The Federal Communications Commission has just posted a comprehensive study it commissioned on broadband policies around the world. Completed by researchers at Harvard University (and led by Professor Yochai Benkler), the study combines a review of international rankings with differing policy approaches. While supporters of the Canadian status quo are sure to find fault with the study (it uses OECD and Speedtest.net data after all), the report is particularly noteworthy given that it attempts to link Canadian policy with its falling rankings.
On the issue of rankings, the study uses several reports to conclude yet again that Canada trails much of the developed world on broadband. The specific rankings are:
- Overall – 22nd
- Access – 16th
- Speed – 20th (using the same Speedtest.net source that Rogers relied upon in its ad campaign that led to a lawsuit by Bell)
- Price – 25th
The report address some of the same criticisms found in a recent Canadian ISP commissioned report such as population density and measuring subscribers vs. households. It concludes that the data is not dramatically different when accounting for these issues. More important, however, is the analysis on how Canada's regulatory environment has led to its middling performance.
The report examines open access policies or unbundling and its effects:
Canada in particular offers an example of half-hearted efforts to impose unbundling, and increasingly heavy reliance on competition between local telephone and cable incumbents. Its results, as our benchmarking study shows, have been weaker than those of other countries we review here.
In the bigger picture, the report notes that Canada was once a leader:
It was a very early broadband adopter, relying primarily on facilities-based competition between cable and incumbent telephone companies. As early as 2000, broadband subscriptions were already 31% of all Internet subscriptions. As of December of 2003, Canada had the second highest level of Internet penetration per 100 inhabitants in the OECD, second only to South Korea, and third highest, after South Korea and Japan, by the per-household measure. At that time, there were 1.29 cable broadband subscribers for every DSL subscriber.
Today, it points the dominance of the big five:
These numbers seem to suggest that the early observations of incumbents venturing out of their historical areas have been reversed, and that the incumbents are retrenching in their own historical territories. There are no smaller entrants of note, although there are a couple of hundred smaller ISPs, over half of whom resell ISP services offered by the incumbents, alongside several local utility companies, municipalities, and some ISPs using wireless technologies. None of these has appeared as a substantial competitor to the five major incumbents.
And why does Canada suffer on the competitive front? The report states:
Canada has the highest monthly charge for access to an unbundled local loop of any OECD country. Combined with the presence of strong incumbents and the Canadian regulator's practice of promising to sunset the requirement of opening access to core facilities – originally copper loops, now fiber – it is possible that the investment environment is too expensive and too uncertain for non-incumbent entrants.
And the end result?
Our company-level pricing study for the highest-speed offers in the countries we observe here locates almost all of the Canadian companies in the cluster with the slowest speeds and highest prices. Given these benchmark measures, the lessons of the Canadian experience do not seem as positive as the CRTC report presents them. On our composite measure, Canada occupies the 22nd spot. Early aggressive facilities-based competition certainly made Canada an early starter, but it does not seem to have enabled it to maintain its standing. Indeed, the decline in its standing in its best-performing measure, penetration per 100 inhabitants, was worse over this period (2nd to 10th) than was the decline of U.S. performance by that measure over the same time period (10th to 15th).
That sounds like we're lagging, not leading.