The State of Broadband Internet in Canada

Canadians are among the highest Internet users in the world, according to comScore Canada. With advances in e-commerce and mobile communication, as well as increased participation in social media, broadband (or “high-speed”) Internet has become an integral part of Canada’s infrastructure.

However, as broadband speeds increase, so does the “availability gap” between Canada’s urban and rural areas, sometimes referred to as a “digital divide.” This creates two classes of users: the technology “haves” and “have-nots.”

According to the Canadian Federation of Municipalities, broadband networks improve productivity, provide new services, spur innovation across the economy, and improve market access in Canada and abroad. Broadband Internet applications can improve the lives of Canadians. In a country as vast as Canada, these applications include:

  • e-commerce platforms that can provide increased choice and lower costs;
  • online academic platforms that can improve the accessibility of higher quality “distance” learning;
  • remote medical diagnostic services that aid physicians in providing improved healthcare services in rural and remote areas;
  • innovative entertainment platforms, such as Netflix and YouTube; and
  • social media platforms that can help connect and mobilize citizens, domestically and internationally.

What is broadband?

According to the Canadian Radio-television and Telecommunications Commission’s (CRTC) Communications Monitoring Report 2015, “broadband” is defined as a minimum Internet download speed of 1.5 megabits per second (Mbps); this speed allows for standard definition video streaming, real-time video gameplay, and music downloads. Speeds of 5 Mbps and higher allow for high-definition video streaming.

Table 1 shows the availability of various broadband speeds for Canadian households in 2014.

Table 1 – Availability of Broadband Services by Canadian households, Selected Download Speeds, 2014

Download Speed Range

Availability (Percentage of Households) 

Large Population Areas

Rural Areas

1.5 to 4.9 Mbps

 100% 98%

5.0 to 9.9 Mbps

 100%

86%

30.0 to 49.9 Mbps  99%

28%

 100+ Mbps  96%

25%

Source: Table prepared by the author using data from the Canadian Radio-television and Telecommunications Commission, Communications Monitoring Report 2015.

 

The data highlight the “availability gap” between Canada’s urban and rural areas. This is also reflected in the CRTC’s broadband coverage map, which shows a rural-urban divide with regard to service level availability. This gap is also due in part to Canada having low rural population densities across vast geographic areas, where it becomes difficult for service providers to make a return on their infrastructure investments.

Canada’s broadband industry

In 2014, revenues generated by the Internet service industry reached $8.4 billion, accounting for 20% of total Canadian telecommunications retail revenue. Average revenue per user increased from $44.87 in 2013 to $47.86 in 2014. Since 2010, this average has risen by 6.1% annually.

A CRTC study comparing different service level “baskets” found that in 2015, Canadian consumers paid less than those in other developed countries for lower-speed services (Level 1 basket), but paid more for higher-speed services (Level 4 basket).

Comparatively higher prices may also help explain the difference in Canada between broadband availability and actual broadband subscriptions. Figure 1 illustrates this difference for Canadian households in 2014.

Figure 1 – Broadband Availability vs. Broadband Subscriptions, by Region, 2014 (Percentage of Households)

Graph showing a comparison between broadband availability and broadband subscriptions by region, 2014 (Percentage of Households)Source: CRTC, Communications Monitoring Report 2015. “HSPA+” refers to “high-speed packet access plus,” which is a standard for wireless communication. Thus, the data shows broadband availability through a combination of fixed and wireless platforms.

 

Broadband usage by Canadians

Between 2010 and 2014, “higher tier” plans (faster speeds, higher data caps) increased from 24% of all subscriptions to 67%. This was due to Canadians’ increasing adoption of data-hungry applications such as video streaming and, increasingly, going online via smartphones and tablets.

As Figure 1 shows, only 80% of Canadians subscribed to broadband in 2014, although it was available to 99% of households. Further analysis of Internet subscribers helps to explain this gap. For example, there is a relationship between Internet access and household income. In 2013, 60% of households with an income of less than $31,000 had Internet access at home, as opposed to over 95% of those with an income of $80,000 and higher.

Furthermore, there is also a relationship between age and Internet usage, regardless of income. In 2012, 95% of individuals aged 16 to 24 in the lowest income quartile used the Internet, compared with 28% of those aged 65 and older.

Canadian government’s policy and programs

The federal government continues to develop and implement policies and programs to help ensure all Canadians can benefit from broadband access.

In Canada, telecommunications services are regulated by the CRTC. However, regarding Internet services, the Commission does not directly control retail prices in this industry as it is deemed to be sufficiently competitive; this is done through the forbearance option established in the Telecommunications Act.

To further increase competition, the CRTC mandates large incumbent telecommunications companies, such as Rogers and Bell, to allow wholesale access to smaller Internet services providers, such as Teksavvy and VMedia. These smaller providers can then sell the service to consumers at a discounted rate.

To help ensure that all Canadians have equal access to the benefits of broadband, the Government of Canada in 2009 launched Broadband Canada, a $225-million dollar program that extended broadband Internet availability to more than 200,000 households in underserved areas.

In 2014, the government announced the Connecting Canadians program, which provides an additional $305 million dollars to further extend high-speed Internet to 280,000 households, with a new target speed of at least 5 Mbps for 98% of Canadian households, and 3-5 Mbps for those in Canada’s North.

Additionally, in late 2015, the CRTC announced a consultation to help determine whether broadband Internet should be classified as an essential service, thus making it subject to a different regulatory framework. Final submissions will be accepted until May 2016.

More recently, following the federal election of 2015, the mandate letter for the Minister of Innovation, Science and Economic Development included the explicit charge to increase “high-speed broadband coverage and work to support competition, choice and availability of services, and foster a strong investment environment for telecommunications services to keep Canada at the leading edge of the digital economy.”

This is supported by the commitment in Budget 2016 of more than $500 million to further “extend and enhance broadband service in rural and remote communities” and First Nations communities.

Author: Dillan Theckedath, Library of Parliament