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6.0 International perspective

6.2 How Canada compares internationally

Service pricing – individual services and bundled rates

Service providers from both the telecommunications and broadcasting industries continue to offer their traditional core business services, as well as packaging communications services into various bundled offerings combining fixed-line voice telephony, mobile wireless services, broadband Internet access, and television and video services. Price comparisons between Canada and four selected foreign jurisdictions are contained in Table 6.2.1.

Table 6.2.1 International pricing (average price ($Cdn) per month)

	Canada	United States	United Kingdom	France	Australia
Wireline service
Low-usage	30	39	35	31	45
Medium-usage	50	71	50	56	87
High-usage	62	82	69	67	96
Wireless service
Low-usage	33	43	24	25	20
Medium-usage	58	66	45	62	37
High-usage	103	133	76	109	93
Broadband service
Low-usage	31	40	n/a	45	41
Medium-usage	47	58	30	49	64
High-usage	60	70	36	48	78
Bundled services
Above services plus television	173	213	134	153	190

Note: Figures are in Canadian dollars adjusted for purchasing power parity differences across the countries.

Source: Price comparison study conducted for the CRTC in April 2009 by Wall Communications Inc.; see Appendix 5 for a summary of the assumptions and methodologies used.

Canadian wireline service rates compare favourably with the four selected foreign jurisdictions displayed in Table 6.2.1, especially relative to the United States and Australia. For mobile wireless services at the low-usage level, Canadian rates are below those in the United States, but higher than the other countries examined. At medium- and high-usage levels, Canadian wireless rates fall within the middle of the group.

For broadband, the market has been moving towards providing higher-speed Internet service offerings, with the effect that fewer lower-speed/lower-usage alternatives are available. In terms of international pricing, Canada compares favourably for low-use broadband Internet service, and reflects a median price point for medium- and high-use baskets. The average advertised speeds for the high-usage broadband offerings considered were as follows: Canada, 12 Mbps; the United States, 13 Mbps; the United Kingdom, 15 Mbps; France, 19 Mbps; and Australia, 25 Mbps. The Canada speed reflects an average of service offerings from generally smaller cities whereas those sampled for the other countries reflect service offerings from larger cities.²⁵⁰

For the quadruple service bundle (wireline, wireless, Internet, and television), average Canadian pricing fell within the middle ground of international bundled service rates surveyed for this study. The price for the quadruple bundle of services in Canada compared very favourably with the United States (which showed the highest rate for bundled services of the countries observed), but was significantly higher than in the United Kingdom and France where basic digital television services were provided at no additional cost in the plans surveyed.

Service penetration

Among the countries shown in Figure 6.2.1, Canada has the lowest number of mobile wireless subscriptions per 100 inhabitants. In North America, there are far fewer wireless subscribers (as a proportion of population) than in Europe, with many European Union (EU) member nations continuing to show very high penetration rates.²⁵¹ In the countries showing relatively fewer mobile connections per 100 population (Canada, Japan, the United States, and France), the majority of subscriptions are post-paid accounts, and therefore multiple subscription ownership is less prevalent than in countries where prepaid represents a larger proportion of subscriptions.

Canada, at 64%, continues to lead in penetration of broadband connections as a proportion of households, followed by the United States at 62% and the United Kingdom at 60%. Fewer broadband connections per household in conjunction with multiple mobile connections per person in countries such as Germany and Italy are likely a reflection of consumers increasingly using their mobile handsets to access the Internet.

Figure 6.2.1 International penetration (2007)

Global telecommunications revenues

With revenues of more than $1.4 trillion in 2007, the value of the global telecommunications services market has experienced average annual growth of 6.6% over the four-year period ending December 2007. The rate of growth in all global regions has steadily increased year over year, with worldwide revenue growth of 7.5% in 2007. The large emerging markets of Asia-Pacific (particularly China and India) account for a majority of the growth, together with emerging nations in other global regions (Latin America, Africa, and the Middle East).

Much of this growth has been spurred by expansion of the customer base in the wireless sector – the number of mobile subscribers surpassed that of fixed lines worldwide in 2002. By the end of 2007 there were over 3.3 billion wireless subscribers around the world, 2.7 times the number of fixed lines.²⁵²

Figure 6.2.2 Telecommunications service revenues, by global region

Table 6.2.2 Global telecommunications revenues ($ billions)

	2004	2005	2006	2007	Growth 2006-2007	CAGR 2004-2007
North America	332	346	356	378	5.9%	4.4%
Europe	402	422	440	459	4.4%	4.5%
Asia-Pacific	316	333	358	388	8.3%	7.0%
Other regions	129	149	177	207	16.4%	16.9%
Global total	1,180	1,251	1,331	1,431	7.5%	6.6%

Note: Canadian dollars shown have been converted from euros using OECD exchange rates adjusted for purchasing power parities for gross domestic product (GDP).

Source: IDATE Digiworld Yearbook 2008

Wireless service

As seen from Table 6.2.3, the number of mobile subscriptions continues to increase, although the rate of growth has been levelling off for most industrialized nations. Across the countries shown, the number of wireless subscriptions grew by 9.4% in 2007, compared to an annual growth rate of 11.6% over the four years ending in 2007. The United States leads in annual wireless subscription growth over the four years, and continues to show strong growth in 2007. Germany has seen annual growth surge in 2007 compared to its annual growth over the four-year period, while year-over-year growth and the annual rate of growth over the same four-year period for Japan, and to a slightly lesser extent for France, have equalized – an indication of market maturation.

Table 6.2.3 Number of wireless subscriptions, by country (millions)

	2003	2004	2005	2006	2007	Growth	CAGR
						2006-2007	2003-2007
United States	139	176	208	233	257	10.2%	16.6%
Italy	57	63	72	81	90	11.6%	12.2%
Canada	13	15	17	19	20	8.6%	11.2%
Germany	65	71	79	85	97	13.8%	10.7%
United Kingdom	53	60	65	70	74	5.3%	8.6%
France	42	45	48	52	55	7.4%	7.3%
Japan	80	86	90	95	101	5.9%	5.9%
Total	448	514	579	634	693	9.4%	11.6%

Source: Ofcom, International Communications Market 2008

In 2007, there were 1.14 billion mobile handsets sold worldwide, 16% more than in 2006 and 36% more than 2005. Of these, the number of 3G (“smartphone”) handsets reached 167 million units in 2007, or 15% of total handsets, twice as many as were sold in 2006. In terms of geographical breakdown, Asia-Pacific markets accounted for 45% of global sales volume, with Western Europe at 14% and North America at 13%. In North America and in Europe, more than 90% of sales were to users replacing their old handset, generally with a new higher-end unit. Despite the growth in low-priced under-$US30 models, the North American selling price averaged $US170, well above the overall 2007 average of $US110.²⁵³ In Canada in 2008, the penetration of smartphones nearly doubled, from 12 to 21%, an increase consistent with the trend worldwide.²⁵⁴

Table 6.2.4 Wireless industry indicators (2007)

	Wireless penetration (subs/population)	Number of major providers (facilities-based)	Market share (by revenue) of top two players	ARPU Growth 2006-2007
Canada	61%	3	68%	4.7%
Japan	82%	3	78%	-5.3%
United States	84%	4	53%	0.5%
France	87%	3	78%	-3.6%
Australia	104%	4	75%	1.9%
Germany	118%	4	72%	-12.7%
United Kingdom	122%	5	50%	2.6%
Italy	151%	4	74%	-11.4%

Source: Merrill Lynch, Global Wireless Matrix 1Q08

As seen in Table 6.2.4, wireless ARPU growth decreased in Germany, Italy, Japan, and France in 2007 compared to 2006. In the United States, ARPU growth was relatively slight, while Australia, the United Kingdom, and Canada experienced varying increases in ARPU growth.

In Figure 6.2.3, Canada’s wireless ARPU of $58 per month in 2007 was somewhat higher than the $56 seen in the United States and Japan. Mobile use in 2007 was relatively less expensive in Germany, Italy, Australia, and the United Kingdom, a likely driver of the high mobile penetration rates experienced in these countries. Data’s share of mobile revenues has been increasing in all the nations listed in Figure 6.2.3, due to the ongoing popularity of text messaging as well as the development and marketing of mobile broadband services as a fast, mobile way to access the Internet. The surge in smartphone penetration, strongly driven by the iPhone, has been a catalyst for wireless data spending.

Figure 6.2.3 Wireless ARPU – Monthly mobile revenues, including data (2007)

Broadband connections

The tremendous growth in the number of broadband connections in recent years is seen in the 35.3% average annual growth over the four-year period ending December 2007 for the countries shown in Table 6.2.5, although year-over-year growth is slowing as Internet users worldwide largely complete the shift from dial-up to high-speed access. Slowing growth in the number of broadband connections in recent years as compared to this growth over the four-year period is likely due to increasing numbers of consumers using a mobile connection in place of fixed broadband. Japan, with broadband year-over-year growth in 2007 of 9.7% (the lowest of the countries examined) is showing signs of maturation in a national market generally characterized as early technology adopters.

Table 6.2.5 Broadband connections, by country (millions)

	2003	2004	2005	2006	2007	Growth 2006-2007	CAGR 2003-2007
United Kingdom	3.1	6.1	9.9	13.0	15.6	20.0%	49.8%
Germany	4.6	7.0	10.7	14.7	19.6	33.3%	43.7%
France	3.7	6.8	9.4	12.7	15.6	22.8%	43.3%
Italy	2.5	4.7	7.0	8.6	9.9	15.1%	41.1%
United States	18.3	35.6	47.1	56.8	71.2	25.4%	40.4%
Japan	13.6	18.6	22.4	25.8	28.3	9.7%	20.1%
Canada	4.5	5.4	6.4	7.5	8.4	12.0%	16.9%
Total	50.3	84.2	112.9	139.1	168.6	21.2%	35.3%

Source: Ofcom, International Communications Market 2008

Bandwidth/broadband speeds

As the number of consumers who download videos and music increases, and online use from both fixed and mobile devices continues to grow rapidly, demand for bandwidth and speed has grown in step. Wireline technology continues to dominate broadband delivery around the world, with high-speed Internet connections made primarily over copper wires, coaxial cables, or fibre-optic strands. Globally, only 2% of subscribers get broadband service via satellite or fixed wireless; these often represent users in rural, remote, or rugged geographical areas.

DSL technology was used to provide Internet access to over 228 million users, or approximately 65% of the world’s 350 million broadband subscribers in 2007; cable modem technology was used by approximately 77 million users, or 22% of global broadband subscribers; and fibre optics technology was used by approximately 38 million users, or 11% of the world’s broadband connections. Fibre-to-the-home (FTTH) is the gold standard in broadband infrastructure, offering the fastest speeds without performance degradation factors such as distance from a switching station (as with DSL) and number of homes sharing the signal (as with cable neighbourhoods). Incumbent telephone operators and cable operators are in the process of upgrading their networks by installing fibre ever closer to consumers, but DSL speeds, even with fibre to the node, are surpassed by current cable offerings, as seen in Figure 6.2.4.

Figure 6.2.4 Broadband subscribers by access technology, OECD countries

Figure 6.2.5 Broadband speeds by access technology, OECD countries

In 2006, advertised cable speeds were nearly identical to DSL at 6 Mbps. By 2008, cable’s average advertised speed had more than doubled. The average advertised fibre speed shows a decline in 2008 as operators included new entry-level offers at speeds below 100 Mbps.

Internet users in the United Kingdom experience some of the slowest broadband access in the developed world, with average speeds of only 3 to 4 Mbps. As consumers in the United Kingdom increase their use of bandwidth-hungry applications such as iPlayer (a BBC catch-up TV service), broadband speed has become a fierce competitive issue between ISPs. Virgin Media, which has its own fibre-optic network connecting half the homes in the United Kingdom using cable technology, announced the rollout of broadband at 50 Mbps in late 2007. All other broadband providers have to use the incumbent’s (i.e. British Telecom) copper lines to connect homes to the Internet; distance limitations of DSL technology means that British Telecom can only offer speeds up to 8 Mbps.

In the United States, cable broadband speeds have been increasing. Typical speeds in 2008 were 10-15 Mbps and, in some markets, up to 50 Mbps compared to an average of 3 Mbps in 2004. The United States regional telephone companies, Verizon Communications, Inc. and, to a lesser extent, AT&T Inc. and Qwest Communications International Inc., continue to roll out fibre to the home, allowing these operators to provide telephone, Internet, and TV services to the subscriber’s premises over fibre-optic lines. Thirty-seven million homes in the United States are forecast to have access to fibre in 2009. This is expected to double to 76 million homes by 2015.²⁵⁵

Canada has relatively few FTTH households. Broadband access is primarily split between cable and DSL. In recent years, incumbent wireline TSPs have been losing ground to cable operators. In 2008, the share of total residential broadband subscribers was 39.5% for DSL and 55.0% for cable, compared to 40.7% and 54.7%, respectively, in 2007.

Broadband network development

Broadband has been one of the most significant developments in communications technologies in recent years, fundamentally changing how people work, communicate, access information, and consume media services. Operators offer ever faster services while customers increase their use of the applications and online services this speed supports. The move to “super-fast” broadband in support of these services will require investment in physical infrastructure and in new technologies in order to realize these “next generation access” (NGA) networks.

Many countries have embarked on programs to bring affordable broadband access to all of its citizens. Public broadband schemes have the potential to extend the benefits of broadband to underserved and unserved areas which would otherwise be disadvantaged without the connectivity that makes businesses competitive and gives end-users access to high-speed Internet services. A typical situation in support of government intervention occurs where there is a high value to society for the rollout of next generation networks, but the business case for private investor funding is relatively weak. When governments intervene in markets by subsidizing communications networks, there is often a stipulation that the network be “open access.” This refers to an arrangement where network providers offer capacity or access to all market participants under the same terms and conditions.

France passed legislation in 2008 which instituted the concept of shared access, with the “last mile” portion of incumbent networks being made available to all operators. Measures in support of France’s target of 4 million NGA broadband subscribers by 2012 include requirements for duct sharing to reduce engineering costs, and fibre installation for all new builds. France followed up with its Digital 2012 plan (20 October 2008) which announced that “every French citizen, wherever they live shall, by 2010, enjoy the right of access to broadband Internet at affordable prices of around €35 per month, inclusive of the equipment needed for access.” Also in 2008, Switzerland’s incumbent telephone operator, Swisscom, announced plans for a €5 billion national FTTH rollout, followed by a proposal to Swiss regulator ComCom that FTTH providers should co-operate through duct-sharing and using each other’s fibre.

In the United Kingdom, the Digital Britain report proposed a “universal service commitment” to offer broadband at speeds of at least 2 Mbps to virtually all homes.

In the wake of a financial crisis and a global economic slowdown, many countries are tabling recovery spending plans to stimulate economic growth. A common strategy appears to be increased investment in delivery of high-speed Internet, including measures to expand broadband access and to improve connection speeds.

Canada’s Economic Action Plan, tabled by the federal government in January 2009, provides $225 million in spending over three years to extend broadband coverage to unserved communities. Canada’s provincial governments are active in expanding the availability of broadband Internet service to Canadians.

In April 2009, the Australian government announced that it would create a publicly-owned company that will invest up to $AU43 billion over eight years to build and operate an open access National Broadband Network. The new fibre-based network, projected to provide speeds of up to 100 Mpbs, will cover 90% of Australian homes, schools, and workplaces, while the more remote areas of rural Australia will have access to next-generation wireless and satellite technologies offering speeds of 12 Mbps or more.

As part of the European Economic Recovery Plan, the European Commission announced its aim to achieve 100% high-speed Internet coverage for all citizens of the EU’s 27 member states by 2010. The European Commission proposed funding of €1 billion in addition to private investments and various national funding schemes by individual European countries.

The United States’ economic stimulus bill passed in early 2009, approving $US7.2 billion to finance projects that “provide the greatest broadband speed possible to the greatest population of users,” with priority for rolling out broadband to underserved and unserved areas.

The United States and Switzerland have recognized broadband as a universal access service, while the European Commission, as well as governments in Australia, India, Japan, Malaysia, and Sweden have also defined broadband universal access goals.

Mobile broadband

Mobile web use has skyrocketed – in Japan, one in five users indicate that their mobile handset has supplanted their desktop computer for online browsing. In response to this growing demand for mobile broadband, wireless service providers around the world are embarking on costly network upgrades, in many cases entering into agreements with rival mobile operators in an effort to share technology, engineering, and maintenance costs. In Canada, Bell Canada and TCC have committed to jointly develop a next-generation HSPA²⁵⁶ wireless network overlay. British mobile operators Vodaphone UK and Orange UK announced plans in March 2009 to integrate both operators’ 3G networks in view of cost-sharing benefits; rival wireless providers T-Mobile UK and 3 UK entered into a similar joint venture in 2008.

Broadcasting – Radio industry

Table 6.2.6 Radio industry indicators (2007)

	Total radio industry revenues ($ billions)	Radio revenues per capita	Number of licensed stations	Listening minutes per day per person
Canada	1.81	56	1,252	157
United States	22.78	75	14,124	159
United Kingdom	2.71	45	510	177
France	2.31	37	886	171
Germany	4.96	60	278	186
Italy	2.07	32	202	180
Japan	3.62	28	368	128
Australia	1.15	55	670	148

Source: Ofcom, International Communications Market 2008; Commercial Radio Australia 2007 survey

Broadcasting – Television industry

Table 6.2.7 Television industry indicators (2007)

	Total television industry revenues ($ billions)	Television revenues per capita	Main TV platform* (% of TV homes)	Viewing minutes per day per person
Canada	9.53	290	Acab (35)	223
United States	143.21	475	Dcab (33)	272
United Kingdom	22.45	370	DTT (37)	218
France	14.98	234	DTT (29)	207
Germany	19.93	243	Acab (50)	208
Italy	13.60	234	ATT (40)	230
Japan	38.06	299	Dsat (36)	240
Australia	4.42	210	DTT (42)	181

*TV platforms: ATT = Analogue terrestrial television, i.e., conventional over-the-air; DTT = Digital terrestrial television; Acab = Analogue cable; Dcab = Digital cable; Dsat = Digital satellite

Source: Ofcom, International Communications Market 2008; Australian Communications and Media Authority (ACMA) Broadcasting Financial Results 2006-07; ACMA Communications Report 2007-08; ACMA Annual Report 2007-08; industry data

Consumers’ preferred television platform varies by nation, depending on historic development within the countries’ television industries. Cable is the most popular method of receiving television in Canada, the United States, and Germany. Digital terrestrial service (received via a digital set-top box that decodes the over-the-air signal it picks up by antenna) is taken by more homes in the United Kingdom, France, and Australia than any other platform, with analogue terrestrial service remaining the most common choice in Italy. In Japan, satellite is the most widely used television platform. IPTV services (television signals delivered to viewers using Internet Protocol), although growing in reach and popularity, are not yet widely available in all areas of the countries examined. Notably, France experienced a 6% increase in IPTV take-up during 2007, compared to less than 1% growth in market share among the other nations surveyed.²⁵⁷

Transition to digital television

Television broadcasting of over-the-air signals in digital format continues to replace analogue TV technology, with scheduled completion dates varying by country, as seen in Figure 6.2.6.

Figure 6.2.6 Digital TV switchover completion

Digital broadcasting is more efficient than analogue in its use of spectrum frequency. With digital TV, all analogue TV channels can be accommodated in less than a quarter of the original spectrum used, giving rise to the concept of a “digital dividend” as broadcasters around the world transition from analogue to digital platforms. Digital technology also allows broadcasters to provide television programming in high-definition format or use a single broadcast channel for multi-channel multiplexing, as well as provide other services such as multimedia or interactivity.

Worldwide, out of 1.2 billion TV households, 29% are estimated to be digital by the end of 2008. By the end of 2013, half the world’s TV households (636 million out of a global estimate of 1.3 billion) can be expected to be receiving digital signals.²⁵⁸

Table 6.2.8 Digital television households (2007)

	Digital subscribers (thousands)	Number of TV households (thousands)	Digital share of TV households (%)	Growth in digital subscribers 2007 - 2006
United Kingdom	21,116	25,552	83	12.7%
France	17,574	22,582	78	40.7%
United States	79,149	112,681	70	17.0%
Canada	6,928	13,026	53	15.0%
Australia	3,985	7,591	53	12.3%
Italy	9,375	21,430	44	21.0%
Japan	15,122	43,888	35	30.6%
Germany	11,265	35,055	32	28.8%

Source: TV International, 19 September 2008 and 3 October 2008

In the United States, the Federal Communications Commission (FCC) in November 2008 gave approval for wireless devices to operate in “white spaces” without the need for a spectrum licence. White spaces refer to the unused gaps of spectrum between ultra high frequency (UHF) television channels which will no longer be needed with the transition from analogue to digital broadcasts. Wireless signals moving through this band of spectrum have superior range than signals using WiFi and other currently available unlicensed spectrum technologies. Availability of new free unregulated spectrum in the form of white spaces is anticipated to create new technologies and new devices, bringing ultra-fast wireless connectivity to the masses.

High-definition television (HDTV) is also poised for mass market adoption. Prices for high-definition sets and set-top boxes have fallen substantially in the last few years; many national free-to-air broadcasters are launching HD services, which will further stimulate take-up. In 2007, there were 25.7 million active²⁵⁹ HDTV households (i.e. homes watching HDTV channels), with the United States currently predominating the viewership numbers.

Table 6.2.9 Penetration of HDTV, by country (2007)

	Number of HDTV-active households (thousands)	HDTV proportion of digital TV households
United States	17,991	23%
Japan	3,982	26%
Canada	1,428	21%
United Kingdom	604	3%
France	462	3%
Italy	143	2%
Australia	122	3%
Germany	77	1%

Source: TV International, 24 February 2009