The real difference between U.S. and Canada

Over the past few weeks, I’ve done some rudimentary comparisons of broadband services from U.S. and Canadian cable providers, all of which have proven to be very popular, judging by the traffic I’ve received. The exercise was originally prompted by U.S. provider Charter recently announcing new packages; although I suspected Canadian cable companies would come off for the worse in a head-to-head comparison, I was genuinely curious as to how things would stack up.

Could this be Canada’s flag soon?

The picture painted by those results was pretty clear: of the five major cable providers in Canada, only Shaw compared favourably with U.S. counterparts. The other four - Rogers, Videotron, Cogeco and Eastlink - came in relatively expensive and with much smaller data caps.

The common denominator among this foursome is that they compete mainly against Bell. The hypothesis that can therefore be arrived at is that if Bell is present in a market, chances are good that market is less than competitive, as evidenced by the higher prices and poorer services in central and eastern Canada compared to Western Canada and the United States.

The particularly poignant part of this whole exercise, however, lies in the data cap situation. While customers of Bell and its competitors are typically saddled with around 60 to 70 gigabytes of monthly usage on mid-tier plans, Americans and Western Canadians are generally getting upwards of 200 or 300. That means about 75% of Canadians are being artificially constrained in how much they’re allowed to use the internet.

In the United States, even a whiff of such a thing is enough to spur action. Indeed, the Department of Justice has launched an investigation into whether data caps - remember, we’re talking hundreds of gigabytes per month - are hindering competition. Here in Canada, the situation is much worse yet no one in power - not regulators, not government - seems to care much.

Why is that? There are a few probable reasons.

Lobbying: A quick glance at the lobbyist registry shows that when it comes to meeting with politicians, regulators and bureaucrats, it’s hard to beat Bell. Since the beginning of 2011, the company has reported at least 32 meetings, or nearly two a month. By way of comparison, Netflix - perhaps one of the biggest companies that is negatively affected by low usage caps - has logged 13 meetings in the same time frame. Clearly one company is in policy makers’ ears all the time.

“Competition”: But wait - if you want broadband service with hundreds of gigabytes of usage, you can get it from one of the independents, right? Sure, but given that the likes of Teksavvy and Acanac aren’t available everywhere and have thus only managed to corral up about 6% of the market, it’s hard to count them as serious competition. Even with the independents factored in, about 70% of Canadians are still constrained, which is more than enough to make any online service that requires big bandwidth think twice. Ironically, even that small sliver of the market was nearly done away with by the CRTC, which originally was going to allow Bell to impose its usage caps on indie ISPs. If not for the spirit of the fearless crew (i.e. an intervention by former industry minister Tony Clement), even this particular minnow would surely have been lost. Just whose interested would the regulator have been working in?

Apathy: Speaking of industry ministers, it’s hard to imagine the current boss responsible for this particular section of the economy, Christian Paradis, caring less about it. Industry Canada’s supposed Digital Strategy is about as real as the Easter Bunny at this point and Paradis is getting more and more invisible by the month, if such a thing is possible.

If you’re ever traveling abroad and are asked by Europeans or Australians what the big difference between Americans and Canadians is, don’t go for the stock answers involving beer or health care. Be sure to tell them that the policy makers in one country clearly care about competitiveness while those in the other sit on their duffs while a few companies ride roughshod over the populace.

Don’t just take my word for it - third-party analysts in the U.S. have found the same broadband companies guilty of some of the highest concentration of media ownership in the world, which means competition for digital services in Canada is an endangered species. Expensive and/or sub-par broadband and wireless, locked-down entertainment content, ownership of just about everything under the sun such as sports teams, TV stations, newspapers…  this is the stuff of dystopian science-fiction. Too bad it’s really happening.