren’t allowed in Canada

Yes, Mobile Virtual Network Operators (MVNOs) should be allowed in Canada. And, (surprise!) they already are.

Indeed, there are a number of MVNOs that have been operating in Canada for years, as well as newer MVNOs like CMlink and CTexcel. Just like most countries in the world, MVNOs are permitted in Canada but, just like almost everywhere, MVNOs aren’t mandated by the regulator.

There are very few countries in the world where the regulator has ordered mobile carriers to make their networks available to MVNOs, and I’m not aware of any regulators that have set wholesale rates. Rather, in the majority of countries with MVNOs, the MVNO must negotiate an arrangement for network access with the mobile network operator. As in all commercial negotiations, there must be a benefit for both parties to the arrangement. This could be through having a well-known brand or reaching a market that the network operator is not targeting. In the end, the MVNO must be able to attract new subscribers to the network operator’s network that the network operator cannot gain by itself.

4. Myth: Government has set a 50/10 minimum speed target for everyone

Over and over I keep reading people say that the CRTC set a minimum basic internet standard of 50 Mbps (down) and 10 Mbps (up) with unlimited download capabilities. A recent ‘Framing Paper’ for a workshop series from Ryerson’s Leadership Lab on ‘Overcoming Digital Divides’ perpetuates the myth that 50/10 is a minimum basic speed.

The CRTC did indeed set a target with those characteristics, but the intent was for all Canadians to have the choice to subscribe to such a broadband service, not a statement that 50/10 is a minimum basic speed that all Canadians require.

There is an important distinction to be made. Some people may choose to subscribe to speeds and capabilities below the infrastructure target; not everyone needs a 50/10 service.

So if you read a report that says X% of households in a given area do not have broadband connectivity that meets the 50/10 target, look closely to see if the report makes clear whether those households do not have that level of connectivity because it is not available or because, for whatever reason, they have chosen not to subscribe to that level of connectivity.

It will be difficult to overcome digital divides if we can’t keep the targets straight.

5. Myth: Other countries have a lot more competitors

Some people say that Canada’s mobile wireless market is too concentrated. But what standard are they applying when making these statements?

Of 29 European countries (including the UK), as of the beginning of 2019, there were 19 countries with 3 mobile operators and 10 with 4 mobile operators. In the period between 2010 and 2018, there 4 European countries that went from 4 to 3 mobile operators, and 3 countries that went from 3 to 4. [pdf, 889KB]

In the United States, the number of tier 1 national mobile operators went from 4 to 3 when T-Mobile and Sprint merged in 2020.

Canada has 3 national operators and a number of regional operators that serve different parts of the country.

In addition to the number of competitors, a common measure of market concentration is the Herfindahl-Hirschman Index (HHI). The HHI is determined by squaring the market share of each firm competing in the market and then summing the result numbers. The lower the HHI the less concentrated is the market.

According to data from GSMA Intelligence, as of 2018, the HHI for Canada was 2518. The HHI for the United States, prior to the merger of T-Mobile and Sprint, was 2664, while the weighted average HHI for the EU was 2966.

Whether looking at the number of mobile wireless operators or the HHI, to say that Canada is an outlier is simply not true.

Which other myths you would like addressed in a follow-up?

With the Shaw – Rogers merger announcement, and Parliament debating a bill that threatens to bring a lot of internet content under CRTC regulation, it seems everyone has been forming an opinion on regulatory reform. Unfortunately, there is a lot of misinformation being spread, and opinion pieces being written using deeply flawed reports. Garbage in; garbage out.

I have written much on two sets of reports that seem to keep being cited, despite egregious errors that should be obvious with even a cursory examination. As I wrote last November, studies from Rewheel Research have been thoroughly discredited, with 24 leading academics and telecom economists and lawyers from around the world referring to their reports as a “careless mish-mash of data points from which no reliable conclusions can be drawn.”

I wrote about some obvious problems with the methodology for a UK-based mobile study from cable.co.uk in a piece last summer, “Look at the data”. As I wrote at that time, “It’s very easy to look at a chart on social media, nod one’s head, and retweet or reply without bothering to look beyond the headline. It is tougher to apply a critical eye, look at the data, and determine policy based on deeper analysis.” Sadly, not enough people take the time to look beyond the eye-catching headlines before regurgitating them.

A more recent report from cable.co.uk suffers from the same methodological problems as I documented about the mobile report. One glaring data point jumped out at me. If you are to believe cable.co.uk, the average monthly cost of broadband in Canada is US$76.14, up from US$34.86 last year – an increase of US$41.28. Does anyone believe prices more than doubled last year? Anyone?

That is why I say, “Look at the data”.

A week ago, Toronto Star columnist David Olive appears to have relied on the flawed cable.co.uk data and rankings as the basis for his article “The time is right for Ottawa to fix Canada’s disgraceful telecom system”. By failing to detect the fairly obvious errors in the report, there is no support for Olive’s conclusions.

CWTA president Robert Ghiz had this response published in Saturday’s Star:

Canada’s telecoms among world’s best in overall value
Questionable studies report misleading findings on price of country’s wireless services

Canadian telecom providers offer some of the best and most affordable telecom services in the world.

The Economist’s Intelligence Unit’s Inclusive internet Index ranks Canada third out of 100 countries in internet affordability. Similarly, global accounting firm PwC recently ranked Canada first in the G7 for affordable wireless services.

Unfortunately, these studies are too often ignored. Instead, more attention has been given to one-dimensional and misleading studies that paint an inaccurate picture of telecom prices and affordability in Canada. These include Cable.co.uk’s fixed broadband price study and price comparison reports by Finnish consultancy, Rewheel.

The Cable.co.uk study looks at the median of surveyed broadband plans to develop its country rankings. Using this median price, it claims that broadband fees in Canada are 27 per cent higher than the U.S. But the actual dataset used by Cable.co.uk tells a different story.

Of the Canadian and U.S. broadband plans measured by Cable.co.uk, the cheapest was offered in Canada. By focusing on the median plan, irrespective of which plans consumers choose, Cable.co.uk gives the false impression that Canadians pay more for broadband service.

The questionable quality of the Cable.co.uk methodology is made crystal clear when its 2020 report is compared to its findings in 2019.

For 2020, Cable.co.uk concluded that the average fixed broadband monthly cost in Canada was $76.14 (U.S.) while the average monthly cost in 2019 was $34.86.

Clearly, prices for fixed broadband internet in Canada did not more than double in one year. In fact, in its most recent pricing study, the government of Canada observed that “over the last five years, Canadian broadband prices have trended downwards” and were lower than the U.S.

Meanwhile, Rewheel has been widely criticized for its flawed approach to mobile wireless price comparisons. Last year, 24 leading telecom academics, policy experts and economists released a highly critical review of Rewheel’s methodology, including the recommendation that Rewheel’s reports should come with the same kind of warning labels that social media platforms apply to suspicious information. Similarly, the International Center of Law and Economics published an article cautioning that a Rewheel study examined by the article’s authors amounted to little more than a “careless mishmash of data points from which no reliable conclusions can be drawn.”

In addition to the Economist and PwC reports, other studies have found that Canada’s telecom industry offers superior value. For example, a U.S. industry association-commissioned study found that Canadian wireless subscribers receive more value for their dollar — or “more bang for their buck” — than customers in all other G7 countries plus Australia.

While the studies cited above do not generate the same eye-catching headlines as those which misrepresent telecom prices in Canada, they offer a more meaningful consideration of affordability and value.

Also under-reported is the fact that the three federal government agencies charged with carefully monitoring the telecommunications industry have all concluded that wireless prices in Canada are dropping quickly. According to the CRTC, the average price of wireless plans declined by 37 per cent between 2016 and 2019.

Statistics Canada’s Cellular Service Price Index has declined 23 per cent since January 2019, in contrast to its all-item Consumer Price Index, which shows the cost of all goods and services increased. Finally ISED’s quarterly price monitoring has found that most wireless plans surveyed have decreased between 10 and 18 per cent compared to benchmark prices collected in early 2020.

Even as prices decline and usage soars, Canada’s telecom network operators continue to invest billions each year in expanding Canada’s digital infrastructure to underserved communities and ensuring that Canada maintains its global leadership in quality of service by deploying next-generation technologies such as 5G. Largely due to these investments, Canada’s telecom industry contributes more than $74 billion in GDP and supports more than 630,000 jobs across Canada.

As the COVID pandemic has highlighted, Canada’s economic well-being, safety and quality of life depend on high-quality digital infrastructure. Making world-class telecommunications services available to all Canadians at affordable prices remains the focus of our members.

Flawed data leads to flawed conclusions.

Canada’s telecom policy needs to be based on high-quality reports and studies.

Every so often, I run across an article that articulates telecom issues in such a way that I want to be able to refer back to it.

Daniel Lyons, a professor at Boston College Law School, wrote such a piece today: “Biden’s infrastructure plan: Implications for broadband”.

A few passages were especially concise in capturing the essence of the issues. Describing the digital divide in terms of both supply and demand:

America’s digital divide is a multifaceted problem. Closing the gap requires attention to both availability and affordability: subsidizing construction of networks in places where the business case does not support investment, and providing assistance to low-income families who have access to broadband networks but cannot afford the monthly service and equipment needed to get online.

And, on the subject of technical neutrality:

the plan says it will prioritize “future-proof” networks, without explaining what that means. Predicting the future of telecommunications networks is a fool’s errand — ask the congressmen who so carefully planned the future of local telephone competition in the 1996 Telecommunications Act. To the extent that this language signifies a preference for fiber networks over other forms of connectivity, that would be a mistake. Recent auctions have embraced a technology-neutral approach to subsidizing unserved areas; indeed, small wireless internet service providers have been some of the greatest success stories in our efforts to connect rural areas. Picking winners and losers among network models undermines the intermodal competition that pushes all technologies forward and increases the chances of finding the most efficient way of serving individual pockets of unserved customers.

Finally, on the issue of government subsidies to overlay networks:

The plan also seemingly equates “unserved” and “underserved” areas, which present two very different challenges for policymakers. Unserved areas lack any broadband access. By comparison, underserved areas have an existing provider whose network performance does not meet some (as-yet undefined) benchmark. Subsidizing a new company to compete directly against an unsubsidized competitor raises different issues than providing service where none currently exists, and it can effectively punish companies that have invested private dollars to connect hard-to-serve populations economically. Unserved areas should be the administration’s priority.

Although the article was written in response to a White House initiative south of the border, its discussion of issues is relevant to those of us concerned about similar challenges in Canada. I encourage you to read it and welcome your comments.

PwC’s Canadian Telecommunications practice released a report [pdf, 2.8 MB | Executive Summary, 1 MB] last week looking at Canada’s connectivity needs in a post-COVID environment.

COVID-19 has forced us to quickly change our ways of working and living, and this has been made possible by internet connectivity. Going forward, both connectivity and Industry 4.0 will be critical to Canada’s long-term economic success. While Industry 4.0 will drive productivity, efficiency and flexibility across the economy, it will rely on advanced connectivity networks such as 5G.

Right now, there’s a window of opportunity for Canada to more firmly leverage 5G as an investment catalyst. But this will require cooperation across government, the telecommunications sector and broader industry.

The report defines Industry 4.0 as “The Fourth Industrial Revolution: the ongoing automation of traditional manufacturing and industrial practices using modern smart technology. It leads to the end-to-end digitization of all physical assets and integration across the value chain using Internet of Things (IoT) hardware, software and connectivity.”

According to PwC, the high quality of Canada’s connectivity networks allowed industries to quickly adapt to digital ways of working during COVID-19. This, combined with Canada’s health and fiscal policy response, supported Canada’s economic activity showing more resilience than the average of its global peers. In addition, the report notes that of course, Canadians’ social well-being during COVID-19 has been supported by the ability to use connectivity for work and school and entertainment. “These uses of connectivity significantly increased overall broadband consumption in Canada, with daily average broadband usage increasing by 43% (Q2 2020 compared to Q2 2019) during the first lockdown period.”

PwC observed that Canada’s overall average mobile download speed (which was 71% higher than the average of global peers pre-COVID-19) maintained its leading position relative to peer countries, despite the significant increase in demand.

According to PwC, COVID-19 accelerated 6 key trends having implications for connectivity and broadband-enabled use cases:

1. Shifts in population centres: The rate of population growth in large urban centres is expected to slow down due to increasing unaffordability in large urban centres and increased viability of remote working and learning.
2. Shift in relationship and entertainment preferences: Increased social media, video streaming and video chat usage habits are likely to persist post-COVID-19.
3. Shifts in business operating models: Employers are expected to accelerate digital transformation and automation plans to increase business resiliency, respond to future disruption and manage increased costs from localized supply chains.
4. Shift to localized supply chains: Supply chains are expected to continue to trend towards onshoring to protect against geopolitical and unpredictable disruption risk.
5. Shifts in service preferences: Preferences for virtual services are expected to continue to increase, as COVID-19 has exposed consumers and businesses to new virtual service offerings.
6. Shifts in consumer purchasing habits: Canadians are expected to continue to increase eCommerce activity and their preference for digital service channels.

PwC examines the impact on connectivity of these trends and the implications for bandwidth usage and network densification.

Looking across the G7, plus Australia and South Korea, PwC says “governments have enacted policies and regulations across six key levers that incentivize and facilitate private investment in the deployment of 5G faster and in different ways than market forces would likely dictate.”

1. Spectrum timing, allocation and costs
2. Network investment incentives
3. Rural network subsidies
4. Regulatory standards
5. Research and innovation funding (technology development)
6. Vertical industry application funding (technology adoption)

The report looks at each of these, and each country’s use of these policy levers, in much more detail.

“Through cooperation between government and industry on 5G and Industry 4.0, Canada can support the mid to long term success of the economy, while providing the telecommunications networks required to meet the connectivity needs of Canadians’ economic and social lives post-COVID-19.”

Surfshark, a provider of online privacy and security solutions, has produced a study examining the quality of a digital wellbeing in 85 countries representing 81% of the global population.

The Surfshark Digital Quality of Life Index is based on five “fundamental pillars”: Internet affordability; Internet quality; Electronic infrastructure; Electronic security; and, Electronic government.

Canada (.78 index) ranked 3rd out of the 85 countries examined, behind Denmark (.79) and Sweden (.79), with its overall ranking brought down by only ‘moderate’ data protection laws.

Canada’s broadband affordability ranked first in the world, with the index looking at how much time on average needed to be worked to afford the lowest price plans.

Overall internet affordability, which included mobile broadband, placed Canada in second place, behind Israel. Surfshark’s ranking is consistent with the Inclusive Internet Index ranking by the Economist’s Intelligence Unit, placing Canada’s internet affordability in third place of 100 countries examined, based on cost relative to income and competitive environment.

And recall that a report by PwC released a little over a year ago showed “Canadian mobile services top G7 affordability ranking”.

So why do we keep hearing these deeply flawed statements like, “everybody knows Canada has some of the most expensive internet access prices in the world?”

While such statements may create eye-catching headlines, it is not a proper reflection of reality.

With so many important Canadian telecom policy issues under consideration, it is critical that discussions are based on the evidence. The Surfshark index, like the Economist’s Inclusive Internet Index and PwC’s study, all demonstrate that on average, Canadian telecom services are affordable.

As I said at the time of the PwC study last year, “there are indeed some Canadians unable to find an affordable device or service plan that they may need to participate in today’s economy.”

That needs to start with developing a greater understanding of those individuals and households on the wrong side of the digital divide and focus programs to target those inequities.

But it is long past the time to leave behind the flawed populist narrative on overall affordability of Canadian telecom services.