Like water or electricity, internet access is increasingly more than a luxury – it’s a necessity for work, education and communication.
But it comes at a cost – and advocates are pushing to let Canadian consumers know they can pay less for an internet connection.
Marc Bissonnette runs CanadianISP.ca, a website that compares the speed and price offered by internet service providers (ISPs) across the country. He founded the site nine years ago, frustrated by the common perception that there were only a couple of options for internet access in Canada.
“One of the most common emails I get is, ‘Oh my God, thanks for your site, I didn’t realize I had a choice,’ ” Bissonnette said.
There are hundreds of ISPs across Canada, and the market for business and residential internet alone was worth $7.2 billion in 2011. But more than three-quarters of that market is dominated by the five largest ISPs and their affiliates, according to the Canadian Radio-Television Telecommunications Commission, which oversees and regulates ISPs in Canada.
BIG PLAYERS IN CONTROL
Larger ISPs such as Bell Canada Enterprises and Rogers Communications Inc. are the incumbent players, and they own large amounts of the essential infrastructure needed to deliver internet services.
“They own the last mile – the wire that comes into your house,” Bissonnette explained.
To allow competition, the larger ISPs are required to sell bandwidth to smaller ISPs at wholesale prices, who in turn can sell it to consumers at a lower price closer to the wholesale cost.
But the smaller players still face significant barriers to entry – Bissonnette contrasts the multimillion dollar marketing budget of Bell with a smaller ISP which can’t afford to run web ads.
“It really is David versus Goliath,” Bissonnette said.
While eight out of 10 Canadian households have Internet access, access is sharply divided between income levels.
In households with an income of $87,000 or more, internet access is almost universal. By contrast, only slightly more than half of all households with incomes of $30,000 or less are connected to the internet.
NO INTERNET LEADER
And Canada consistently places in the middle of the pack in international rankings of internet speed and pricing.
Ookla Net Metrics, a company that measures bandwidth speeds around the world, ranks Canada 33rd – one spot above the United States, but behind the Ukraine, Estonia and Hungary.
The Organization for Economic Cooperation and Development (OECD) also tracks broadband penetration and pricing in developed countries.
In the latest rankings, Canada is pegged at 23rd out of 33 OECD countries in total broadband access.
Catherine Hart takes issue with that.
Hart is the communications co-ordinator of OpenMedia, an advocacy organization that pushes for increased internet access in Canada, and lower prices for consumers.
She points to a recent report by the CRTC that identified per customer revenues in Canada as higher than anywhere else in the world.
NO INCENTIVE FOR PRICE-CUTTING
She said that means that the established players have little incentive to lower prices.
“You can see why they wouldn’t want that situation to change,” Hart said.
“One thing that’s been made clear is that this is a systemic problem,” Hart said. “It’s not just a customer problem, it’s the market structure.”
And in order for that to change, Hart said the public needs to put pressure on the government.
“When you’ve got somebody who’s both the supplier to all their competitors, and the competitor, that’s a tough nut to crack,” Bissonnette said.
“This isn’t just a matter of national pride – it’s a raw necessity,” Bissonnette said, explaining that internet access is essential for the shift from a resource-based economy to a knowledge-based economy.
“So many jobs are literally going the way of the dodo,” he added.