Monday October 11, 2010
in the Toronto Star on October 10, 2010 as Why are U.S. Net Services
Slow to Migrate North?
Netflix, the popular online movie rental service, launched in Canada
last month, providing consumers with the option to download an
unlimited number of movies and television shows for a flat monthly
fee. While the Netflix debut was marred by an ill-advised public
relations stunt that involved actors masquerading as excited consumers,
the long delays in migrating the service north once again raised
questions over why popular online services rarely view Canada as a
Canada's legal framework makes for a convenient explanation, but the
reality is that subtle legal differences are rarely the primary
rationale for business and marketing decisions. Moreover,
Canadian privacy, e-commerce, and intellectual property laws are
compliant with international standards and recent surveys have found
that business executives view Canadian protections as better than those
in the United States.
As the Canadian government readies its national digital economy
strategy, identifying the real reasons behind delayed entry into the
Canadian market is a crucial piece of the puzzle.
At least three explanations come to mind.
Topping the list is the fact that Canada's geographical advantage is
lost in the online world. In the physical world (ie. retail
stores and services), Canada's close proximity to the U.S., common
language, and similar culture, long made it the obvious choice for U.S.
businesses thinking of expanding beyond their domestic market.
The online world diminishes those advantages. Establishing an
online presence is as easy to do in Britain or Japan as it is in Canada
and the size of those markets is considerably larger. Canada
remains on the to-do list of many companies, but the small market size
makes it less attractive in an environment where physical barriers are
Canada's broadband market is a second key factor given the widespread
use of bandwidth caps. The caps, which are far more restrictive
than comparable caps in the U.S., create a significant hidden cost for
consumers anxious to use online services that require considerable
For example, Netflix advises consumers that the average HD movie
consumes 2 gigabytes of bandwidth per hour. Monthly bandwidth is
capped at 15 gigabytes with the Rogers Lite service, with an additional
charge of $4.00 for each additional gigabyte. While there are
other, more expensive options that offer more bandwidth, a Canadian
consumer could easily use their entire monthly bandwidth allocation by
watching one movie a week. By comparison, Comcast, the leading
U.S. cable Internet provider, has a monthly cap of 250 gigabytes
(Rogers does not offer any comparable package).
A third factor appears to be licencing requirements, which are
particularly complex and costly in Canada. Online video services
may be disappointed to find that popular content has already been
licenced for Internet distribution on an exclusive basis by large
Canadian broadcasters, effectively shutting out Internet upstarts.
Further, the licencing costs for available content is often
prohibitively expensive when compared to the U.S. market. For
example, Pandora, a popular online music service in the U.S., notes
that recent licencing demands for online streaming services run as high
as 45 percent of gross revenues. That places Canadian licencing
costs far above those found in the U.S. and Britain forcing many
providers to look for more cost-competitive markets. For a service like
Pandora, the costs mean that the Canadian market is a non-starter.
Attracting new online services - as well as nurturing homegrown
alternatives - depends upon a multitude of factors. Making
legislative changes may appear at first blush to be an easy fix, but a
more competitive broadband and licencing market would likely to do far
more to bring popular services streaming north of the border.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at firstname.lastname@example.org or online
TagsShareMonday October 11, 2010
Monday May 10, 2010
Industry Minister Tony Clement held a press conference on Sunday to announce the first round of Broadband Canada projects to receive funding. The 52 projects will help bring service to 169,000 households. TagsShareMonday May 10, 2010
Wednesday May 05, 2010
The Liberals have promised broadband for all Canadian communities by 2013 with speeds of at least 1.5 megabits. Industry Minister Tony Clement says the government's plan will be unveiled shortly. TagsShareWednesday May 05, 2010
Thursday April 15, 2010
The Globe reports that Industry Minister Tony Clement has acknowledged that Canada's broadband leadership has "vanished." TagsShareThursday April 15, 2010
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