Canada Has Most Affordable Internet, Economist Intelligence Unit Declares In New Index

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You probably did a spit-take with your coffee when you read that headline, but yes. Canada was recently ranked number one by the Economist Intelligence Unit (EIU) on Internet affordability in a list of 75 countries, ahead of the U.S. and European nations.

How is this possible? We hear constantly how we pay sky-high prices for communications services compared to other developed countries, especially for wireless.

Despite its number-one ranking on affordability, Canada fell further back in the index on several other metrics, including availability, relevance and readiness, which tracks citizens’ capacity to access the Internet. Overall, Canada was ranked eighth, behind the U.S., Singapore, France, South Korea and others.

The study used two categories to determine affordability — the cost of Internet access relative to income and level of industry competition.

rogers communications
Big Telecom execs must be laughing as they read this. (Photo: CP)

On cost of Internet access alone, we actually came 12th, tied with Kazakhstan. So this top spot came thanks to Canada’s apparently impressive competitive environment, which is another head-scratcher.

The "competitive" category includes three factors — average revenue per user, wireless operators’ market share, and broadband operators’ market share. Canada came first on all three.

Average revenue per user may not be the best gauge of competition. It just means companies are getting a lot of money out of us. A report released last year found that Canada ranked in the top three or four countries on all home Internet rates and wireless prices.

The EIU used a metric called the Herfindahl-Hirschman Index to measure market concentration, but it may have been too generous in its interpretation. While the EIU described Canada's score on that as showing signs of strong competition, tech blogger Peter Nowak points out that the U.S. government would consider that same score to mean "moderately concentrated" — in other words, not really all that much competition.

Canada likely ranked better than others on that measure because, unlike many other countries, Canada doesn't have a "dominant player" — a single company that controls 40 per cent or more of the market. Rather, a handful of companies controls the vast majority of the market.

wireless prices data usage
The monthly costs of wireless service (bottom axis) compared to mobile data usage (left axis). Revenue numbers are in euros. (Chart: Tefficient)

Canada’s Competition Bureau would also appear to disagree with the EIU's conclusions.

"Mobile wireless markets are highly concentrated and possess high barriers to entry and expansion,” it wrote in a decision approving Bell’s takeover of Manitoba Telecom Services (MTS) last month.

We also only have three major Internet providers, you might say. How is that competitive?

Nowak speculated that the EIU may have just counted the full number of providers in the country without taking into account the size of the markets they serve. If you tally them all up, we’d have Bell, Rogers, Telus, Eastlink, Videotron, Freedom, MTS and Sasktel.

"Taken at face value, that looks like a very competitive market,” he wrote. “Of course, any Canadian knows better."

We also know better than to believe that Internet access in this country is affordable. Maybe the researchers should rename that category.

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