Canadian broadband blasted by Harvard study

Canada has some of the poorest high-speed internet service in the developed world and is an example of what not to do from a policy perspective, according to a study by Harvard University.

The 232-page study, commissioned by American regulators and released Wednesday evening, found that Canada rates poorlycompared topeer countries when measures such as national broadband adoption, network capacity and pricesare taken into account.

Canadawas 22nd overall out of 30 countries surveyed by Harvard's Berkman Center for Internet and Society. Canada ranked 16th on broadband adoption, 20th on speed and capacity, and 25th on price. Japan, Sweden and South Korea headed up Harvard's rankings, while the United States placed above Canada at 13th overall.

Canada"is often thought of as a very high performer, based on the most commonly used benchmark of penetration per 100 inhabitants," the study said. "Because our analysis includes important measures on which Canada has had weaker outcomes prices, speeds and 3G mobile broadband penetration in our analysis it shows up as quite a weak performer, overall."

The purpose of the study, which had funding from the Ford and MacArthur grant foundations, was to give the Federal Communications Commission the U.S. version of the Canadian Radio-television and Telecommunications Commission a basis on which to form a national next-generation broadband plan over the next few months.

The study recognized broadband as a key enabler of economic growth that can benefitservices such as telemedicine in rural areas, allowbetter management of transportationand energy systems and reduce infrastructure costs for businesses.

Open-access rules successful

The researchers concluded that if the United States wants to be a world broadband leader, it needs to look to open-access policies implemented in Europe and Asia to spur competition among service providers. The U.S. and Canadian approach so far,relying on competition between cable and phone companies to develop better and cheaper services, is the wrong way to go, the report said.

"Early aggressive facilities-based competition certainly made Canada an early starter, but it does not seem to have enabled it to maintain its standing," the report said. "The Canadian experience suggest[s] that reliance purely on competition between strong cable incumbents and telephony incumbents may be insufficient to sustain high penetration or achieve high capacity and low competitive pricing in the long term."

Canadahas takena"half-hearted" approach to open access, which enables a new entrant companyto lease lines froma network owner to provide its own internet services to customers. The CRTC implementedopen-access rules in 1997, but the report said the commission messed them up by allowing network owners to chargethe highest lease rates in the developed world, about 70 per cent higher than similar fees in South Korea and Denmark.

The rules also had a "sunset" clause, meaning that openaccess would be discontinued in 2002. The CRTC extended the rules indefinitely in 2001, after few companies tookup theoffer.

These high rates and"regulatory hesitance" likely contributed to fewer new competitors making investments, the study said. Other countries that have had strong rules have fared better. France, as one example, has very little cable-versus-phone-company competition, yet it rankswell in Harvard'ssurvey seventh overall because of strongenforcement of open-access rules.

The report took issue with theCRTC's recent "self-congratulatory reference" to Canada's leadership of G7 nations in terms of broadband adoption. Adoption is only one measure of broadband leadership, and the report"locates almost all of the Canadian companies in the cluster with the slowest speeds and highest prices."

"The highest prices for the lowest speeds are overwhelmingly offered by firms in the United States and Canada, all of which inhabit markets structured around'inter-modal' [cable versus phone]competition," the report said.

ISPs step up lobbying

The report comes at a critical time for Canada's largest internet service providers. The federal government is considering several appeals of CRTC decisions on open-access rules, both from incumbent network owners including Bell and Telus and from access seekers such as MTS Allstream and a group of smaller internet providers. Cabinet has until early December to decidewhether it should take action on the rules.

The CRTC is also debating whether it should impose so-called "net neutrality" rules that would limit how much ISPs are allowed to manage their networks.

The big ISPs have stepped up their lobbying efforts recently as a result. A report last week funded by Bell, Rogers, Telus, Shaw and a number of others attacked the methodology used in other studies especially one from the Organization for Economic Co-operation and Development which also found Canada to be laggard. The ISP-funded studyproclaimed Canada to be a world broadband leader in four key areas: availability, user adoption, speed and price.

'The reality is our rates are considerably higher than most leading countries.' University of Waterloo president David Johnston

Mark Goldberg, the telecommunications consultant who was one of thelead authors onthe ISP-funded report, on Thursday criticized the Harvard study for using some of the same "flawed" numbers as the OECD.

"Preliminary examination seems to indicate that many of the Harvard rankings appear to incorporate the same problematic data points from reports and measurement tools that we have already discussed," he wrote on his blog.

The Harvard researchers acknowledged that international comparisons are a "hot button" issue, particularly as ISPs try to fend off government intervention in their markets. They said theyused multiple studies and methodologies and found thatnone of the critiques ofOECD numbers invalidated their accuracy.

"The debate occasionally resembles that of a horse race; indeed, a horse race in which those who have already placed their bets are arguing about how to decide which horse has won," the report said.

David Johnston, president of the University of Waterloo, said several recent reports have assessed Canada's broadband situation, and the country has been found wanting.

"The reality is our rates are considerably higher than most leading countries. We have not yet been able to make a field that's as competitive as somewhere like Singapore or Finland," he told CBCNews.ca. "The measurement of Canada's standing in world broadband and that declining trajectory is pretty clear from numerous studies. I really don't think there's much dispute that we don't occupy the same spot as we did 15 years ago."