We don’t need a ‘plan’ for high-speed Internet

Should broadband Internet be regulated and subsidized as an essential service? CRTC Chairman Jean-Pierre Blais made his own opinion fairly clear during the basic service objective hearing that wrapped up last week.

After raising the alarm about unconnected Canadians being “disenfranchised” and “profoundly disadvantaged,” and worrying about the prosperity of our regions and the country’s international competitiveness, Blais presented his conclusion: “Canada needs a plan.” He proceeded to draw an analogy with his home garden and the planning required to get his daffodils and tulips to bloom ahead of his neighbours’ flowers, and then wondered aloud if we are ready to develop “our Canadian broadband garden.”

Now granted, all analogies break down at some point. But Blais seemed unaware that his analogy breaks down right from the start, on the crucial point of whether Canada’s broadband garden needs to be centrally planned. After all, he doesn’t seem to think that he and his neighbours need central planners telling them how to plant their daffodils and tulips. They are each perfectly capable of making their own plans—and indeed, Blais seemed to acknowledge that competition brings out the best in him.

Canada’s broadband garden, if we want to call it that, is healthy, characterized by competitive market players providing quality services at affordable prices. Thanks to each of these players making its own plans, Canada has one of the better-performing Internet infrastructures when compared to the most developed countries in the world.

In terms of average broadband download speed, a survey carried out by Akamai ranked Canada 13th among the 29 OECD countries for which data were available in late 2015. Akamai also estimated that nearly 50% of IP addresses had an average broadband download speed above 10 Mbps, placing Canada 13th according to this metric as well.

According to the CRTC itself, 96% of Canadian households could access a download speed of 5 Mbps in 2014, which allows users to do almost anything on the Internet, including watching relatively high-quality videos. In terms of actual subscriptions to such a service, 77% of households were connected in 2014, up from 71% just one year earlier.

Critics who note that access to high-speed Internet is limited in some regions of Canada, or among less advantaged socioeconomic groups, invariably conclude that government intervention will be necessary to close the gap.

But as communications scholar Everett Rogers noted half a century ago, technology adoption typically goes through a series of phases: It starts with innovators and early adopters and progressively spreads until it finally reaches a saturation level when essentially 100% of the population is using it. What critics consider a market failure is actually just the normal course of technology adoption.

The major difference today is that new information technologies become widely accessible to all not in a matter of decades, but in a matter of years. For example, while it took almost half a century before a quarter of the American population was using electricity after it had been made commercially available in 1873, and more than three decades for telephones and radio, it took only 13 years and 7 years for mobile phones and the Internet to reach the same proportion of the population.

Broadband technology is likely already close to its saturation rate in Canada, and various subsidy programs already exist at all levels of government aimed at accelerating the deployment of broadband service in targeted, underserved rural and remote areas. At the federal level, the Connecting Canadians program announced by the previous government in 2014 is set to devote $305 million to connecting 280,000 Canadian households by 2017. The new federal government has committed an additional $500 million over the next five years to the same goal of connecting underserved areas.

Furthermore, all Canadians will soon be able to connect to the Internet at even higher speeds. The telecommunications industry is investing billions of dollars every year to develop new technologies and deploy the necessary infrastructure—not because of any comprehensive national strategy devised by civil servants in Ottawa, but because of competitive pressure. Companies are simply adapting to consumer demand and trying to attract more customers by offering better and faster broadband services at affordable prices. In this context, for the CRTC to declare that broadband is an essential service and to set new speed targets is simply irrelevant.

In sum, there is no need to create new funding mechanisms or impose more layers of distortionary regulation in order to duplicate what market players are already doing in an efficient manner. Or to use the CRTC Chairman’s analogy: Canada’s broadband garden is coming along quite nicely without a national plan.

Martin Masse and Paul Beaudry, respectively Senior Writer and Editor and Associate Researcher at the MEI, and authors of The State of Competition in Canada’s Telecommunications Industry – 2016.