Search Results for: affordability

How should we measure broadband affordability?

A couple of years ago, I wrote a piece that looked at 4 different ways to measure affordability of telecom services: Income-based affordability; Expense-based affordability; Relative affordability; and, Subjective affordability. I wrote that affordability is a complex and multifaceted concept, that is dependent on the context and the goods or services being considered. I observed that economists may use one or a combination of these approaches to assess affordability in different situations.

In that piece, I also wrote:

In a 2015 report [pdf, 2.1MB], the Public Interest Advocacy Centre (PIAC) said “We suggest that communications services are “affordable” where, as a guideline, they make up about 4% to 6% of a household’s income.” In 2017, PIAC found that low income households considered home internet to be equally important as health care.

So I was very interested to see that the Federal Reserve Bank of New York released a study on Broadband Affordability last week [pdf, 634KB]. Among its key findings: “Low- and moderate-income communities pay a notably higher share of their income for broadband — 2.43% compared to 0.51% in wealthier areas — exceeding the FCC’s 2% affordability benchmark.”

I shouldn’t have to point out that for low and moderate income households, just about everything costs more as a percentage of income than it does for wealthier communities. Basic arithmetic teaches us that happens when the denominator gets bigger.

What I was interested in was how this compared to Canadian figures. As it turns out, Statistics Canada tracks a lot of this kind of information on its Telecommunications Statistics portal. The data shows that spending by all Canadians has been hovering around 1% of total expenditures, and for the lowest income quintile, broadband has remained under 2% of total expenditures.

Please note that this chart looks at broadband affordability as a percentage of total expenditures (expense-based affordability), not total income (income-based affordability). Total expenditures is almost always lower than total income, the percentage of total income would be even lower. In 2023, Statistics Canada reported the figure for total expenditures for the lowest income quintile was $42,240.

It is also interesting to look at trends in what households are spending for broadband service. We can see that monthly expenditures have increased over time, from 60 to 80%. A major part of that has been due to families choosing to subscribe to faster, most robust services. In addition, especially in lower income households, more families are now choosing to subscribe to broadband for the first time, which has the effect of increasing average expenditures.

In the CRTC’s Canadian Telecommunications Market Report 2025, the section on Prices and Affordability confirms that prices have been falling, with gigabit services down 35% and 50 Mbps services down 25% in the period from January 2020 to September 2024.

There is a lot of interesting information in the NY Fed report on broadband affordability. The first message I gleaned was that Canada is far ahead of the US for affordability and adoption of broadband, even for our most vulnerable communities.

More can always be done, but with the cost of living figuring so prominently in political debates these days, the data shows that Canada is doing much better than the US for affordability of broadband services.

It has been a little over three years since I last looked at mobile affordability in detail. We frequently hear the term “affordability” used interchangeably with “lower spending”. That isn’t necessarily so, as we will see from a detailed examination of data from the latest release of Statistics Canada’s Survey of Household Spending (SHS).

Lower prices make items more affordable, but stable prices with rising incomes can have the same effect. Lower prices can also serve as an incentive for people to consume more of a service, or substitute one service for another. Statistics Canada’s Consumer Price Index (CPI) reveals mobile services prices are less than half what they were 5 years ago. Contrast that with the overall price index (reflecting goods and services across the economy), which is now 20% higher over that same time frame. So, mobile services are certainly more affordable than before.

At the same time, mobile penetration has risen substantially. According to the CRTC, there were 33.0M mobile subscribers in the first quarter of 2019. There were 35.2M by the first quarter of 2023, an increase of 10%. In addition, people are subscribing to enhanced services packages, using faster mobile data with larger data buckets.

More people choosing to connect, and more people choosing more data, serve as additional indicators of affordability.

That helps to explain why monthly household spending on mobile services has increased from $111.92 in 2019 to $125.33 in 2023. Still, as a percentage of after tax household spending, mobile services have remained constant at 1.8%.

I thought it was interesting to see that household spending on income taxes have increased 38% over the period 2019-2023, nearly double the increase measured by the overall CPI.

This isn’t to say there are no households for whom communications services are unaffordable. There are households that have trouble putting food on the table and staying warm in the winter. At virtually any price point, these households might find communications services unaffordable. As I wrote last November, targeted solutions (including measures to improve digital literacy) are the best approach to address mobile affordability concerns.

I may take a deeper dive into the Survey of Household Spending data through the summer. There is a lot of data embedded in the SHS tables for those who choose to poke around.

In the meantime, be wary of those looking for overall communications prices to come down in the name of “affordability”. Targeted programs remain the best way to address such cases.

A new report looks at technology adoption and affordability through analysis of recent Statistics Canada data. I promised a look at this report in my recent post on rural broadband solutions.

Communic@tions Management Inc. (CMI) published “Technology adoption, use, and affordability in Canada” [pdf, 1.1 MB], documenting key indicators for how Canadians relate to the internet and smartphones. Through the years, CMI has developed an expertise in analyzing and interpreting Statistics Canada publications, in addition to developing custom tabulations and correlations of the raw Statistics Canada data.

CMI estimates that in 2023, 95% of Canadian households had home internet connections, and 90% of households had smartphones. An additional 5% of households had mobile devices that were not smartphones, for total mobile adoption rate of 95%.

CMI notes that in 2021, more than half of Canadian households now rely exclusively on cell phones for their phone service – a notable milestone.

CMI took a look at spending by income quintile (similar to what I have done in the past) and added in a comparison to spending by income quintile in the US. “Across most income groups, Canadian households spend less on cellular service than do Americans.”

While we know that the mobile phone has become a substitute for wireline phone service, CMI says “it is not unreasonable to state that the smartphone has substitution effects for landlines, photographic services, newspapers, and magazines and periodicals.” Looking at other data from the 2021 Survey on Household Spending, CMI found the following changes in average household spending on each of these items from 2010 to 2021:

• Landline telephone services -56.4%
• Photographic services -42.8%
• Newspapers -27.3%
• Magazines and periodicals -50.0%

During that period, the number and percentage of households with cell phones was increasing – from 78.1% of households in 2010 to 93.9% in 2021. And, within those totals, an increasing number of devices were smartphones.

CMI also notes that the Survey of Household Spending estimated there were 13,297,000 households, of which 10,378,000 had cell phones. Using Statistics Canada data, CMI estimated there were at least 17,772,000 cell phones in use at that time. By 2021, 14,197,000 out of Canada’s 15,123,000 households had at least 26,759,000 mobile phones. “In other words, from 2010 to 2021, the number of total households went up 13.7 per cent; the number of households with cell phones went up 36.8 per cent; and the number of cell phones in those households went up 50.6 per cent.”

Using data from custom tabulations of Statistics Canada’s General Social Survey, CMI found that smartphone owners were almost twice as likely to read news online daily, compared to those that do not own smartphones; and smartphone owners were less than half as likely to read a print copy of a newspaper daily, compared to those that do not own smartphones.

To examine affordability, CMI turned to Statistics Canada’s 2022 Canadian Internet Use Survey (CIUS). As seen in the figure, “home Internet is nearly ubiquitous for Canadians, and “no need or interest” is the most important reason for non-adoption.”

Adoption varies by age, ranging from 99.3% in the age group 15-24; 98.8% for ages 25-34; 98.0% for ages 35-44; 96.7% for ages 45-54; 93.1% for ages 55-64 and 83.7% for those 65 and older. In each segment, “No need or no interest” was the dominant reason for non-adoption, beating out “the cost of equipment” and “the cost of the service”. CMI stated “In other words, there is much more likely a demographic link based on age than an affordability link based on income.” Similar results were found for smartphone adoption.

There are clear policy implications that arise from CMI’s work. As CMI says,

Thus, one might say that the adoption of Internet and smartphone technology in Canada is nearly ubiquitous, with age and attitudes a much greater factor than affordability when influencing non-adoption.

To the extent it is a goal of public policy to maximize adoption – and use – of these technologies, targeted solutions, including measures to improve digital literacy and skills, especially among older adults, would appear to be more logical and efficient than broader, more disruptive, industry structural changes.

It is worth emphasizing that sentence: “Targeted solutions, including measures to improve digital literacy and skills, especially among older adults, would appear to be more logical and efficient than broader, more disruptive, industry structural changes.” This resonates with themes you have seen before on these pages.

The distillation of data in the report is worth keeping in mind as we turn our minds toward 2025 plans and objectives. Targeted solutions will be an approach for policy strategists to keep in mind when developing platforms for the 2025 election.

The full report is a worthwhile read.

A report from PwC Canada takes a new look at the state of telecom affordability in Canada.

According to “Understanding the affordability of wireless and wireline services in Canada” [26-page pdf, 7.7MB] focuses on assessing three elements of Canadian telecommunications affordability:

1. Canadian economics statistics, including telecommunications expenditure, inflation, and changing incomes.
2. The assessment of wireless and wireline affordability in Canada, including assessing the changing prices of wireless and wireline services over time relative to increases in data consumption and changing patterns of data usage.
3. The affordability of wireless and wireline services for Canadians against consumption and income metrics relative to global jurisdictions.

What did PwC find?

• Canadians have been impacted by inflation, with inflation in 2021 and 2022 surpassing the rate of income growth. Prior to 2021, incomes were growing faster than inflation for every quintile except the highest.
• Between 2017 and 2021, cellular services was the second largest CPI drop among the only 13 deflationary goods and services in the CPI bucket, falling at a CAGR of 8.1%. Driven by the decrease in cellular service CPI, communications was also a deflationary service, with communications CPI falling by 16% from 2017 to 2022.
• Affordability increased for all quintiles when assessing the cost of entry-level wireless and wireline plans against adjusted disposable incomes. Notably, for the lowest income quintile, the affordability of entry-level wireline plans improved by 11% between 2017 and 2021, while wireless affordability improved by 39%.
• The price per gigabyte of wireless and wireline data fell by over a 19% CAGR in Canada from 2017 to 2021. This is attributed to increases in data consumption significantly outpacing changes in prices, with data consumption growing at CAGRs of 24% for wireless and 28% for wireline. Among selected international peers, Canada has the second-lowest cost per gigabyte of wireline data.
• The affordability of wireless and wireline services in Canada is on par with peer countries. As the CPI of Canadian communications has dropped, it has brought the price of services in line with international peers as a percentage of income, indicating relative affordability.
• Together, the Canadian market and international analyses demonstrate that facilities-based competition in Canada is able to maintain a healthy telecommunications industry while delivering on network coverage, quality, and affordability

Earlier this year, I wrote, “Affordability is a complex and multifaceted concept that varies depending on the context and the goods or services being considered.”

The report looks at telecom affordability across various income quintiles, but it did not explicitly include a discussion of targeted affordable services such as the industry-led Connecting Families initiative. It is worth noting that Rogers recently introduced its Connected for Success 5G Wireless Program, promised as a benefit of the Shaw acquisition, and it has rolled out its broadband Connected for Success to the former Shaw footprint. TELUS offers Mobility for Good, among other targeted services, as I have described.

The PwC report lays out a fact-based narrative on telecom affordability in Canada, and paints a very different picture from the conventional wisdom.

Affordability of telecom services is a major theme in the CRTC’s review of telecommunications in the far north. The far north is one of the only areas where broadband service is price regulated, and prices in many areas are substantially higher in the north than consumers typically pay in urban areas. Of course, prices for virtually everything are substantially higher in the north.

For more than 15 years, I have been writing about the relationship between income and the adoption of computers and broadband, observing as early as 2008 that the rate of adoption of broadband are as much an issue of getting computers into households as it is an issue of affordability of telecom services.

Economists typically define affordability as the ability of individuals or households to purchase or access goods, services, or resources without undue financial burden or hardship. Various measures of affordability relate costs to a personal (or household) income, expenses, and financial situation.

There are various ways to measure affordability, depending on the context. Some common methods include:

• Income-based affordability: This approach measures affordability by comparing individual (or household) income to the cost of a particular good or service. For example, a common measure is the “housing cost-to-income ratio,” calculating the proportion of household income spent on housing costs such as rent or mortgage payments.
• Expense-based affordability: This approach measures affordability by considering overall expenses for an individual (or household) in relation to income. It takes into account not only the cost of a particular good or service, but also other expenses such as transportation, utilities, food, and healthcare.
• Relative affordability: This approach compares the affordability of a good or service across different groups or locations. For example, economists may compare the affordability of housing in different cities or countries by looking at factors such as median incomes, housing prices, and cost of living indices.
• Subjective affordability: This approach takes into account perceptions of affordability. It may involve surveying individuals or conducting qualitative research to understand their subjective experiences and perceptions of affordability, including their ability to meet their basic needs, maintain a certain standard of living, or achieve their financial goals.

Affordability is a complex and multifaceted concept that varies depending on the context and the goods or services being considered. Economists may use one or a combination of these approaches to assess affordability in different situations. Policy makers must rely on such measures to inform policy decisions related to income redistribution, social welfare programs, or market regulations, especially as the CRTC considers acting as an agent to provide social welfare subsidies for telecom services in the north.

In a 2015 report [pdf, 2.1MB], the Public Interest Advocacy Centre (PIAC) said “We suggest that communications services are “affordable” where, as a guideline, they make up about 4% to 6% of a household’s income.” In 2017, PIAC found that low income households considered home internet to be equally important as health care.

At the hearing on telecom services in the Far North, NWTel announced that it will be joining Connecting Families, an industry-led program to bring affordable broadband services to the most disadvantaged households. Connecting Families provides 50 Mbps (down) / 10 Mbps (up) speed service for just $20 a month to families receiving the maximum Canada Child Benefit or low-income seniors receiving the maximum Guaranteed Income Supplement. There is also a 10/1 service available for just $10 per month.

Too many people confuse affordability with the overall desire to lower prices across the board. We all want lower prices for everything. The best approach for affordability of telecom services is to target help to those who need it most, with programs like Connecting Families.

A recent study by UK regulator Ofcom found that half of those eligible were unaware of “social tariffs” that could reduce household broadband rates by about £200 per year for millions of households.

Savings opportunities for eligible Canadian families are even greater than in the UK. But, the industry, including service providers, policy makers and the regulator, may need to develop partnerships with trusted community groups and social service agencies to understand (and overcome) the reasons why some households are not adopting broadband, even at deeply discounted pricing, with services priced well below costs.

It isn’t enough to make affordable broadband service available to targeted communities. Collectively, we need to make sure people actually get online.