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Proactive Disclosure

5.0 Telecommunications

5.3 Internet and broadband availability

Overview

In 2008, Internet revenues were approximately $6.2 billion, or 15%, of telecommunications revenues. Retail Internet access and transport revenues were approximately 80% of total Internet revenues. Of the retail Internet access revenues, approximately 80% were from residential Internet access service.

Internet services are provisioned using various technologies and platforms such as dial-up access lines, digital subscriber line (DSL), cable modem (i.e. coax cable), fibre cable, fixed wireless, and satellite facilities. Internet services are available on a retail and wholesale basis. Revenues from terminal equipment rental and sales, Internet applications, and other Internet-related services are also part of Internet revenues.

Highlights

• The top five Internet service providers (ISPs) were dominant in the Internet access market, capturing 76% of the Internet access revenues in 2008.
• Residential Internet access subscriptions had a lower annual growth rate in 2008 of 5.6%, compared to 6.8% in 2007.
• Approximately 74% of Canadian households²²⁸ subscribed to Internet service, up from 72% in 2007.
• 69% of Canadian households subscribed to high-speed²²⁹ Internet access service, up from 64% in 2007. Broadband²³⁰ services were taken by 52%²³¹ of all households, up from 48%, while services above 5 megabits per second (Mbps) were taken by 41%, up from 38%.
• Excluding satellite, broadband Internet access service was available to 94% of Canadian households. Virtually all urban households and 78% of rural households can have access to broadband service.

The Industry

The Internet access industry consists of an estimated 500 companies:

• 9% are incumbent TSPs, who own the vast majority of the copper twisted pair access links to homes and businesses: these service providers provide Internet access mainly by dial up, DSL, fibre optic, satellite, and fixed wireless facilities;
• 18% are cable companies who own the coaxial based television distribution networks serving households and, to a much lesser extent, businesses. They essentially provide Internet access using cable modem, fibre optic, and fixed wireless facilities;
• 19% are utility telcos, municipalities, and other TSPs who own facilities and mainly provide service using dial up, DSL, fibre optic, satellite, or fixed wireless facilities; and
• the remaining 54% are resellers who essentially rely on facilities-based TSPs to provide them with the facilities on a wholesale basis. Resellers mainly provide dial up Internet access service, as well as high-speed Internet service using leased DSL, cable modem, and fibre optic facilities.

Sector analysis

Retail Internet access revenues

The five largest Internet access service providers²³² and their affiliates continued to dominate the market for retail Internet access with 76% of the Internet access revenues in 2008.

The incumbent TSPs, excluding their out of territory operations, and the cable BDUs are the major providers of Internet access service with revenue market shares in 2008 of approximately 40% and 48%, respectively.

The market share of the incumbent TSPs when operating outside their traditional territories, resellers, utility telcos, and other carriers remained unchanged at approximately 12% in 2008. In 2003, these TSPs had 23% revenue market share, which declined over the years to 12% in 2007.

As displayed in Figure 5.3.1, as a group, incumbent TSPs operating outside their traditional territories, resellers, utility telcos, and other TSPs have a far larger share of the business Internet access revenues than of the residential Internet access revenues. Conversely, the cable BDUs have a far larger share of the residential Internet access revenues than of the business Internet access revenues.

Residential subscribers and the shift to high-speed

As of year end 2008, 9.8 million residential Internet access subscribers, or approximately 74% of all Canadian households, had an Internet access subscription. Households with high speed Internet access reached 9.1 million households, or 69% of all Canadian households, up from 64% in the previous year. In 2000, high speed Internet access subscriptions were 31% of all Internet subscriptions. Since then, high speed Internet access has become the dominant means of accessing the Internet, comprising 93% of all residential Internet subscriptions.

As displayed in Table 5.3.2, over the 2004 to 2008 period, the subscriber-based residential market share of the other TSPs (i.e. excluding incumbent TSPs and cable BDUs) declined from 16% in 2004 to 8% in 2008. However, the total number of subscribers in 2008 for these TSPs increased in 2008 for the first time since 2001.

In 2003, cable modem subscriptions were approximately 1.29 times that of DSL. The gap or difference between the number of cable modem subscriptions and the number of DSL subscriptions was steadily narrowing to the point where, by 2004, the gap was 1.2 cable modem subscriptions per DSL subscription. However, by 2006, this trend had stopped and the gap had started to widen, to the point where cable modem subscriptions were 1.31 times that of DSL subscriptions by year-end 2008.

High-speed and broadband

Residential subscribers of high-speed Internet access have been making increasing use of their connections, as discussed in the New Media section of this report. The weighted-average download speed for Canadian subscribers is 5.0 Mbps, compared to 4.2 Mbps in 2007. The weighted-average downloads were 9.1 gigabytes per month, and the weighted-average uploads were 3.2 gigabytes, in 2008.²³³ The weighted-average monthly data transfer limit was approximately 42 gigabytes.

Broadband service (i.e. services above 1.5 Mbps) has been increasingly popular, as shown in Figure 5.3.4. The greater popularity or demand for broadband service can be attributed to the greater availability of broadband and the activities pursued on the Internet such as music, video, and high definition (HD) video downloads.

Most Canadians subscribed to broadband plans with an advertised top speed of 5 to 9 Mbps. Plans in the 5 to 9 Mbps range allow the user to download or view online movie rentals or purchases, and may allow for certain low bandwidth forms of HD video. Fifty-nine percent of high-speed subscribers were at or above this capability. The average lowest price for this range of speeds was approximately $43.40 per month.

Lower-speed plans in the 300 to 1400 Kbps range were also available. These speeds would be adequate for web video, gaming, and current virtual world implementations, and should be adequate for use with music downloads and small software downloads. Ninety-six percent of high-speed subscribers were at or above these speeds. The average lowest price was approximately $31.71 per month for these speeds.

The next most popular range of speeds was the 1.5 to 4 Mbps category. At these speeds users can download full compact disk (CD) software. Seventy-six percent of high-speed subscribers were at or above these speeds. The average lowest price for these speeds was approximately $44.29.

The most expensive services were those at 10 Mbps or above. These services were considered adequate for most forms of HD video, full DVD downloading, and may be suitable for HD-DVD videos. These services were taken by 9% of subscribers. The average lowest offer for this type of service is approximately $56.83 per month for services between 10 and 15 Mbps, and approximately $79.98 per month for services at or above 16 Mbps.

ISPs also offered "Lite" and wideband services that were at or below 256 Kbps. These speeds are considered sufficient for VoIP services and for some gaming and email and web use. The average lowest price for these speeds was approximately $24.56 per month.

Internet - Statistical Information

Table 5.3.1 Internet revenues ($ millions)

														Growth 2007-2008			CAGR 2004-2008
		2004		2005		2006		2007		2008
Residential	Incumbent TSPs (excluding out-of-territory)
	Dial-up	228		192		159		141		116				-17.2%			-15.5%
	High-speed	813		1,014		1,160		1,331	#	1,406				5.6%			14.7%
	Subtotal	1,041		1,206		1,319		1,471		1,522				3.6%			10.0%
	Cable BDUs
	Dial-up	6		13		8		5		2				-54.9%			-23.7%
	High-speed	1,212		1,380		1,649		1,935		2,129				10.0%			15.1%
	Subtotal	1,218		1,393		1,657		1,940		2,131				9.9%			15.0%
	Incumbent TSPs (excluding out-of-territory) and cable BDUs subtotal
	Dial-up	234		205		167		145		118				-18.4%			-15.6%
	High-speed	2,025		2,394		2,809		3,266		3,535				8.3%			14.9%
	Subtotal	2,259		2,599		2,976		3,411		3,654				7.2%			12.8%
	Other TSPs
	Dial-up	199		157		112		83		71				-14.6%			-22.8%
	High-speed	65		83		103		128	#	175				36.1%			28.0%
	Subtotal	264		239		215		211		245				14.9%			-1.8%
	Total
	Dial-up	433		362		279		228		189				-17.0%			-18.7%
	High-speed	2,090		2,477		2,912		3,394		3,710				9.3%			15.4%
	Residential Total	2,523		2,838		3,191		3,622		3,899				7.6%			11.5%
Business	Incumbent TSPs
	(excluding out-of-territory)	391		396		406		434		457				5.1%			4.0%
	Cable BDUs	66		127		134		169		201				18.7%			32.0%
	Incumbent TSPs (excluding out-of-
	territory) and cable BDUs subtotal	457		523		540		604		657				8.9%			9.5%
	Other TSPs
	Incumbent TSPs   (out-of-territory)	106		125		98		112		98				-12.8%			-1.9%
	Resellers, utility telcos,   and other carriers	254		214		236		223		241				8.4%			-1.3%
	Other TSPs subtotal	360		339		335		335		339				1.3%			-1.5%
	Business Access Total	816		862		874		938		997				6.2%			5.1%
	Business Transport Total	46		41		50		73		76				4.4%			13.7%
	Business Total	862		903		924		1,011		1,073				6.1%			5.6%
Wholesale Access	Higher capacity access and transport	107		95		77		54		54				-0.4%			-15.9%
	Lower capacity access	103		111		125		147		161				9.7%			11.7%
	Wholesale Total	210		206		202		201		215				7.0%			0.5%
Other	Applications, equipment, and other Internet-related services	569		583		720		835		1,015				21.6%			15.6%
	Grand Total	4,164		4,530		5,037		5,669		6,202				9.4%			10.5%

Notes:

1. Wholesale Internet access and transport services are generally sold to ISPs. These services are used by the ISPs to provide Internet access service to their retail customers. Sales to non ISP entities, such as VoIP service providers, are also included in the wholesale revenues presented in Table 5.3.1 as "higher capacity access and transport" revenues.
2. "Lower capacity access" includes services such as Bell Canada's Gateway Access Service (GAS), TCC's virtual point of presence (VPOP) DSL, and cable BDU-provided third-party Internet access (TPIA) service, as well as satellite capacity, and dial up bundled with Internet access sold to ISPs.
3. In previous years, modem rental fees for residential service were included with Internet access service revenue. However, they are no longer included as of 2008. They total approximately $121 million in 2008.

Source: CRTC Data Collection

Figure 5.3.1 Internet access revenue share, by type of entity

Figure 5.3.2 Business Internet access revenues, by access technology

Note:      Other includes the remaining technologies such as, but not limited to, integrated services digital network (ISDN), fixed wireless, and satellite.

Table 5.3.2 Residential Internet subscribers, by type of TSP

	2004		2005		2006		2007		2008
	Subscribers /1000	Share*	Subscribers /1000	Share*	Subscribers /1000	Share*	Subscribers /1000	Share*	Subscribers /1000	Share*	Growth 2007-2008	CAGR 2004-2008
Incumbent TSPs (excluding  out-of-territory)
Dial-up	1,010	49.8%	765	48.8%	642	51.8%	566	60.6%	433	59.1%	-23.5%	-19.1%
High-speed	2,268	41.9%	2,676	41.6%	3,095	41.5%	3,405	40.7%	3,584	39.5%	5.3%	12.1%
Subtotal	3,277	44.0%	3,441	43.0%	3,736	42.9%	3,971	42.7%	4,017	40.9%	1.2%	5.2%
Cable BDUs
Dial-up	38	1.9%	53	3.4%	38	3.1%	18	1.9%	18	2.4%	1.9%	-17.2%
High-speed	2,933	54.1%	3,467	53.9%	4,041	54.2%	4,573	54.7%	4,990	55.0%	9.1%	14.2%
Subtotal	2,971	39.9%	3,520	44.0%	4,079	46.9%	4,590	49.5%	5,008	51.1%	9.1%	13.9%
Incumbent TSPs (excluding out-of-territory) and cable BDUs subtotal
Dial-up	1,048	51.8%	818	52.2%	680	54.8%	584	62.5%	451	61.6%	-22.8%	-19.0%
High-speed	5,201	96.0%	6,143	95.6%	7,136	95.6%	7,978	95.5%	8,574	94.5%	7.5%	13.3%
Subtotal	6,249	84.0%	6,961	87.0%	7,815	89.8%	8,561	92.2%	9,024	92.0%	5.4%	9.6%
Other TSPs
Dial-up	977	48.2%	750	47.8%	560	45.2%	350	37.5%	281	38.4%	-19.7%	-26.8%
High-speed	216	4.0%	286	4.4%	327	4.4%	379	4.5%	503	5.5%	32.9%	23.6%
Subtotal	1,193	16.0%	1,036	13.0%	886	10.2%	729	7.8%	785	8.0%	7.6%	-9.9%
Total
Dial-up	2,025	27.2%	1,568	19.6%	1,239	14.2%	934	10.0%	732	7.5%	-21.6%	-22.5%
High-speed	5,416	72.8%	6,429	80.4%	7,461	85.8%	8,356	90.0%	9,077	92.5%	8.6%	13.8%
Grand Total	7,442		7,997		8,700		9,290		9,809		5.6%	7.1%

Note: (*) Percentages refer to access mode's proportion of all residential Internet subscriptions of its type, except for the total rows, where they are a proportion of total industry residential subscriptions.

Source: CRTC data collection

Table 5.3.3 Residential Internet plans and pricing (part 1 of 2)

	2006						2007				2008
Downstream speed	One-month revenue (%)
Lite and wideband up to 256 Kbps	6.6						6.8				2.9
Wideband 300 to 1400 Kbps	11.9						12.2				15.1
Broadband
1.5 to 4 Mbps	14.7						14.0				17.3
5 to 9 Mbps	60.3						58.0				53.6
10 to 15 Mbps	6.3						8.7				10.8
16 to 25 Mbps	0.2						0.2				0.3
Total sample	242.1						268.9				306.4
Downstream speed	Subscribers (%)
Lite and wideband up to 256 Kbps	10.1						10.0				4.3
Wideband 300 to 1400 Kbps	14.7						15.3				19.8
Broadband
1.5 to 4 Mbps	15.1						15.3				17.0
5 to 9 Mbps	54.8						52.5				50.1
10 to 15 Mbps	5.2						6.8				8.6
16 to 25 Mbps	0.1						0.1				0.2
Total sample	6,880.3						7,576.6				8,184.4
Downstream speed	Average revenue per subscriber
Lite and wideband up to 256 Kbps	$22.91						$24.37				$24.86
Wideband 300 to 1400 Kbps	$28.30						$28.29				$28.57
Broadband
1.5 to 4 Mbps	$34.24						$32.53				$38.22
5 to 9 Mbps	$38.74						$39.26				$40.00
10 to 15 Mbps	$43.17						$45.23				$47.06
16 to 25 Mbps	$81.30						$51.17				$63.06
Total sample	$35.18						$35.50				$37.44
Downstream speed	Weighted-average upload speed (Kbps)
Lite and wideband up to 256 Kbps	94						118				131
Wideband 300 to 1400 Kbps	306						294				286
Broadband
1.5 to 4 Mbps	537						537				809
5 to 9 Mbps	619						677				744
10 to 15 Mbps	742						815				862
16 to 25 Mbps	1,006						1,000				1,120
Total sample	514						552				649
Weighted-average download speed	3,826						4,227				4,928

Table 5.3.3 Residential Internet plans and pricing (part 2 of 2)

	2006		2007		2008
Downstream speed	Weighted-average upload/download limit in gigabytes (GB)
Lite and wideband up to 256 Kbps	-		-		8.50
Wideband 300 to 1400 Kbps	-		-		8.75
Broadband	-
1.5 to 4 Mbps	-		-		43.25
5 to 9 Mbps	-		-		54.18
10 to 15 Mbps	-		-		80.81
16 to 25 Mbps	-		-		101.91
Total sample	-		-		42.34

Source: CRTC data collection

Note:

1. Weighted average download limits are calculated only for those plans that have limits.
2. 2008 data excludes terminal rental revenues.

Figure 5.3.3 Residential Internet access technology mix (2004 v. 2008)

Figure 5.3.4 Broadband (greater than 1.5 Mbps) subscriptions

Broadband availability

There are a number of platforms capable of delivering services equivalent to broadband in Canada. These include wireless 3G or equivalent networks, wireline DSL, cable networks, and satellite.

When viewed on a household basis, approximately 94% of Canadian households were located within areas with access to broadband services in 2008. Satellite facilities can extend this reach to virtually all Canadian households and is only limited by capacity constraints. Terrestrial broadband availability ranges from a low of 66% in the North²³⁴ to a high of nearly 100% in Nova Scotia.²³⁵

The majority of the Canadian population (75%) is located in large urban²³⁶ centres. In 2008, virtually all Canadian households in urban centres could have access to broadband services, versus 78% of households that were in rural areas.

In 2008 DSL-based broadband Internet access service was available to 84% of Canadian households, and cable modem-based broadband Internet access service was available to 80% of households.

The availability of fixed wireless was estimated to be over 75% of households. These systems are typically limited by the distance from the transmitter, the terrain, the availability of spectrum, and the load imposed on the network by other subscribers served by the same transmitter.

Canadians can determine if they can have access to broadband service to their homes by accessing Industry Canada's website²³⁷.

Broadband availability - Statistical information

Table 5.3.4 Key telecommunications availability indicators

Platform	Availability
	2005	2006	2007	2008
Wireless	97%	97%	98%	98%
Mobile 3G or equivalent	na	na	78%	91%
DSL	na	na	na	84%
Cable modem	na	na	na	80%
IPTV	n/a	8%	10%	10%
Digital satellite	National	National	National	National

Source: CRTC Data Collection
n/a data not available

Figure 5.3.5 Broadband availability (percentage of households)

Figure 5.3.6 Broadband availability - Urban v. rural (percent of households) (2008)

Figure 5.3.7 High-speed availability v. high-speed subscriptions (2008)

Table 5.3.5 Number of households that can have broadband access (thousands)

Province	2008
British Columbia	1,658
Alberta	1,312
Saskatchewan	389
Manitoba	442
Ontario	4,659
Quebec	3,009
New Brunswick	257
Nova Scotia	387
Prince Edward Island	51
Newfoundland and Labrador	155
North	25
Canada	12,333

Note: Due to the increased granularity of the data and the resulting improvements in the methodology, the 2008 data is not directly comparable to previous years at the provincial level