Scarcely a year ago, the CRTC had these comments to make about the quality of Canada’s broadband services:

“For Internet service, Canada compares favourably for low-use broadband Internet service, and reflects a median price point for medium- and high-use baskets. Canada has the highest proportion of households with broadband connections among the G7 countries. Broadband to the home in Europe is primarily supplied via digital subscriber line (DSL) technology over fixed telephone lines, whereas in Canada, consumers have more choice as broadband delivery is widely available over both cable and DSL (August 2009 Communications Monitoring Report, p. v).”

This rosy passage turns out to reveal far more about the quality of federal policymaking than about the day-to-day broadband experience of real-life Canadians.

It also turns out to be a remarkable piece of sophistry, though you’d hardly suspect that without getting all the way to Appendix 5, almost 300 pages later, deep into the wonk zone. The Berkman Final Report to the FCC’s Broadband Task Force describes the CRTC’s tone as “self-congratulatory” (p.168).

In a town where everybody wants to look good, regulator and regulatee are often heard singing the same self-congratulatory chorus. During last summer’s traffic management hearings, for example, a member of the Rogers team could have been reading from the CRTC’s playbook when he said proudly:

“Canada has the highest penetration of cable modem service in the world and the highest penetration of broadband in the G8 countries. [...] Market forces, not government fiat, are responsible for Canada's remarkable success” (my emphasis: transcript, July 13, 2009, para 4901).

What’s wrong with this picture?

Houston, we don’t have a problem

First, you can’t solve problems if you pretend you don’t have any. Policymakers sitting on the fence might wish to take a leaf from Chairman Genachowski’s book. On June 17, the FCC voted to find a “third way” to re-regulate broadband, the latest and most controversial move in their National Broadband Plan. Apart from actually having a plan, which the Harper government obviously doesn’t, Genachowski asked everyone to face the music in his follow-up statement:

“I ask only this of all participants in this discussion, inside and outside the Commission: Let’s not pretend that the problems with the state of broadband in America don’t exist; let’s not pretend that the risk of excessive regulation is not real, or, at the other extreme, that the absence of basic protections for competition and consumers is acceptable.”

Let’s move to a second issue that seems to have afflicted Ottawa’s powers of reasoning. The Monitoring Report authors could be forgiven if their sense of complacency was at least achieved through reliance on the empirical evidence. This is what the Genachowski FCC refers to as evidence-based policymaking, a principle to which they are deeply attached. What I see in Ottawa by contrast is a blithe preference for policy cherrypicking – take what makes us look good and bury the rest.

Back to that opening quotation.

It takes refuge in Canada’s oft-quoted claim that we have the highest penetration rate among the G7. Some defenders of the status quo conveniently overlook the fact the OECD Broadband Portal has more to offer than G7 rank by household. One question I would ask is why has the Commission picked the G7 item and ignored everything in the OECD’s 47 other datasets on broadband? And why would the Commission also ignore what’s going on in the 23 (now 24) other OECD countries?

Much of a muchness

Let’s for the moment ignore the information on Usage, Coverage, Prices, and Services and Speeds, and put the penetration thing to rest. The OECD team, which updated many of its rankings in May, has the following news:

a) Households.On this measure Canada beats its G7 partners. On the full ranking of 30 countries, Canada comes in 8th.

b) Per 100 population, G7 only.The last time Canada held the lead here was Q4-2007. As of Q4-2009, we dropped to 3rd place behind France and Germany.

c) Per 100 population, full OECD. Canada comes in 11th out of 31 (includes Chile).

So what are we to make of these differences? The short answer: not much. This kind of debate over metrics is a lousy way to make policy, as Berkman notes:

“Arguments about the weakness of the data by pointing to different numbers from different survey organizations that show slightly different rankings is somewhat akin to saying that one does not agree with the BLS employment statistics for the last month, and prefers this or that market survey instead. It may make one’s country look better on the rankings, but it simply is not a basis on which to form policy using long term comparable data” (p.35, my emphasis).

Cherry-picking in Appendix 5

Depending on your expectations, you might have been surprised to read that “Canada compares favourably for low-use broadband Internet service, and reflects a median price point for medium- and high-use baskets.” You’d be even more surprised to read how the Monitoring Report authors arrived at their cheerful conclusions. The secret sauce is in Appendix 5:

“Canadian prices were compared to those in the U.S., U.K., France, and Australia for wireline, wireless, and broadband services at three different usage levels. [...] Prices were collected from the three or four largest service providers in each country, and then weighted by the market share of each provider [...].”

It turns out we win the international comparison contest by going up against four other countries. But the real kicker is that each of the three service levels examined here is assigned a completely arbitrary “usage allowance.” Lite gets 25 GB, medium 60 GB and so-called very high-speed 100 GB.

It’s bad enough the authors fail to point out what happens when a Canadian subscriber goes over her bit cap: she pays more than the monthly fee the CRTC has used to calculate our moderate price points. Moreover, of the other three countries in this CRTC basket, two – the US and France – have no bit caps, while the UK has caps on 40% of the services noted by the OECD.

It then turns out Canada and Australia are the only two in which 100% of all services observed carry bit caps. To get an idea how out of step this practice is with the rest of the developed world, consider that 17 of our sister countries are 100% bit-cap free – and in eight of the others, caps apply to 40% or fewer of the services observed.

As I’ve tried to explain in a couple of blog posts recently, bit caps are retrograde, consumer-unfriendly and innovation-killers, because they discourage experimentation with new products and services. That’s why progressive jurisdictions don’t use them – such as France and Germany, the two G7 countries that have pulled ahead of Canada on penetration per 100 population.  

Sticker shock

So what about those prices? The OECD has organized its pricing information in 13 different datasets (all data are available on the OECD Broadband Portal). Let’s look at two of these: average broadband monthly subscription price, by country (4e), and average broadband monthly price per advertised Mbit/s, by country (4f):

- Average monthly subscription price: Canada ranks 23rd out of 30.

- Average monthly price per advertised Mbit/s: Canada ranks 25th out of 30.

In case you don’t believe in large-scale international comparisons, I asked a colleague in Paris to send me some real-life numbers on the cost of broadband. Nothing fancy, no USD PPP or regression analysis, just Euros converted to Canadian dollars. That was in November 2009.

Unlike the CRTC, which looked at exactly two French services (France Telecom and Neuf Cegetel, the two biggest suppliers), we looked at several others, including Numericable, Free and SFR. Here’s what was on offer, with downlink/uplink in Mbps, and all prices in Canadian dollars:

- France Telecom (100/100) = $102

- France Telecom (100/10) = $71

- Numericable (100/2) = $32

- Free (100/50) = $47

- SFR (100/50) = $47

Notice two things. First, in France you can get affordable symmetric connectivity. And in France, there are no bit caps, period. Now, check out these roughly comparable Canadian offerings (which may have changed):

- Shaw (100/5 with 400 GB cap) = $157

- Shaw (25/2 with 150 GB cap)  = $96

- Videotron (50/1 with 100 GB cap) = $80

The only Canadian offering here that matches the French services is the 100/5 Shaw service. It falls halfway between Numericable at 2 megs and France Telecom at 10 megs, whose prices are $32 and $71. That makes the Shaw service five times more expensive than Numericable’s.

What about bundles? Free, the French operator, charges the equivalent of $47 for the following triple-play:

- DSL (26/1)

- TV (200 channels)

- unlimited phone calls to 80 countries, including Canada.

Here’s a comparable triple-play from Telus Corp:

- DSL (15/1) – cost $38

- TV at lowest price in build your own package – cost $25

- unlimited calls to US, CA + 1000 min international – cost $60

The Telus Total: $123. If you’re on Free, you can make unlimited calls across Canada for $47 – which includes your DSL, with nearly twice the bandwidth, and 200 TV channels. You could say based on these numbers that it’s now cheaper to call Canada from France than it is to call Canada from Canada. How do you like them apples?

What has Ottawa got against affordability?

You’d think with numbers like these turning up the deciders would be showing signs of worry about retail prices – or, in consumer-centric terms, affordability. Take the digital content agenda for example. If this government wants Canadian onliners consuming the digital products it’s subsidizing, it should be considering what will happen if large numbers of Canadians are either a) using broadband with a measly 4 or 5 Mbps of bandwidth, or b) not using broadband at all because they can’t afford it. No bandwidth, no audience.

Meanwhile, in Washington, FCC Chairman Genachowski describes his overall goal as spurring “ubiquitous, fast, competitive, and affordable broadband networks available to every American.” The term “affordable” is itself ubiquitous in FCC pronouncements. Not so in Canada. I did a word search in three federal documents of interest in this discussion: the Digital Consultation backgrounder; the Monitoring Report; and the CRTC’s May 6 decision on usage-based billing (Telecom Decision CRTC 2010-255). Here’s what I found:

The Consultation backgrounder:uses “affordable” exactly once in 36 pages (p.25), in reference to “creative control” not the retail purchase of broadband. As a point of comparison, it uses “investment” 71 times, “competitive” 22 times and “business” 63 times.

The CRTC Monitoring Report:uses “affordable” on 9 out of roughly 300 pages. Only two of these instances make explicit reference to the affordability of broadband service (pp.259-60) - and that’s in other countries. Not a single passage explains what the Commission or any other agency is doing to contain retail broadband prices in Canada as a continuing policy.

CRTC’s May 6 decision on UBB:does not use “affordable” a single time, except in footnote 8 (a citation from the Telecommunications Act). For the first time in three years, a Commission decision has resulted directly in a fee increase for my DSL service. I know because my not-for-profit reseller, National Capital Freenet, told me so. NCF, which has to lease its bandwidth through Bell’s Gateway Access Service, emailed me a brisk 25 days after release of the Decision, saying they’d “just been advised by our upstream DSL wholesaler [Bell] that they are increasing their fees.” This time it’s personal.

Two modest suggestions

In my comment here last month, I was skeptical about the current government’s Digital Consultation, as well as about its background paper. What I’ve been trying to do this time is point to some of the contextual factors weighing against policy reform and a better broadband ecosystem.

I don’t see much hope for progressive reform unless and until two sets of pretty radical changes get implemented. One has to do with the constraints imposed by paragraph 7(f) of the Telecommunications Act, which stipulates federal policy must “foster increased reliance on market forces.” The other has to do with the CRTC’s relationship to government and the public it serves.

For reasons I don’t pretend to understand, the Harper government issued its famous Policy Direction in December 2006, which requires the CRTC to “rely on market forces to the maximum extent feasible as the means of achieving [Canada’s] telecommunications policy objectives.” The Direction has ended up contaminating a great deal of what the Commission says and does – an excellent case in point being the May 6 UBB decision I alluded to earlier. This decision strives above all to relieve the regulatory asymmetry that has for years annoyed both the telcos and the cablecos. The solution: so-called “competitive neutrality,” which has now helped Bell level the playing field and raise its prices – again. What has this done for broadband subscribers? Absolutely nothing.

So my first recommendation to our politicians would be to rescind the Policy Direction, and good riddance. The puzzle for me is why provisions in the Act that protect consumers (“to render reliable and affordable telecommunications services of high quality”) should have taken a back seat to provisions whose net effect is to protect large regulated businesses. If that means amending the Telecommunications Act, let’s get to it.

My other point concerns the beleaguered CRTC. It’s a bitter irony that it was the Commission’s June 2009 new media decision that really got us talking about a national digital strategy. But its ability to help push that agenda is remarkably limited – far too limited for what is after all an independent tribunal.

The Commission makes decisions that, quite apart from their merits, are incomprehensible to anyone outside the industry. What it needs to do most of all is become a much more familiar and friendly face. It needs to get out more often. It needs to translate items like the UBB decision into terms it can defend to the general public. Let Commissioners and staff speak out. Let them blog. Let them be more like real people.

Most of all, get the market forces doctrine off its back. And while the feds are it at, they should double the Commission’s research budget.

That’s the dream.

David Ellis teaches Communication Studies at York University, works off campus as a consultant and blogs at www.davidellis.ca.

 

 

1