Search Results for: affordable

Low income households and similar vulnerable communities have lower rates of adoption of digital services. This is a well known problem.

What is less well understood is the appropriate means to deal with the challenge.

Fifteen years ago, in my opening remarks at The 2008 Canadian Telecom Summit, I said:

there are many households in urban areas that can’t afford to equip their homes with a computer and connectivity. Shouldn’t our connectivity strategy be as concerned about that kind of digital divide? We might find that a direct, needs-based subsidy, costs less and benefits a broader group of Canadians caught on the wrong side of the digital divide.

The digital divide is not just a chasm between rural and urban. At the root is affordability, which is a problem facing lower income urban dwellers as much as rural markets.

I used to think the right solution is for the government to develop a direct subsidy program that would provide targeted groups with lower cost access to technology and services. In the United States, the FCC has US$14.2 billion dollars to transform its Emergency Broadband Benefit Program into its long-term Affordable Connectivity Program. “The benefit provides a discount of up to $30 per month toward internet service for eligible households and up to $75 per month for households on qualifying Tribal lands. Eligible households can also receive a one-time discount of up to $100 to purchase a laptop, desktop computer, or tablet from participating providers if they contribute more than $10 and less than $50 toward the purchase price.”

Unfortunately, the Canadian government likely lacks the competence to effectively (or efficiently) deliver such a program.

That is unfortunate.

Ideally, we would let qualified households choose their own suppliers and make their own choices for communications services and devices in order to receive a direct user subsidy, similar to other targeted government programs. Under such a program, consumers would make their own decisions about which speeds and services meets their needs. Select the products and services you want, negotiate your best deal, and then present your affordability discount certificate to get an additional $X off as a discrete line item on the bill.

I just don’t see this government doing such a thing. As such, it will be interesting to watch the outcome of the CRTC’s hearing currently underway as part part of its review of telecommunications in the Far North.

Fortunately, for the overwhelming majority of Canadians, we have seen communications services providers develop and fund their own programs, such as Rogers Connected for Success and TELUS Internet for Good. The government’s role has been limited to helping the service providers by identifying qualifying households.

Since these programs were launched 10 years ago, there have been a number of enhancements and a lot of lessons have emerged.

I wrote last year,

Unfortunately, we have learned that it isn’t enough to offer low-priced computers and $10 per month broadband. Indeed, as Georgetown University economist Scott Wallsten writes [pdf, 1.8MB], the FCC conducted studies associated with its Broadband Lifeline service testing “consumer responses to a range of issues, including preferences for speed, the effects of different levels and types of discounts” Surprisingly, the FCC found “only about ten percent of the expected number of households signed up, even with the price of one plan set at $1.99 per month.” The research also found a significant avoidance of digital literacy training classes. “In one project, many participants were willing to forego an additional $10 per month savings or a free computer in order to avoid taking those classes.”

There is still much work to be done. Fifteen years after my opening address at The 2008 Canadian Telecom Summit, there are still too many vulnerable members of society who have not been able to benefit from a digital world. Many are concerned about the risks of being a novice user. Many distrust government and the potential risks of always being online.

More recently, I wrote, “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?”

We need to try new means of community outreach to get vulnerable communities online.

A very brief post today in order to highlight a new report from GSMA, “Socio-Economic Benefits of 5G: The importance of low-band spectrum” [pdf, 8.9MB].

The report was released last week as GSMA set out its vision for the ITU’s upcoming World Radiocommunications Conference (WRC2023), taking place at the end of the year in Dubai.

GSMA says the importance of low-band spectrum is because of the propagation characteristics of such frequencies. Low-band spectrum is particularly well suited for providing coverage in rural and remote areas. In addition such frequencies have better in-building penetration, providing ‘deep’ indoor coverage as well as capacity in urban areas.

Low-band spectrum is a driver of digital equality, reducing the gap between urban and rural areas and delivering affordable connectivity. Without sufficient low-band spectrum, the digital divide is likely to widen, and those living in rural areas will be excluded from the latest digital technologies.

The report has an interesting comparison of indoor 5G signal strength in the largest cities in Australia, Canada and Japan. Look for Figure 12 in the report.

As WRC-23 approaches, we will likely be hearing more about spectrum policy.

As promised, here is further look at the 2022 edition of ISED’s telecom price study report [pdf version, 1.8MB].

In its press release, ISED claims the government “continues to deliver on more affordable telecom services”.

The report is clear, Canada’s wireless prices declined by an average of 2.6% across all levels, with declines up to 16% for the largest data plans in 2022. For home Internet, prices declined or were stable, an 11% decline was recorded for mid-range plans. The report also shows that regional competitors are offering prices up to 39% lower than the major national service providers.

I’m not convinced the telecom price study report, or the press release for that matter, is so clear. That paragraph starts with a sentence about wireless plans, then a line about home internet.

To which service does that third sentence refer? “Regional competitors are offering prices up to 39% lower than the major national service providers.” All of the facilities-based internet service providers are regional; the national providers are the wholesale based ones. You have to search the report to find Table 3, to find that the 39% refers to Freedom Mobile’s Level 7 price plan in Ontario. Level 7 is defined as “unlimited nationwide talk and text along with 20-49 GB of data.”

The report also indicates that “Average prices in Quebec tend to be among the lowest in the country.” This has been a highlight driving a number of policies out of Ottawa. Yes, prices have been lower in Quebec but do we actually understand the reasons? Is there enough focus on what is driving lower prices in some parts of the country?

Are lower prices in Quebec actually due to the presence of Videotron as a “disruptor”? Or, are lower prices driven by lower rates of adoption and attempts by service providers to stimulate demand in a province with lower average income levels?

Let’s look at what the press release says is “clear”. “Canada’s wireless prices declined by an average of 2.6% across all levels, with declines up to 16% for the largest data plans in 2022.” I’m not sure the data in the report is really that clear.

The source for this line appears to be this chart (found on page 10 of the pdf version):

As can be seen readily, the average price change (-2.6%) is heavily skewed by the nearly 13% price increase in Level 2 pricing. Of course, very few people choose to subscribe to such a plan any more. Indeed, the report itself acknowledges “very few providers currently have a stand-alone 1 GB plan. Only Virgin offers this service across the country and only one regional provider (SaskTel) offers this type of plan.”

Also, recall that the mid-range plans had already dropped by more than 25% prior to the start of last year. That helps explains why one might expect modest price declines for those price baskets.

Although the press release says “The report is clear, Canada’s wireless prices declined by an average of 2.6% across all levels”, what is actually clear is that prices declined significantly more if you exclude the obvious outlier.

As with other international price comparisons, look at the data with a critical eye. As a test, see if you can find the typo at the bottom of page 69 of the pdf version (Table A3.1).

The missing caveats from the older editions of ISED’s telecom price study should be returned. As I wrote earlier this week, “Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks.”

In the absence of such notes to the reader, is it fair to describe any price study as “clear”?

A week and a half ago, ISED released the latest edition of its series of telecom price studies. I’m going to look at that report over the course of a few posts.

It’s a real challenge to create meaningful international telecom price studies.

Remember when two dozen leading economists and academics said, “The Rewheel story is easy to understand. It is also completely wrong.” and “Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets.” Rewheel’s reports were characterized by ICLE as “a careless mish-mash of data points from which no reliable conclusions can be drawn.” Last week’s report [pdf, 1.2 MB] lives up to that billing.

I looked at a couple well publicized international telecom price studies about a year and a half ago. In that post, I write of my frustration with “the misinformation from pseudo-statistical studies being circulated with viral velocity”. I pointed out what should be easy to detect flaws with the methodology being used by Cable.co.uk.

Typical problems with telecom price studies arise from overly simplistic examination of the different countries. While most studies adjust for currency variations, very few make adjustments for PPP (purchasing power parity). If consumers are earning 80% less in one country, it doesn’t help for them to pay 25% less for their digital connections.

Fewer still account for variances in quality of the products and services, such as speeds, coverage, costs of building networks. That can be like comparing prices for bicycles and motorcycles. A recent PwC study [pdf, 660 KB] compared Canada to the rest of the G7 plus Australia. Canadian carriers invest almost double the amount capital measured on a per subscriber basis ($168 vs $87), with capital intensity 35% more (19% versus 14%).

There are hundreds (or thousands) of price plans available in each country. It is virtually impossible for telecom price studies to look at which plans are the most popular in each market. And then, how would a study start to compare those to the plans in other countries? Arithmetic averages (means or medians) are somewhat meaningless. Are the plans that most consumers are buying are weighted more heavily than those on extreme ends of the menu? In countries with 150 to 200% mobile penetration rates, does the study account for people paying multiple bills?

Let’s consider the telecom price study released earlier this month by Innovation, Science and Economic Development: “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2022 Edition” [pdf version, 1.8MB]. Wall Communications prepared the report for ISED.

As in some other recent years, the 2022 edition is missing a section on caveats to the interpretation of the findings. Those notes used to be an important part of the study. For example, in 2016, the ISED study included a page of notes, including these two paragraphs:

Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks. As wireless technology is constantly improving and consumers demand ever more bandwidth and data caps, service providers are constantly increasing features. In the Study, these changes are reflected by the need to regularly update the definition of service baskets. Hence, price increases in those baskets may in part, simply reflect better service levels offered to consumers.

This Study did not take into account the network technologies deployed in the networks nor the speed or quality of service of those networks. Finally, this Study did not account for any cost of service or socio-economic factors that may be relevant for price differences across different domestic and international jurisdictions. Thus, factors such as population density, terrain and climate have significant impacts on the cost of service. Similarly, socio-economic factors such as affordability indicators (i.e. mobile prices in relation to disposable income), number of handsets per subscriber, number of minutes of usage per subscriber and other factors were not within the scope of this Study.

The 2022 edition includes a few caveats in its Introduction, but it would benefit from a separate “reader’s notes” section.

I’ll look at the results of ISED’s 2022 price report in another post later this week.

You can’t measure competitiveness or competitive intensity simply by looking at prices or counting the number of competitors. Measuring competitiveness in the telecommunications industry can be complex and may involve multiple factors.

In a recent interview, the CEO of telecommunications supplier Ericsson said that Europe’s industry structure is “probably unsustainable”.

Börje Ekholm told CNBC, “I do believe Europe needs to consolidate.”

Mr. Ekholm said that in countries such as the US, China and India, consolidation had meant there were now just two or three operators nationwide. In Europe, he said there are “200 operators, pretty much four plus in almost every country. It is an industry structure that is probably unsustainable and that needs to be addressed.”

The issue is one of financial viability. “The big problem in Europe is really that our customers can simply not afford to build out the networks and I think that is going to hurt European competitiveness long term.”

As Ericsson’s CEO suggests, telecommunications is an economic enabler. Absent the macro economic conditions to encourage investment in networks, the overall competitiveness of the national economy can suffer. Protecting competition doesn’t mean protecting the number of competitors.

Once again, the words of previous Minister Navdeep Bains come to mind.

So our government understands that Canadians want three things from their telecom services.

• Quality. Is the service fast enough to do what I want it to do?
• Coverage. Is the service available where I want it to be?
• and lastly, Price. Is this service affordable?

These three areas are clearly where providers need to compete and that’s why our Government is doing our part to promote competition and investment.

In “Quality, Coverage And Affordable Prices”, I wrote, “There is a difficult tension in these objectives, seeking increased investment while maintaining, if not improving, affordability.”

How we approach and achieve these 3 outcomes: quality, coverage, and price, is the way we should measure success in telecommunications competitiveness.

The CRTC has launched yet another consultation, saying “its current approach is not meeting its objective of encouraging more competition in the Internet services market.” Telecom Notice of Consultation (TNC) CRTC 2023-56: Review of the wholesale high-speed access service framework, starts off with an immediate (interim) reduction in existing wholesale rates “that reflects a 10% decrease in the costs of traffic-sensitive components”. Revised tariffs are due March 17.

The Commission invites comments on several issues, including its preliminary views that (i) the provision of aggregated wholesale HSA services should be mandated; (ii) access to fibre-to-the-premises (FTTP) facilities should be provided over these services; and (iii) the provision of FTTP facilities over aggregated wholesale HSA services should be mandated on a temporary and expedited basis, until the Commission reaches a decision as to whether such access is to be provided indefinitely.

The first round of comments are due April 24.

I will have more comments on this proceeding over the coming weeks and months.

In the meantime, I’ll close with this observation (that I have cited previously). Dr. Christian Dippon has written, “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.” The comment is as relevant for wireline as it is for wireless.