Canada’s telecom companies are on a public relations rampage of late, with Bell, Rogers and Telus presenting a united front across national media in trying to convince the federal government to abandon its plan to bring U.S. wireless giant Verizon into the market. One of the blitz’s big talking points is how much the companies are investing in Canada, both in wireless and other services. Telus, for one, says it has invested $100 billion since 2000, and that the industry as a whole has spent $420 billion. Of course, as a company spokesman confirmed, that figure includes the cost of labour and supplies, meaning that every-day expenses such as paperclips and envelopes are being counted.
If the companies really were spending that kind of money in meaningful ways, Canadians would literally be hemorrhaging bandwidth everywhere they turned. South Korea who?
The latest Communications Outlook from the Organization for Economic Co-operation and Development points out just how overcooked the claims are. While the report certainly does show that Canadian companies companies are investing a decent amount in actual telecommunications – they collectively spent the fourth most among member countries in 2011 – it seems like Canadians should have more to show for it, especially on the wired broadband side, which is where most that spending has happened.
The Outlook compares download speed tests (in megabits per second) from three different sources – Akamai, M-Labs and Ookla – and Canada doesn’t fare well in any of them:
Part of the problem is likely Canada’s woeful position in next-generation fiber infrastructure. Here are the percentages of OECD broadband subscribers who are on such ultra-fast connections. The correlations with the speed tests above are glaringly obvious:
How can the relatively high spending be reconciled with low speeds and pathetic fiber uptake? Simple: pricing. It may be that Canadian telecom companies have indeed rolled out fiber, but the fact is, nobody is using it. With the highest-speed services costing hundreds of dollars (Rogers’ 250-megabit service costs a whopping $225 a month), that’s hardly a surprise.
Canada’s broadband networks are thus akin to North Korea’s Kijong-dong, or the Propaganda Village built on the border with South Korea – they sure look nice on the surface, but they don’t serve any functional purpose.
The chart below shows, once again, where Canada sits in terms of pricing both on wired and wireless services. The country is near the bottom of the OECD in almost every service level comparison:
As University of Ottawa professor Michael Geist points out, all of this is only set to get worse with the likes of Rogers promising more price hikes and declaring unlimited usage plans to be “short-sighted.”
There’s a practicality to all of this besides the hit to consumers’ wallets. Six years ago, Bell and Telus were caught flat-footed by the arrival of the iPhone, the device that kicked off the smartphone revolution. Their antiquated wireless networks couldn’t handle it, so they were forced to upgrade – hence all that investment they’re now waving around. The iPhone already took an extra year to arrive in Canada via Rogers, and it took even longer than that for proper competition to break out for it, happening only once Bell and Telus had their upgrades completed.
The wired broadband equivalent is coming, and soon, and just like the iPhone, it might give Canada a pass because of the woeful uptake of faster services. Unlike the iPhone, the avoidance could be longer than a year or two.
Take 4K television, the next evolution from plain old high-definition, as one example. Last month, Netflix executives told me there’s no real distribution method for such super HD programming, which is a void they’re looking to fill. They estimate it will take internet connections with a solid throughput of 15 Megabits per second to deliver. Glancing at the above speed results, it’s clear Canada won’t qualify for years to come.
4K video is just one possibility, but like the iPhone, no one is likely to see the next killer broadband application coming. When it does arrive, it’s either going to bypass Canada altogether or internet subscribers here are going to have to pay through the teeth to get it.
Verizon might actually help with this. Despite wanting a “level playing field” with the company, Bell, Rogers and Telus will still have huge advantages over the U.S. company, particularly with respect to their being able to offer bundles of services, including home internet and television. Verizon’s entry in wireless could actually result in the Big Three offering better deals on those other services.
The other solution to the wired broadband problem is pretty obvious: it’s time for the Canadian Radio-television and Telecommunications Commission to give small, independent internet service providers such as Teksavvy and Acanac better access to the big guys’ fiber networks. Lowering the regulated wholesale prices these companies pay to the likes of the Big Three would start to bring those ultra-fast services down in cost to the point where people might actually start moving into that Propaganda Village. And then, 4K video for everyone!