Broadband in Canada

canada_flag-1920x1080We can get a bit myopic and tend to think that issues in the US are somehow different than the issues elsewhere. But Canada is having the same issues with broadband that we are experiencing in the US. There is considerable activity in Canada to bring gigabit speeds to its major cities. Like in the US, there are various incumbents building or upgrading networks in cities.

Bell Canada is spending over $20 billion to pass 2.2 million homes with fiber in Ontario and Quebec under the tradename of Gigabit Fibe (‘r’ intentionally not included). This will bring fiber to major cities like Montreal and Toronto. Unlike the pricing in the US, they will upgrade customers to a gigabit speed for an additional $10 per month.

Telus has announced it is going to spend several billion to bring fiber to Edmonton and Vancouver. Their plan is to extend fiber over a 5-year period but to eventually cover the cities.

Not to be outdone by Bell Canada, Rogers Communications, the cable incumbent, has announced plans to upgrade to gigabit speeds in Toronto and Atlantic Canada by the end of 2016.

But just like in the US, Canada has poor broadband outside of the cities. Their rural areas are much like the ones here with slow satellite or dial-up access. Last year the Canadian government announced a $305 million plan to bring better broadband over five years to about 280,000 rural households. This is a successor to the Broadband Canada Program which spent $225 million over three years to bring faster broadband to remote northern parts of the country.

These national programs are very analogous to the Connect America Fund in the US which is being used to upgrade rural areas to 10 Mbps download speeds. The funding in Canada is also being largely used to extend rural DSL or wireless and to bring some broadband to rural areas that have little or no broadband today.

Both countries are putting band-aids on rural broadband while large commercial companies are bringing gigabit speeds to the urban areas. While the rural areas in both countries are going to welcome getting faster broadband, especially if they never had it before, these areas will soon be further behind the cities in terms of the difference in broadband speeds than they were just a few years ago.

The governments of both countries face a major rural dilemma. It is going to cost many billions to bring real broadband to rural places. The governments in both countries are throwing federal money at old broadband technologies in order to take off some of the political heat from rural citizens. But by doing so they are doing a long-term disservice to rural areas.

In the US a lot of rural counties are willing to tackle bringing fiber to their areas. These efforts would be greatly improved if the federal government would have made the federal subsidies available for fiber instead of for tweaking obsolete DSL.

Federal and state governments in the US have further made it harder for rural business plans to succeed by funding broadband to ‘anchor institutions’ like schools and local governments. In a lot of rural America fiber has been built to those entities but to nobody else, thus removing those anchor revenues from any local effort to fund fiber projects.

And in both countries there is an additional swath of citizens who will soon be on the wrong side of the digital divide. While large cities are getting gigabit fiber, there is not nearly as much interest in bringing faster broadband to the smaller cities in either country. While smaller towns and cities in the US have somewhat okay broadband today, they are quickly falling behind the push for urban gigabit speeds. I don’t see a lot of business plans from anybody to fund and build fiber in places under 50,000 in population – which includes many county seats across the country.

I guess it’s not surprising to see Canada’s path so closely paralleling ours. Since they have fewer large cities it is likely that they will have widespread urban gigabit broadband before we do. But in both countries the gulf between urban and rural broadband, between the haves and have-nots, is growing rapidly.

Unbundling the Broadband Networks

canada_flag-1920x1080The Canadian Radio-television and Telecommunications Commission (CRTC) has ordered that large telecom companies, both telcos and cable companies, must unbundle the last mile of their network and make the facilities available to competitors.

With this ruling the CRTC has said that competition and choice is important. This was a surprising ruling because all telecom companies had filed comments stating that forced unbundling would be a disincentive for them to build expensive fiber facilities to homes and businesses.

This ruling was only the first step; the processes and procedures needed to accomplish unbundling still need to be worked out. It’s estimated that perhaps the first unbundled connections will be available to competitors by the end of 2016

This ruling applies to both fiber and coaxial networks and will apply to the larger providers like BCE (Bell Canada Enterprises) as well as to the two biggest cable companies, Rogers Communications and Shaw Communications. But the biggest impact is expected to be on BCE which has invested heavily in fiber to both businesses and residences.

The CRTC said that this was the only path they saw towards competition since the cost of building duplicate fiber networks was expensive and not likely to happen.

We know something about unbundling in this country. The Telecommunications Act of 1996 ordered large US telcos to unbundle their copper networks and make them available to competition. This promoted the explosion of CLECs in the late 90s, but the use of unbundled copper largely died when many of the CLECs formed during that period imploded during the telecom crash in the early 00s.

But the FCC in this country has never required unbundling of fiber. In fact, the 1996 Act removed the unbundling requirement as soon as a telco replaced copper with fiber. The Act did require the unbundling of dark fiber (fiber sold without electronics), but as is typical in this country, the telcos chipped away at that requirement to the point where it became incredibly difficult for a competitor to get access to telco dark fiber.

Our experience in this country is that the large companies will comply with this requirement only reluctantly, and here they put as many roadblocks as they could in the way of competitors. The telcos here required difficult paperwork for every step of the process and dragged their feet as much as possible any time they worked with a competitor. There is a famous rumor in the industry that in the work space at one of the large US telcos that dealt with unbundling there was a large sign reading “Delay, Delay, Delay”. Too bad this was before cellphone cameras because several reputable industry people swear this is true.

The idea of unbundling active fiber is an interesting one. Certainly if a competitor could get access to fiber affordably they could offer an alternate suite of products and bring both product and price competition into the network.

The idea of unbundling a cable company’s coaxial network is not as easy to contemplate. Coaxial cables are arranged so that there is not a unique cable for each customer. At the pole each customer is added into the same data and cable TV transmission path as everybody else in their neighborhood. It’s hard to think of a neat technical way to unbundle anything in an HFC network. It might be possible to unbundle the data path, but this is also shared through most of the network. It will be interesting to see how the CRTC deals with the technical issues.

Obviously competitors here will keep an eye on the Canadian experiment to see how it progresses. There has been no cry here for unbundling of fiber networks, but if there was such a ruling I think it would enable a raft of new competitive providers and would bring real competition into the duopoly networks we have in most US markets. Certainly the US suffers from the same duopoly competition that drove Canada to make this ruling.