The current state of Gigabit broadband in Canada

With more and more people getting to work from home in 2018, Canadians have in recent years been able to enjoy faster upload and download speeds according to CIRA, the Canadian Internet Registration Authority. Although there have been massive improvements in recent years, still at the beginning of 2019 there seem to be no plans in place to get fast broadband to the more rural areas of the country though. With major companies fighting for speed supremacy and trying to win the bigger piece of the pie, broadband in the land of immigrants seems to have a bit of a long way to go.  In this post, we want to take a closer look at the current situation and delve a bit more into detail to assess the pros and cons of the current situation of Broadband in Canada. Way back in 2015, both Bell and Telus, the major players in the local industry had announced new heavy investments in a fibre gigabit infrastructure to be distributed within Toronto and Edmonton, respectively. Having said that though there were a few caveats, this due to the fact that Bell’s proposition was rather unaffordable for the general population at the time whilst Telus’ speeds had a long way to go.
Fast Forward to 2019 and Bell still seems to be winning the broadband race, largely thanks to “Bell FIBE”, the branding that Bell Canada gave to the fibre optic broadband service that went active in Toronto, in April 2018.  This was part of a 1.5 million dollar investment that the company has put into the infrastructure, a bold move that seems to still be paying off.

Canada’s Broadband Prices vs Other countries

What about the price though?  When they introduced fibre broadband in 2015 the company’s best and highest speed offering, at 175 Mbps – cost $94, and that was with a capped 300 GB of monthly usage.  In 2018 there were some amendments to the company’s favor and the price for what now seems much less of a punch in download speed is a bit atrocious.  A quick google search for Bell Fibe shows a price of $84.95 for a lilliputian download speed of 25Mbps with a 350 Gigabit cap for monthly use.
Now let’s try and give this a bit more context and delve into what a gigabit means for the end user.  With a speed of a 1,000 megabits per second, one could potentially download an HD movie in seven seconds or less or maybe a whole season of Dexter in 2 minutes. The crux of the matter here is that Bell has in the past compared its FIBE service to Google Fiber, the search giant’s similar gigabit project in the United States. Comparing their service to  Google’s offerings would indicate such a comparison to the giant’s services are fair game, although as you might have guessed, this might not necessarily be the case.
Google ’s subscribers are paying a mere $50 (U.S.) for a 100 megabits per second whilst Comcast and At&T are now also heavily competing with The Giant’s offerings albeit struggling to match out Google’s rollout initially. In cities where they have to compete, they have no choice but to offer similar services at very similar price points. In other words, Bell is still having a tough time competing with all the other players that have entered early in the game and as one might think they might have to re-evaluate and rethink their whole proposition, but will they? It gets much worse if we had to take a gander across the pond over to the United Kingdom. Major British provider TalkTalk only charges £25.45 (44.45 CAD) for 63Mbps and unlimited downloads. That is rather astonishing and to be fair beats everyone else out of the game. Meanwhile Telus, the other Canadian company’s gigabit network still seems to be way out of the game with prices as high as $110 a month for 300 Mbps and also a lot of fine print in their deal, such as a 2-year minimum contract and monthly rental of their Advanced ac-Wi-fi Technology modem.  

The Inclusive Internet Report

Let’s move on to the next topic in the matter, the inclusive internet report.  The Economist Intelligence Unit released a report they called “The Inclusive Internet,” back in 2017 which among its other findings suggests that Canada’s internet is, wait for it… the most affordable in the world.

Measuring price and the competitive environment for wireless and wired broadband services, sponsored by Facebook’s  has Canada edging out the United States, France, Sweden, the United Kingdom and 70 other countries with Malawi, Niger, and Congo at the very bottom of the affordability list.  Separate studies from the Canadian Radio-television and Telecommunications, the Organization for Economic Co-operation and Development and other independent organizations have found the opposite, and undoubtedly so.  

So what on earth is happening here? Is Canada’s gigabit internet cheaper or is somebody pulling our leg? The Internet has become more essential to human beings than coffee and other necessities and some argue that it is also a basic human right to have access to the world wide web. A 2015 study by the Public Interest Advocacy Centre, alarmingly found that many Canadians were having to make cuts in their food spending to afford communications.

So how does the EIU (Economist Intelligence Unit) come to such different conclusions? When put under a bit more scrutiny the report’s methodology suggests a couple of explanations.

For one, a host of emerging countries are lumped into the same rankings with developed ones, which inevitably makes developed nations look far better than they should.  One cannot compare most African countries to the US and vice versa. Several countries that tend to perform well in other studies, such as Hong Kong, Denmark, and Finland, (to name a few) aren’t included in any comparative study at all, which is rather strange and also makes you think twice as to the legitimacy of the study. The EIU also gives weight to how much services cost relative to a country’s average gross national income, which is, first of all, a meaningless measure due to the fact that the differences between developed countries are minor, while those between developed and developing countries are obviously rather apparent.

For the sake of example, a monthly postpaid service plan with 500 megabytes data eats up only 2 percent of income in Canada, or 1 percent in the U.S., Japan, Germany, and France, according to the EIU. The same plan requires 20 percent of the average income in Malawi, 93 percent in Niger and 44 percent in Congo. The EIU’s other factor in determining affordability is a competitive environment, a category in which Canada places first overall.  This poses a problem simply because of the fact that competitiveness is quite obviously not directly proportional to affordability. Using the Hirschman-Herfindahl (HHI) Index to measure industry concentration, the EIU concludes  that Canada’s wireless market has a score of 2,740 out of a possible 10,000, which it deems to be “unconcentrated.” In other words, Canada’s wireless industry is highly competitive according to this score whilst the same goes for wired internet, where Canada scores 1,508 points.

In this measure, the EIU seems to have a far more lax definition of concentration than most. The U.S. Justice Department, for one, considers markets in which the HHI is between 1,500 and 2,500 points to be “moderately concentrated.” An HHI over 2,500 points which is where both the Canadian and U.S. wireless markets rate under the EIU’s findings is considered “highly concentrated.” So this whole HHI seems like it is also being offered up to interpretation. And without a definitive explanation, it’s hard to know exactly why they (the EIU) chose to differ so vastly from other findings in other competitive environments.

One possibility is that the organization simply counted the total number of wired and wireless providers in all of the country without equating for their limited regional coverage.
Rather than three national wireless providers, for example, Canada could thus be considered to have at least eight if Eastlink, Videotron, Freedom, MTS, and Sasktel are taken into account. At face value, this looks like a very competitive market but of course, any Canadian knows that this is a bunch of Bull.
At least the EIU inadvertently counters its own findings by confirming that Canadian wireless operators enjoy the highest average revenue per user (ARPU) in the world with annual ARPU of $653 (U.S.). In a nutshell, Canadian consumers are spending more per year on wireless service than anyone else – even more than Americans, who are in second place with $633.  Brits and Australians, in comparison, respectively spend $313 and $478 per year. And what’s happening to the rural areas and households with the lower income you may ask? Aren’t these prices a bit much for a family of 6 on regular income?  Even the Ontario Federation of Agriculture is calling on the government to fix the spotty internet in rural areas. The situation is so dire that farmers are saying that the unreliable service is hurting their business.  In a world where paying bills and ordering produce and fertilizer happens online, one could see the point as to why even farmers are voicing their concerns.

The low-income broadband project

The Liberal Government has announced a 22 Million investment to be funneled into improving the infrastructure to reach these 39 or so areas according to the Telecoms Minister Navdeep Bains, and as far as low-income families are concerned, the federal government seems to want to try and come to the rescue to throw these Canadian low-income families a lifebuoy.  The program offers households with children who are considered as being low income (under 40K per year) a $10 a month internet subscription and a free computer.  Although this program has taken a lot of heat from critics in general who stated that most low-income Canadians will still not be benefiting from this.

“This federal program will allow underserved schools, libraries, and businesses to fully engage in Canada’s digital economy. This investment will benefit five Indigenous communities as well that are particularly challenged by geography in small and remote populations,” said Bains, the  Minister in charge of Innovation, Science and Economic Development.  The program which was revealed at the annual summit In Toronto will have certain similarities to the “Connected For Success” project launched by Rogers way back in 2013.

This previous initiative saw families get internet service for as low as $9.99 a month from Rogers if they lived in non-profit housing units that would need to have partnered with the company offering the service (Rogers in this case).  Rogers has reported that 16,000 household have already signed up at the time of writing this post. The households who have benefited from this program in Ontario, New Brunswick, and Newfoundland have done so through the collaboration between willing broadband providers and around 160 partnerships with housing unit owners.  

The CRTC (the regulator in Canada) ruled out that broadband internet is an essential service and set 50 Mbps as the minimum download speed that each and every Canadian should have access to as a minimum.  Every Canadian should also have access to unlimited usage plans, the regulator said.

Studies have shown that about 18 percent of Canadian households don’t have access to those speeds or data as things stand. A spokesman for the CRTC has stated that they want this figure to reduce to 10 percent by 2021 and down to zero in the next 10 to 15 years.

In Conclusion, broadband in Canada still has a long way to go and luckily the government seems to be stepping in to make things move towards the right direction albeit at a slower rate than one would expect.