Rogers Communications Submission on a Digital Economy Strategy for Canada

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Submitted by Rogers Communications 2010-07-14 08:02:08 EDT

Theme(s): Building Digital Skills, Canada's Digital Content, Digital Infrastructure, Growing the ICT Industry, Innovation Using Digital Technologies

Table of content

Executive Summary

This consultation comes at a critical juncture for Canada's digital communications industries. Customer demands are changing, technologies are converging, competition is intensifying, and the future of regulated content delivery is uncertain. In this environment, Canada needs an action plan that builds on existing successes and collaboration between the public and private sectors to maintain and expand Canada's digital advantage and to provide the basis for a stronger and more competitive economy.

In the area of network infrastructure, reliance on market forces has attracted unprecedented investment in leading edge digital networks in Canada. The Consultation Paper correctly identifies, however, a number of issues that will not be remedied by the operation of market forces alone, but that need to be addressed to cement Canada's leadership in the digital economy.

Complete Rural Broadband Coverage

While there have been a number of government initiatives to extend broadband service to rural areas over the last decade, as many as 2 million Canadians live in areas that remain unserved. Canada needs a single plan to remedy this.

We recommend a joint government/industry initiative aimed at extending broadband access to remaining unserved rural and remote communities in Canada as soon as possible. The emphasis should be on mobile broadband networks which will simultaneously bring both mobile and broadband service to rural communities.

Implement Forward-looking Spectrum Policies

As mobile broadband is a fundamental driver of the digital economy and spectrum is the lifeblood of the wireless industry, Canada must:

  • Adopt a 10-year spectrum plan
  • Allocate substantial additional spectrum to mobile broadband services
  • Allow individual carriers to acquire large contiguous blocks of spectrum; and
  • Alleviate the spectrum licence fee burden.

Create a Canadian Venture Capital Industry

The virtual absence of a venture capital industry in Canada is a serious impediment to the evolution of Canada's digital economy. Significant government risk capital needs to be directed to private sector venture capital funds to jump-start a Canadian venture capital industry. Private sector investment in new start-ups should also be promoted through tax shelters.

Extend Tax Incentives to Online Content

Canada has implemented tax measures that mitigate the cost and revenue disadvantages faced by Canadian producers of content for traditional media relative to their U.S. and other global competitors. These measures need to be extended to online content, to address the economic challenge that new media content producers face in the digital economy.

Stimulate ICT Adoption

ICT adoption by small and medium sized Canadian businesses, which are a key engine of economic growth and prosperity, is lagging. Governments need to address this issue by acting as role models and increasing their usage of ICT and e-service delivery, and by increasing their funding of science and engineering programs at Canadian universities.


Submission

Introduction

Rogers is pleased to submit its response to the consultation process initiated by Improving Canada's Digital Advantage: Strategies for Sustainable Prosperity, Consultation Paper on a Digital Economy Strategy for Canada.

Rogers is a diversified communications and media company engaged in a variety of businesses including wireless, cable television, high speed internet access, radio and television broadcasting and program production. Rogers is also a publisher of magazines and an innovator in digital media. Rogers' diversification across the communications sector, and our proven leadership in innovation and investment in leading edge network infrastructure and digital applications, provide us with a useful perspective on the appropriate goals of a Canadian digital economy strategy and steps necessary to achieve those goals.

The Consultation Paper recognizes that Canada's future prosperity will be enhanced by the development and adoption of an effective and efficient digital economy strategy. This submission focuses primarily on two of the themes identified in the Consultation Paper, namely, ensuring a world class digital infrastructure and creating Canada's digital content advantage.

Ensuring a World Class Digital Infrastructure

Continue to rely on market forces

The Consultation Paper asks whether Canada should set goals (including speed and other service targets) for next generation networks, and seeks input on two other fundamental questions: First, what steps should be taken to ensure that there is sufficient spectrum available to support advanced infrastructure development? Second, how can government guarantee that all Canadians have affordable access to advanced broadband networks?

Assuming a continued reliance on market forces, there is no need for speed or other service targets to ensure a state-of-the-art digital network infrastructure in Canada. It has been Rogers' experience that competition is the best means of ensuring that networks are constantly upgraded to meet consumer expectations. If a service provider does not meet those expectations, Canadian consumers can and will shop elsewhere. The Senate Standing Committee concluded as much in its report, Plan for a Digital Canada:

The government should avoid the current international game of focusing on super-fast broadband speeds or on certain advanced technologies (such as fibre optics). To do so is expensive, can overlap private-sector investment and can widen digital divides. Instead the government should determine the broadband speed required to access basic digital services (health, education and other online services, whether provided by the public or private sector), and focus government policy on bringing this broadband speed to all Canadians, whether in cities or in rural and remote regions.Footnote 1

Canada's leadership in digital infrastructure attests to the wisdom of this advice and the effectiveness of competitive market forces. The Canadian government expressly recognized this in its 2006 Policy Direction, in which it instructed the CRTC to rely, to the maximum extent feasible, on market forces and to regulate only where market forces cannot be relied upon to achieve Canadian telecommunications policy objectives. These principles have formed the basis for the CRTC's subsequent framework decisions including its acclaimed decisions on network neutrality.

Canada is a leader in the development and implementation of digital network infrastructure. Notwithstanding the challenges of a relatively small population spread over a large and challenging land mass, most Canadians enjoy competitively priced access to a choice of state-of-the-art broadband networks along with a deep and diverse array of products and services equal to the best in the world. Two recent examples demonstrate the outstanding speed and qualityFootnote 2 of Canadian network infrastructure. The first involves our wireless networks. Rogers was the first carrier in North America and one of the first in the world to launch HSPA+, supporting speeds of 21 Mbps and now covering approximately 85% of the Canadian population. Other carriers followed suit, and Canada now has three of only 17 HSPA+ networks in the world. Today, 93% of the Canadian population has access to mobile broadband services with speeds of up to 21 Mbps. Rogers also has a clear migration path to increase speeds in the future based on HSPA+ and 4G LTE technologies.Footnote 3

In contrast, U.S. carriers are only now beginning to upgrade their networks to 7.2 Mbps (with plans to go to 14 Mbps), and their 3G networks experience reliability issues because U.S. carriers have not built enough capacity.Footnote 4

A recent article in the Wall Street Journal underscores the superiority of Canadian wireless networks in the following terms:

A year after Canadian carriers began moving out of basic 3G, AT&T and TMobile, the largest and fourth-largest U.S. carriers respectively, are now making the move into HSPA+ in certain markets. Sprint, the third-largest U.S. carrier, is advancing into a fourth-generation (4G) standard now, with services up in 36 markets. But the carrier has a single phone, the HTC EVO 4G, it just began selling as well as a few mobile sticks that attach to users' laptops. More importantly, actual download speeds on the new network are between three and six megabits per second (mbps), spokesman Mike DiGioia told me last week.

For all the hype surrounding theoretical 4G speeds (50-100/mbps), the new Sprint network's performance is no better than HSPA+ speeds at present.Footnote 5

A second example of the superior speed and reliability of Canadian networks – this time in the wireline space – is the implementation of DOCSIS 3.0 and the launch of 25 and 50 Mbps high-speed Internet service by cable companies in Canada. As in the case of Canada's HSPA+ wireless networks, this platform already has the capacity to support an increase in current speeds, to 100 Mbps.Footnote 6 Just as importantly, DOCSIS 3.0 speeds can be expanded much further through the use of additional equipment. DOCSIS 3.0 is available to over 65% of the Canadian population, providing Canada with some of the fastest landline residential Internet speeds available in the world.Footnote 7 Countries with much greater population densities and far fewer geographic challenges are struggling to develop plans to deliver these speeds to a similar proportion of the population.

These are not isolated examples. In its State of the Internet Report, Q4 2009, Akamai Technologies Inc. of Cambridge, Massachusetts (Akamai) concluded that average Internet speeds in Canada are above those offered in the U.S. and most European countries surveyed. The percentage of the Canadian population with access to speeds in excess of 5 Mbps and 2 Mbps also exceeded most European countries and the U.S.Footnote 8 Significantly, these results do not capture the full rollout of HSPA+ and DOCSIS 3.0 in Canada, already supporting speeds of 21 Mbps and 50 Mbps, respectively, and capable of doubling those speeds in the near future.

Studies which ignore recent mobile broadband deployment and cable infrastructure in Canada do not provide an accurate measure of the coverage and performance of Canada's broadband infrastructure. Akamai's analysis is based on actual download speeds, as opposed to advertised speeds. As advertised speeds bear little relationship to real world download speeds, international comparisons based on advertised speeds are largely, if not entirely, misleading. For example, Akamai reported an average measured speed for France of 3.2 Mbps, while the OECD found that the average advertised speed in France is 51 Mbps.Footnote 9 The Akamai results also capture the quality (reliability and availability) of Canadian networks, something studies based on advertised speeds largely ignore.

The high quality of Canadian wireless networks, in particular, was underscored by the debacle in the U.S. following the launch of iPhone. Higher data usage by American iPhone customers resulted in dropped calls, delayed text and voice messages, slow download speeds, spotty service and frustrated customers, and may also have caused AT&T to delay implementation of new features and tethering, which is a standard feature of Rogers' service.Footnote 10 None of these problems have been experienced in Canada due to the superior reliability and availability of our mobile networks.

Rogers recently commissioned Lemay Yates to prepare a report (attached as Appendix1) assessing the performance of Canada's consumer broadband networks relative to other countries.Footnote 11 Lemay-Yates found that:

  • Canadian household penetration of high-speed Internet in 2009 was 75%, higher than the penetration of similar services in the U.S., UK, France and Germany, and the EU average;Footnote 12
  • Canada is a leader in household penetration of very high speed fixed Internet service. Over 65% of Canadian households have access today to cable Internet service of at least 20 Mbps and 10% of Canadian households already have access to 100 Mbps cable service;Footnote 13
  • Mobile broadband device penetration in Canada as at February 2010 compares well with penetration levels achieved in the U.S. and the EU;Footnote 14
  • Data evidencing strong and growing Canada Internet usage corroborates the availability and penetration of very high speed fixed and mobile services in Canada.Footnote 15

Canadian carriers also compare very favourably with their international counterparts in terms of capital investment. In 2007 and 2008, major Canadian carriers invested more in capital – divided by revenues, and on a per capita basis – than carriers either in the U.S. or the EU.Footnote 16

Canadian wireless carriers have invested more than $25 billion to build Canada's wireless industry and as of March 2010, Canadian wireless carriers had the third highest cumulative capital expenditures in the G7.Footnote 17 Further, in both 2007 and 2008, Canadian carriers invested more intensively than their U.S. and EU counterparts.Footnote 18 Rogers alone has spent over $10 billion since 1987 on wireless network infrastructure and continues to invest over $2 billion per year in its wireline and wireless networks.

Overall measures of Canadian connectivity confirm that Canadian investment in infrastructure is a hallmark of the Canadian ICT sector. Professor Leonard Waverman, Dean of the Haskayne School of Business at the University of Calgary and a Fellow at the Centre for Management Development at the London Business School, recently conducted a country comparison using an ICT index based on measures of infrastructure, complementary skills, capital, software and informed usage.Footnote 19 The Canadian strengths identified by Professor Waverman included broadband penetration and average download speeds. Areas for improvement included government ereadiness, online applications, usage skills and investments of Canadian business in IT hardware and software. Professor Waverman concluded that the important issue in Canada is not investment in network infrastructure, but rather business investment in IT.

Canadian investment in competing networks has also resulted in highly competitive voice and broadband prices in Canada. Bank of America and Merrill Lynch have reported, for example, that in 2009 Canada had the 19th lowest average revenue per minute for wireless services out of 21 countries served. Only Singapore and the United States were lower.Footnote 20

A recent report by BMO Capital Markets corroborates this conclusion. BMO Capital Markets compared smartphone/iPad pricing in Canada and the U.S. and concluded that Canadian data prices are lower than AT&T's prices for light and extremely heavy users and that this trend is expected to continue into 2011 "given the competitive dynamics in Canada … as carriers focus on driving adoption of wireless data"Footnote 21 For 200 MB of data, AT&T and Rogers' pricing are very similar. At 250 MB, Rogers' price is half the price charged by AT&T ($0.06 vs. $0.12 per MB). At 500 MB, AT&T is cheaper than Rogers but more expensive than TELUS. AT&T becomes more expensive again at 5 GB. Significantly, these price comparisons do not factor in the superior speeds offered by Canadian carriers. As shown in the table below, when prices for a 5 GB rocket stick are measured in terms of network speed, Rogers' price is dramatically below the prices of US carriers.

  Rogers AT&T T-Mobile Verizon
5 GB Rocket Stick $65.00 $60.00 USD
$62.98 CDN
$39.99 USD
$41.97 CDN
$59.99 USD
$62.97 CDN
Network Speed (Mbps) 21 7.2 7.2 1.4
$/Mbps $3.10 $8.74 $5.83 $44.98

Canada also scores well on comprehensive measures of voice and broadband prices. In its recent study Measuring the Information Society, Version 1.01, 2010, the International Telecommunications Union (ITU) ranked Canadian telecommunications prices third lowest in the G8 and 11th lowest out of all 80 countries studied based on a comprehensive measure referred to as the ICT price basket which includes fixed telephone, mobile telephone and fixed broadband price measures.Footnote 22

The evidence, therefore, convincingly shows that, today, Canada is very much at the head of the pack in terms of broadband availability, penetration and price. As telecom analyst Greg MacDonald recently stated:

The reality is, in Canada we have good service in mobile broadband despite what some studies say … We have high penetration of data at attractive rates. And for a country of this size, the coverage we have is phenomenal.Footnote 23

This is not to say that Canadian broadband coverage is perfect. There remain pockets of unserved rural and remote areas. The joint action of public and private sectors is required to fill these coverage gaps. In addition, Canada needs to adopt forwardlooking spectrum policies that support the exploding demand for mobile broadband services.

Complete rural broadband coverage

While there have been a number of federal and provincial initiatives over the last decade to extend service, as many as 2 million Canadians live in rural and remote areas of the country that are still not served by terrestrial broadband networks. The marketplace alone does not, and likely never will, support the provision of terrestrial broadband services to all of these communities. Accordingly, Canada needs a plan which ensures that these Canadians have broadband access as quickly and costeffectively as possible.

Mobile broadband technology provides the greatest promise of extending broadband access to unserved rural and remote communities. This is true for a number of reasons:

  • A mobile network can be used to deliver high-quality mobile voice and Internet service anywhere and everywhere.
  • A mobile network can also be used to deliver high-quality fixed wireless voice and Internet service to rural and remote homes and businesses.
  • A mobile network can be deployed more quickly in remote areas than a wireline network.
  • Mobile broadband technology provides a clear migration path to higher speed services and, because it is standards-based, promotes continued innovation, development and long-term support.
  • There already exists a large selection of low cost, broadband-ready devices. Mobile broadband has a global ecosystem behind it that supports a complete range of affordable customer devices.
  • Mobile services are an essential driver of increased productivity.Footnote 24

One of the major drawbacks of current patchwork approaches to extending broadband to rural Canadians is that it results in fragmented deployment of incompatible networks that do not have an evolution path. Also, a key factor that drives low prices (in devices and network gear) and user adoption is economies of scale that can only be achieved when widely deployed technologies are used to solve last mile connectivity. Global, mobile, standards-based broadband addresses both these shortcomings. It has a clear evolution path. In addition, customers have access to a broad array of end-user devices. This equipment will be cheaper, mobile and equivalent to the equipment that urban customers can access. The alternative – deployment of non-standards-based networks with limited customer bases – will inadvertently lead to the creation of an even larger digital divide.

Mobile broadband technologies have been successfully deployed in other countries , including Australia, Sweden, India and Finland. Australia in particular has a history of successfully investing in mobile broadband for rural coverage. Both Telstra and Optus have received government funding that has been used to roll out HSPA networks in rural areas of Australia.

The mobile broadband model is one that Canada, in partnership with wireless carriers, should adopt to extend broadband access to unserved rural and remote communities.Footnote 25 .Footnote 26

Access for Lower Income Canadians

Public-private partnerships also provide an effective platform for extending broadband access to lower income Canadians who are not connected to high speed networks. Enabling these individuals and families to develop the skills necessary to participate effectively in the digital economy must be a top priority.

Two programs have recently been suggested in the U.S. to address this issue. The first, called "Adoption Plus," was proposed by the National Cable and Telecommunications Association. Adoption Plus is aimed at promoting broadband adoption in low income families with middle-school aged children. In order to promote sustainable adoption, the program includes digital media literacy training as well as discounted computers and broadband access. The proposed partnership includes school boards, federal and state governments, computer manufacturers and broadband ISPs. Participating cable companies have agreed to provide broadband service and cable modems to eligible households at a 50% discount for two years. Participating computer manufacturers are expected to assist in the funding of discounted computers. Public bodies would also provide funds and manage the program.Footnote 27

Economy One has proposed a similar program targeting low income families in government housing. The program, which also brings together a coalition of ISPs, computer technology companies and non-profit organizations, is seeking U.S. federal stimulus funding. Like Adoption Plus, the program includes digital literacy training, and subsidies for computers and broadband access.Footnote 28

At present, Canada does not appear to be developing these kinds of programs. Canada needs to pursue public-private partnerships, akin to the Adoption Plus and Economy One proposals, to promote broadband adoption by low income families and address the prosperity gap that will increasingly separate Canadians with and without broadband access.


Footnotes

  1. 1 Plan for a Digital Canada, The Standing Senate Committee on Transport and Communications, June 2010, p. 58. See also recommendation 3. (back to footnote reference 1)
  2. 2 Quality speaks to both the reliability and availability of the network (for example, dropped calls, inconsistent data rates). (back to footnote reference 2)
  3. 3 HSPA stands for High Speed Packet Access and LTE stands for Long Term Evolution. HSPA+ is generally considered to be 3.5G and LTE to be 4G. (back to footnote reference 3)
  4. 4 AT&T, for example, announced late in 2009 that it would rollout an HSPA network supporting speeds up to 7.2 Mbps in six US cities by the end of 2009 and expand this network to other cities over the course of 2010 and 2011. (AT&T to Make Faster 3G Technology Available in Six Major Cities This Year, AT&T Press Release, September 9, 2009. http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=27068 ; AT&T Upgrades 3G Technology at Cell Sites Across Nation, AT&T Press Release, January 5, 2010. http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=30358) Verizon Wireless currently operates an EV-DO Revision A mobile data network offering average speeds of between 600 Kbps and 1.8 Mbps. (http://phones.verizonwireless.com/3g/default.aspx) Verizon has announced its intention to start rolling out a long term evolution (LTE) broadband network some time this year. (Leading 4G Network Build, Verizon Wireless Also Focuses On Fueling LTE Ecosystem, Collaboration, Verizon Wireless Press Release, November 4, 2009. http://news.vzw.com/news/2009/11/pr2009-11-04b.html ) Clear launched its WiMAX network in one US market in 2008 and expanded the network throughout 2009, offering speeds up to 6 Mbps. (http://www2.sprint.com/mr/cda_pkDetail.do?id=1260#whatcanyoudo ) Clear's WiMAX network will be expanded to additional US cities during 2010. T-Mobile announced the start of its rollout of an HSPDA network offering speeds up to 1 Mbps in late 2008.4 It has recently announced its intention to roll-out a 21 Mbps HSPA+ network this year. (T-Mobile USA Announces Commercial 3G Network Availability in 21 Markets By Mid-October, T-Mobile Press Release, September 18, 2008. http://www.tmobile.com/company/PressReleases_Article.aspx?assetName=Prs_Prs_20080919&title=TMobile%20USA%20Announces%20Commercial%203G%20Network%20Availability ) (back to footnote reference 4)
  5. 5 Wall Street Journal, July 1, 2010 as quoted in FP Tech Desk: U.S. wireless carriers playing network catch-up to Canada, Financial Post 2 July 2010, http://business.financialpost.com/2010/07/02/fp-techdesk-us-wireless-carriers-playing-catch-up-to-canada/ . (back to footnote reference 5)
  6. 6 Rogers has already launched a 70 Mbps high-speed Internet service in the Atlantic provinces. (back to footnote reference 6)
  7. 7 The Performance of Canada's Consumer Broadband Networks in 2010, Lemay-Yates Associates Inc., July 2010, pp. 20-23. (back to footnote reference 7)
  8. 8 Akamai, The State of the Internet, 4th Quarter 2009, Vol. 2. No. 2, section 6. See also Lemay-Yates, supra, pp. 36-37. (back to footnote reference 8)
  9. 9 Leonard Waverman and Kaylan Dasgupta, Canada and broadband: When 'behind" is actually ahead, Globe and Mail (5 March 2010)) (back to footnote reference 9)
  10. 10 Tethering is the use of a mobile device to supply Internet access for another device, such as computer. (back to footnote reference 10)
  11. 11 Lemay-Yates, supra. (back to footnote reference 11)
  12. 12 Lemay-Yates, supra, p. 13 (back to footnote reference 12)
  13. 13 Lemay-Yates, supra, pp. 17-28 (back to footnote reference 13)
  14. 14 Lemay-Yates, supra, pp. 34-35 (back to footnote reference 14)
  15. 15 Lemay-Yates, supra, pp. 38-49 (back to footnote reference 15)
  16. 16 Lemay-Yates, supra, pp. 51-52 (back to footnote reference 16)
  17. 17 Global Wireless Matrix 4Q09, Bank of America/Merrill Lynch (back to footnote reference 17)
  18. 18 Lemay-Yates, supra, pp. 53-54 (back to footnote reference 18)
  19. 19 Connectivity Scorecard 2010: How does Canada rate?, Canadian Telecom Summit, 8 June 2010 (back to footnote reference 19)
  20. 20 Global Wireless Matrix, 4Q09, supra (back to footnote reference 20)
  21. 21 Communications – Telecommunications, BMO Capital Markets, 14 June 2010 (back to footnote reference 21)
  22. 22 Measuring the Information Society 2010, ITU, http://www.itu.int/ITUD/ict/publications/idi/2010/material/MIS_2010_without%20annex%2004-e.pdf . (back to footnote reference 22)
  23. 23 Greg MacDonald, Telecom Analyst, National Bank Financial, as quoted in FP Tech Desk: U.S. wireless carriers playing network catch-up to Canada, supra (back to footnote reference 23)
  24. 24 The Benefit of the Wireless Telecommunications Industry to the Canadian Economy, OVUM, April 2010, pp. 24-29 (back to footnote reference 24)
  25. 25 Fibre backhaul transport systems will also be required. (back to footnote reference 25)
  26. 26 The Senate Standing Committee has also recommended that proceeds from spectrum auctions be used to fund broadband access for rural and remote communities. (Recommendation 6) See Plan for a Digital Canada, supra. (back to footnote reference 26)
  27. 27 A more detailed description of the proposed program is available at http://www.ncta.com/Resource/Resource/AdoptionPlus.aspx (back to footnote reference 27)
  28. 28 See the Economy One press release at http://www.oneeconomy.com/sites/all/files/DigitalAdoptionCoalition.pdf (back to footnote reference 28)

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