GIVEN THE IMPORTANCE of digital connectivity in the modern, digital era, the affordability and availability of Internet access for Canadian households is an extremely important concern for policymakers.
Fortunately, Canada ranks very high in both of these dimensions, according to an international survey published annually by the Economist Intelligence Unit (EIU). Canada ranks first among the 100 countries in internet affordability and 18th in internet availability in the most recent, 2019, EIU report.
The EIU, a sister company to The Economist newspaper, is a highly-regarded international provider of global information for businesses, the financial sector, and governments. It has been publishing an extensive international comparative measure of the quality of consumers’ experience in using the Internet, the Inclusive Internet Index, since 2017.
This index measures the availability and affordability of internet connections in 100 countries, in addition to the relevance (availability of content) and the readiness of users to benefit from access to the Internet. Only the availability and affordability components, contributing 70% of the weight in the overall Index, are a reflection of the performance of a country’s wireline and wireless Internet services sectors.
In both dimensions, Canada’s service providers are awarded very high scores. Overall, Canada ranks sixth in this year’s Inclusive Internet Index.
The affordability index is comprised of measures of the price of accessing and using the Internet – and the degree of competition in the Internet services sectors. Price, in the index, is a weighted average of the price of a mobile smartphone, the prices of prepaid and postpaid wireless services offering 500 MB of monthly data, and the price of a fixed broadband connection, all expressed as a share of personal income in the country.
The degree of competition is comprised of three measures: the average revenue per user (ARPU) of wireless carriers, the Herfindahl-Hirschman Index (HHI) measure of concentration in the mobile wireless sector, and the HHI in the wireline broadband sector. Strong competition among carriers provides consumers with high-quality Internet services.
Canada ranks very high in both components of the affordability index. It ranks number one in the degree of competition and in all three sub-components of it. It’s not surprising that Canada ranks very high –indeed, the highest –in the degree of carrier competition among the 100 countries surveyed.
It has relied heavily on facilities-based competition, leading to the establishment of three national wireless carriers, who compete aggressively with a number of regional carriers, to deliver extremely high-speed services to Canadians, even those in the vast rural areas of Canada. The average wireless download speed ranks fourth among the 100 countries surveyed, a remarkable feat given Canada’s dispersed population over often-difficult terrain.
Canada ranks 16th in the price component of the EIU’s 2019 affordability index. Given Canada’s dispersed population and thus its extremely low population density, Canadian carriers are presumed to have much higher fixed network costs per subscriber than most countries’ Internet providers. Nevertheless, Canada ranks number one in the price sub-component for fixed broadband access and 14th and 43rd among the 100 countries surveyed by the EIU in the wireless price sub-components.
It undoubtedly would rank much better in these wireless price components of affordability had Canada’s wireless spectrum policy been more conducive to carrier investment in wireless networks. Canada has among the highest spectrum prices in the developed world because of these policies, thereby increasing wireless carrier costs and, thus, wireless prices.
Canada’s relatively high ranking in Internet Availability, currently 18th among 100 countries, is driven by the high speeds offered by wireline and wireless carriers. Canada’s average wireless download speed ranks fourth and its average wireline download speed ranks 14th among the 100 countries surveyed. This high-quality access is buttressed by the top ranking for both private and government initiatives to provide widespread wi-fi access for Canadian subscribers.
It is notable that Canada ranks above such high-income countries as Japan, Germany, France and Italy in the EIU’s measure of internet affordability despite the large costs of extending wireline and wireless networks across its vast geographic expanse. Indeed, Canada ranks above all of these countries in the EIU’s overall Inclusive Internet Index, a result that reflects the excellent Internet experience generally available to Canadian households.
Dr. Robert Crandall is a non-resident senior fellow at the Technology Policy Institute in Washington, D.C. He was a senior fellow in the economics studies program of the Brookings Institution for more than 35 years, where his research focused on telecommunications regulation, cable television regulation, competition policy, international trade policy, and the changing regional structure of the U.S. economy.
Dr. Crandall also submitted research as part of the Telus submission to the CRTC wireless policy review.