Broadband internet access offers a powerful tool \u2013 connecting to friends, family, business and government services online is increasingly central to our lives. Without broadband, users struggle to meaningfully participate in the digital economy. Governments around the world should work to make sure citizens have access to broadband and eliminate any barriers to widespread adoption.<\/p>\n
Unfortunately, there are stark social disparities in the adoption of broadband internet service. Generally speaking, if you are older, less educated, poorer, a minority, or live in a rural area, you are less likely to use the internet. The reasons for not embracing broadband even where networks are available vary. Surveys indicate people go without broadband due to expense, limited digital literacy, or simply because they aren\u2019t interested. However, now that we\u2019re forced to rely on digital tools as we self-isolate during the pandemic, the importance of broadband is clearer than ever. Policy discussions have started to address affordability as a barrier to broadband adoption.<\/p>\n
No doubt, for many low-income citizens, the cost of a broadband subscription and devices can be prohibitive. But too often advocates overstate the challenge as a generalized problem with the structure of competitive, privately provided broadband. They wrongly call for radical change \u2013 through complicated intervention in the competitive system \u2013 rather than a narrow, direct and more effective fix: subsidies for low-income users.<\/p>\n
Broadband prices from municipal utility and private providers are comparable<\/strong><\/p>\n Near universal broadband adoption is a worthy policy objective. Canada and other countries around the world would be better off if society could organize itself assuming everyone had access to the internet regardless of their income level. Given the benefits of near-universal broadband adoption, it is critical to understand barriers to adoption, including affordability.<\/p>\n Unfortunately, broadband prices are difficult to study. How products are offered \u2013 what speed, whether there is a data cap, whether it is bundled with other advertising-supported services \u2013 can have a significant effect on the advertised price. As a result, studies attempting to compare broadband prices are often riddled with flaws.<\/p>\n Consider, for example, New America\u2019s Open Technology Institute (OTI) 2020 report<\/u><\/a> which held up open-access municipal broadband as offering the most competitive prices in the United States. The report summary<\/u><\/a> lauded advertised prices in Ammon, Idaho, (a municipal utility system) as \u201clow as $9.99\/month \u2013 faster and cheaper than plans available to many\u2026around the country.\u201d Yet deeper in the report the authors acknowledged this figure did not include monthly utility and construction fees charged by the municipality itself, which raised the cost to consumers by nearly $40 per month \u2013 in line with rates charged by private competitors. Residents connecting to Ammon\u2019s fibre network also faced installation fees<\/u><\/a> that, when paid upfront, came to $3,200 to $3,600.<\/p>\n The city of Wilson, North Carolina also provides municipal broadband. Here again OTI\u2019s study<\/a> neglected hidden costs. Advertised prices used in the analysis were only offered<\/u><\/a> for those who purchased multiple services from the provider. Broadband pricing from Ammon and Wilson underscores that comparing prices requires a careful analysis if we\u2019re to get an accurate sense of where prices stand. A closer evaluation indicates that for entry-level prices, private internet service providers offer competitive, if not lower, rates than municipalities.<\/p>\n Canadian broadband pricing is in line with rates abroad<\/strong><\/p>\n While there is no definitive international pricing study, analysis of reputable sources put Canada and the United States on roughly even footing with peer countries. The International Telecommunications Union (ITU) ranks<\/u><\/a> Canada as tied for sixth place globally for affordability of fixed broadband prices as a percentage of gross national income (GNI) per capita, on par with France and Singapore. The United States is also ranked<\/a> sixth for affordability<\/u><\/a>.<\/u><\/p>\n Separately, the Inclusive Internet Index for 2020<\/u><\/a>,<\/u> a report developed by The Economist Intelligence Unit (EIU), highlights where Canada and the United States stand in comparison to 98 other countries when evaluating internet availability, affordability, relevance (which measures the availability of content relevant to local users) and readiness. Importantly, the EIU index considers income and competition, which are omitted from other similar reports that focus narrowly on advertised prices. Canada and the United States are both ranked<\/a> highly in terms of their affordability (seventh and third place respectively). Of note, Canada and the United States were ranked<\/a> second and first, respectively, for their competitive environments, both of which rely primarily on facilities-based competition<\/u><\/a> where those who own and operate broadband networks also sell internet service to individual consumers.<\/p>\n The lack of pricing comparison relative to income is a noticeable flaw in some studies. For example, OTI\u2019s \u201cCost of Connectivity<\/u><\/a>\u201d report simply compares advertised prices without controlling for purchasing power in different countries. Of the OECD countries evaluated in the report (a total of 13, including the Canada and the United States), only four countries (one of which is the United States) have annual average wages<\/a> greater than Canada and all but one have annual average wages well below that of the United States (Switzerland is the exception). Without factoring in average wages and purchasing power parity, it is difficult to compare the relative affordability of broadband prices (see figure one).<\/p>\n