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Does UBB curtail Internet use? Not according to the data

Everyone knows Canada is an Internet backwater: usage based billing (UBB), data caps and too-high data prices are preventing us from succeeding as a 21st century economy.

Everyone is wrong.

Although there are some good arguments to make disputing the OECD study that identified Canada as having relatively high Internet prices, I'm not going to make them. Nor am I going to talk about UBB and wholesale pricing and what regulators should do in the upcoming CRTC hearing.

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Almost all of the debate up until now has focused on the inputs (like pricing) to Canadian digital behaviour … and a lot of it has been pretty inflammatory: a Google search for " Canada+digital+backwater" yields more than half a million hits.

Until recently, there hasn't been a lot of data available on the actual behaviour of Canadians. Last week Cisco released the latest update to their Visual Networking Index, and the folks at the Economist did a slice-and-dice of the data on monthly per capita consumer Internet usage by country.

As a digital backwater-in-the-making, you'd expect Canada to be at the bottom of the 16 countries for which Cisco has data: ahead of India but behind South Africa kind of thing…

Canada ranked 3rd in 2010, behind only South Korea and France. We were ahead of such digital laggards as Britain, Germany, and that small, technologically backward nation to the south of us – the one with Silicon Valley. In fact, at just under 10GB/consumer/month, Canadians used almost twice as much Internet data as the average Japanese internet surfer, despite that country's well known tendency to be an early adopter of technology.

But I thought caps and higher prices would reduce Internet usage, right?

Using the OECD data, out of 34 countries studied, Canada is one of only four with 100% prevalence of data caps from its ISPs. In fact, when I compare the Economist chart with the OECD chart (Excel spreadsheet 5j, for those playing along at home) I can see almost no connection whatsoever between bandwidth caps and internet usage. Some countries with data caps use lots of internet, and some countries with no caps use very little, and everything in between.

When we look at price as a factor, it also seems to be a mixed bag. High speed broadband, including the line charge, in Italy is about 10% cheaper than France…but they use 60% less data per month! Japan and South Korea both have high speed broadband tariffs well under the OECD average, and are only 200 km apart, but one country uses 7 times as much data as the other. Canada is supposed to have high prices…but we use more internet than almost everyone.

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If there are no strong correlations between price, bandwidth caps and Internet usage, what about some other metrics?

It turns out there is a relationship between GDP and broadband penetration, as seen in chart 1k of the OECD report. The correlation isn't super high at 0.71, but it kind of makes sense: richer countries tend to have more of many things (including fast Internet links) than poorer countries. There are still big swings: three countries with roughly the same broadband levels have per capita GDPs ranging from $20,000 to $120,000.

As I learned back in statistics class in Vancouver, correlation does not imply causation. Maybe having more broadband is a side effect of being rich, not a cause? If a very poor country spent a lot of money on getting broadband to 36 per cent of its population, just like Switzerland, that doesn't mean its per capita GDP will suddenly rise to Swiss levels.

What does all this mean for innovation and Canada's future?

Nobody knows. The links between Internet usage, prices, speeds, caps, economic growth and innovation are not clear.

Which is why I am writing this column: in the last year I have read literally hundreds of pronouncements that Canada "must" do various things, or we are doomed. We must allow unlimited Internet, we must get prices down, we must get speeds up and we must get better broadband penetration.

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Based on what the data reveals, those are not musts, those are maybes. They all have costs, and they all have benefits, and they are choices that, as a nation, we can either make or not make. Please note, I am not suggesting we need higher prices or lower broadband penetration … but given the Economist usage numbers, should lowering prices or increasing penetration be Canada's top priority?

We are already global leaders in using data on the Internet. Why are so many lobbyists arguing so strenuously in favour of policies that encourage us to use even more? What's in it for them?

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About the Author
Technology columnist

Duncan Stewart is the Director of Deloitte Canada Research in the areas of Technology, Media & Telecommunications (TMT). Duncan has two decades of experience in the TMT industry. As an analyst and portfolio manager, he has provided research or made investments in the entire Canadian technology and telecommunications sector. More

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