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Another indicator appear to show that Canadian telecom services are affordable, further contradicting the oft-repeated misrepresentations of some critics.

Just last week, a World Bank study showed that Canada’s mobile services ranks among the world’s most affordable, measured as a percentage of income.

Now, the Pew Research Center released a report that shows Canadian adults are among the world’s most connected, with 90% of Canadians affirmatively answering the question “Do you use the internet, at least occasionally?” Only Australia, marginally higher with 92%, had a higher percentage of its adult population reporting online access.

The detailed survey has data from a similar 2007 study allowing a comparison of changes between countries. In 2007, 75% of Canadians had answered the occasional use question “yes”; 78% of Americans said yes in 2007, compared to 87% in the most recent study. Unfortunately, no comparable 2007 data is available for Australia.

Canada and Australia were also among the top countries responding “several times a day” to the question “Overall, how often do you use the internet — several times a day, once a day, at least once a week or less often?”.

Together with last week’s World Bank study, Pew Research provides further ammunition to challenge those critics who repeat tired slogans about the state of Canada’s communications services. Will these studies help inform the CRTC’s upcoming “Review of basic telecommunications services“?

Access to broadband internet service isn’t an issue for the vast majority of Canadians. Almost all Canadians have access to superfast broadband. Still, so many people focus on the “supply” side of the adoption calculation, rather than the much more difficult question of stimulating “demand”.

As a result, a number of articles attack the government for setting “unambitious” goals for its broadband strategy [Digital Canada 150, 3MB pdf], without understanding the real challenges of providing broadband service in rural markets (see “Rural broadband isn’t easy“).

There are companies making substantial investments to improve rural broadband coverage and service quality. The release of the 2500 MHz spectrum auction results last week saw millions of dollars being invested by Xplornet and Corridor Communications to improve the reach and speeds for their broadband services.

The biggest challenge restricting Canadians’ ability to participate meaningfully in the digital economy isn’t access to broadband, it is the question of affordability.

How do we determine what is affordable? Of course, we all want to pay less that what we are paying today. Affordability isn’t measured by what we want to pay, but more by what we are willing to pay. In the interests of rural and urban parity, people sometimes point to the prices being charged in urban markets as an appropriate target for affordable broadband service.

The problem is that there simply isn’t a “one size fits all” price point for universal broadband. Should a system of subsidies be set up to bring rural pricing down to urban levels? Such a “geographic-based” system appears to be premised on a belief that higher rural prices are not affordable. Equally, such a system also presumes that urban prices are, in fact, affordable to all.

Neither of these presumptions are supported by the data.

We continue to have a problem with broadband adoption in low-income households, whether urban or rural, despite government programs continuing to define digital adoption as a problem framed in terms of geography, not affordability.

The CRTC’s consultation launching a “Review of basic telecommunications services” examines the issue, but there is a risk that the consultation will also approach the problem with the same prejudice:

In phase 1, the Commission will review its policies regarding basic telecommunications services in Canada. The Commission will also gather information from the industry to better understand which telecommunications services are being offered across Canada and whether any areas in Canada are underserved or unserved.

The CRTC is starting with an examination of what areas might be underserved when it might be more useful to start by trying to understand “who in Canada is underserved or unserved”? The preamble of the consultation starts with a presumption that the problem is geographic, not based on any other factor. It is as though we are already asking about solutions for “where” before asking about “who” needs help.

In paragraph 3 of the Basic Service public notice, the CRTC acknowledges that Section 7 of the Telecom Act sets the following relevant policy objectives:

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada; and
(h) to respond to the economic and social requirements of users of telecommunications services;

The Appendix to the public notice does in fact seek input in terms of economic requirements of users. The CRTC asks participants to “Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.”

However, in seeking public comments on solutions, we continue to see the terminology of a geographic bias. “What action, if any, should the Commission take where Canadians do not have access…” and “What action, if any, should the Commission take in cases where its target speeds will not be achieved…”

What evidence do we have that says “affordability” is a rural/urban issue? Why is there no discussion specifically seeking comments on the advisability of lifeline services [such as Lifeline Services described by the FCC] based on income?

When last produced, Statistics Canada showed that more than a quarter of households in Montreal had no internet use from home; the same was true for 1 in six households in Toronto and Vancouver; 1 in 5 in Regina.

Our telecom policy seeks to render affordable telecommunications services in both urban and rural areas in Canada, which requires substantially more information about economic and social factors that inhibit service adoption, in accordance with Section 7(h). Based on Statistics Canada’s information, there may be more Canadians in urban markets who are not subscribing to internet service than in rural markets.

Who are they and why are they not on-line?

Who will speak for the households that don’t have internet access?

The Commission says it “will consider what its role should be in ensuring the availability of basic telecommunications services, particularly in rural and remote regions of Canada.”

Before we answer the question about “where” the CRTC should be acting, perhaps we need to have a more clear understanding of “who” needs help and “why”.

We may need to find a solution that turns the current subsidy system upside down. Rather than subsidizing the “where”, has anyone looked at providing subsidies directly to those who need it?

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Update: [May 19, 7:45 am]

An article today at AEI’s Tech Policy Daily by Bronwyn Howell looks at “The rural-urban divide on broadband adoption and pricing: Fact or fiction?” from an econometric perspective. “The bottom line is that broadband adoption is complicated, and that price is only one of its many determinants. When regulators are facing a problem where the root causes are ill-defined (or perhaps the problem is even non-existent and simply a statistics-mirage), a high degree of regulatory humility becomes important.”

I drove to and from Montreal over the weekend and passed through a lot of rural territory that has been the subject of various rural broadband projects. For example, the Eastern Ontario Warden’s Caucus (EOWC) is looking at enhancing the broadband capabilities of its residents.

It seems to me that an important issue is broadband affordability – rural and urban. More than simply being concerned with connectivity, how do we make broadband affordable for all Canadians? We have technologies available that can reach every Canadian household and business, but can they afford to sign on?

We have a session called Building Broadband on June 15 at The 2009 Canadian Telecom Summit. Have you registered yet?

Technorati Tags:
EOWC, broadband, Canadian Telecom Summit

Bell Canada has announced an unlimited mobile data plan for $75 per month. Details are available on the Bell website.

The plan is designed for wireless connection cards operating on Bell’s EVDO Rev A high speed mobile network, offering peak upload speeds of up to 1.8 Mbps and peak download speeds of up to 3.1 Mbps and covering about 70% of the Canadian population. The small print says that Bell’s acceptable use policies apply, meaning you agree not to use you device in a manner that “consumes excessive network capacity in Bell’s reasonable opinion, or causes our network, or our ability to provide services to others, to be adversely affected.”

A clause that will raise eyebrows is that you also agree not to use the service “for multi-media streaming, voice over Internet protocol or any other application which uses excessive network capacity that is not made available to you by Bell.” Well, so much for unlimited service!

These restrictions seem to conflict with some of the freedom that is promoted in the press release and may be artifacts of an older acceptable use policy. I’ll post an update if Bell lets me know that these restrictions no longer apply.

System access fees apply, so the monthly cost is actually $84, but this a dramatic improvement in data services affordability.

How will other carriers respond?

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Update [October 24, 10:50 am]
Today’s NY Times includes a story about Verizon settling a case with the NY attorney general’s office. According to the story, New York found that Verizon Wireless had marketed certain mobile internet plans as “unlimited,” without disclosing that actions like downloading movies and playing games online were prohibited.

Technorati Tags:
Bell, EVDO

The CRTC recently released its “Canadian Telecommunications Market Report 2025”, available online or as a 73-page 1.0 MB downloadable pdf.

You may recall that last year, the CRTC released its Market report, labelled as “Annual highlights of the telecommunications sector 2022”, and as you will see, it can be found among the 2023 files on the CRTC website. This year’s edition is found among the 2025 files, but contains market data from 2023. Confused?

In the Executive Summary of the report, the CRTC recognized the importance of encouraging investment, but in some ways, it failed to draw a line between investment and the need for high EBITDA margins. The Commission wrote “A central challenge for the CRTC is to incentivize providers to invest, while allowing new competitors access to their networks to provide more affordable choices to Canadians.” The report observes that among comparator countries (Australia, France, Germany, Italy, Japan, and the United States), “Canada’s telecommunications service sector shows among the highest levels of capital expenditures.”

The CRTC’s Market Report could be more precise in its use of language to be more objective in its presentation of the data. For example, the Competition section of the Executive Summary leads with “Canada’s telecommunications industry has expanded to several Internet and cellphone service providers. However, a small group of large service providers maintain commanding market shares and continue to report high profit margins.”

What does this mean? How are we supposed to interpret this? Why start that sentence with “However”?

In Section 4.2 of the report, the CRTC states “Canadians benefit from competition when there is a range of service options and providers of various sizes competing in the market.” Can someone point me to an economics text that says an indicator of a markets level of competitiveness is the variety of size of service providers? Ted Woodhead suggests “It would appear that CRTC believes the ideal state would be to have a large group of small service providers with low market shares reporting low profit margins.”

Let’s look a little more closely at “a small group of large service providers maintain commanding market shares and continue to report high profit margins”. Later in the report, we see that “profit margins” are defined as EBITDA (earnings before interest, taxes, depreciation and amortization). The report leaves the reader with the impression that these EBITDA profit margins are too high, which ignores the actual financial challenges being faced by Canada’s facilities-based carriers. That is misleading. EBITDA, by definition, is a measure before taking into account interest, taxes, depreciation, and amortization. For capital-intensive businesses, EBITDA simply doesn’t reflect business profitability, especially in times of rising interest rates and high levels of investment.

The Executive Summary goes on to say “In the last two years, Internet and cellphone prices have declined nearly 10%, and roughly 25% respectively. However, Canadians have noted the opposite, with many seeing higher bills. This may be explained by some Canadians paying for more data and faster speeds.”

“May be explained”? Come on now. The phenomenon of higher bills is fully explained by customers choosing to buy higher value plans.

Let’s take a look at the data. In Figure 15, the CRTC shows some pretty significant changes in internet services prices between 2020 and 2024. In the case of 50 Mbps service, the monthly price dropped 27.4%; Gigabit per second services fell 35.6% during the same period. In Figure 16, the drop for the Internet Price Index over that same period is less dramatic, at 10.6%.

Prices for specific plans dropped more significantly than the Statistics Canada Internet Price Index. How do we account for the discrepancy?

Clearly, as the prices for various speeds fall, households are migrating to faster services, changing the norm. Figure 27 provides evidence of that migration. In 2020, only 1 in 12 households (8.3%) subscribed to gigabit internet service; just 3 years later, by 2023, more than a quarter of Canadian households (25.7%) subscribed to gig services.

On the wireless side, the same effect can be observed in Figure 43. The price for a 10 GB plan dropped nearly 60%, from $69.42 to $28.03. The 50 GB plan fell by more than two thirds, from $124.28 to $39.94. During the same period, Figure 55 shows a migration to higher capacity mobile plans.

Why would the CRTC cast shade over the fact that prices have gone down? Its phrase “Canadians have noted the opposite” should have been written as “Canadians have incorrectly noted the opposite”. Why would the CRTC be peddling public opinion – urban legends – along side of hard data? The facts show prices have gone down significantly. Why isn’t the CRTC clearly dispelling misperceptions about prices instead of contributing to the confusion? 

If you can read past the biased commentary, the Canadian Telecommunications Market Report 2025 is a valuable collection of authoritative data. Just be prepared to read a report that was written with a not-so-hidden agenda.