Giganomics Consulting Inc.

Earlier this spring, the OECD released some statistics comparing 30 countries on several indicators of broadband internet performance. In addition to the oft-cited broadband per 100 persons statistic, in which Canada placed 10th, the OECD indicated that Canada's average price of a broadband service per megabyte (Mbps) was $26.11 (converted to U.S. purchasing power parity), making it the third most expensive.  That price seemed high to some observers but, because of the source, was cited by several as an indication that the Canadian internet market is failing consumers.

On August 11, the OECD released its Communications Outlook for 2009.  Table 7.14 of this publication includes the underlying data used to derive the $26.11 per Mbps price of broadband in Canada.  How this was calculated was actually quite simple, and perhaps a bit too simple.  It is based on the advertised price and speed of 16 services offered by three ISPs in Canada.  The price was divided by the speed for each service and then a simple unweighted average was calculated.  A 'Lite' service that costs about $25 to $30 per month and provides speeds of between 256 kbps and 1 Mbps works out to a price per Mbps of $50 to $100. (All dollar amounts in US PPP.)  These types of services were given the same weight as the services that cost $40 to $50 per month and deliver speeds of 5 to 10 Mbps, which equates to a price per Mbps of $5 or $6.  Also included in the 16 offers considered for Canada were three Wimax services with a calculated price per Mbps of $17 to $74.  With all 16 offers given the same weight, the average price per Mbps equates to $26.11. 

Statistics published by the CRTC in its Communications Monitoring Report 2009 (Table 5.3.3) indicate that almost 60% of residential broadband users subscribe to services that provide speeds of at least 5 Mbps, and fewer than one-quarter rely on 'Lite' services.  A simple average of 16 offers does not correspond to these usage levels.

Canada's apparently poor performance as third most expensive among OECD countries is an artifact of this approach that appears to underrepesent the higher service levels and over represent the lower service levels, resulting in a skewed average price per Mbps. 

Conversely, the OECD's analysis for most other countries included two or three times as many advertised offers.  In a number of cases, the listed offers are heavily weighted to higher speeds, with some countries' lists including duplicate services for these higher speeds.  The list for France includes two identical offers of "La fibre" service from Orange offering 100 Mbps that are priced the same.  The list for Australia includes multiple offers from Bigpond with speeds of 20 and 30 Mbps. 

Because the OECD's methodology did not apply any weights to the listed offers, a country's ranking in price per Mbps was determined to a large degree by how many and which offers were included in the calculations. 

If the OECD's data for Canada had included more of the higher-speed services, the average price per Mbps would have been much lower.  For example, Videotron's Ultimate Internet Speed 50 is advertised at $79.95 per month ($89.95 without a contract) and provides up to 50 Mbps, for an average price per Mbps of $1.60 (Canadian $) or about $1.32 in US PPP.  There is a growing number of broadband internet service offers in Canada that have a price per Mbps of $5 or less (US PPP). 

The CRTC's Communications Monitoring Report's Table 5.3.3 indicates the average revenue per residential internet subscriber was $37.44 (Canadian $) and the average downstream speed was 4.9 Mbps, based on actual reported subscription levels.  A weighted average price per Mbps using this data would work out to $6.28 (US PPP), less than one-quarter the price derived by the OECD. 

At this price per Mbps, Canada would rank among the ten least expensive countries in terms of price per Mbps.  However, this ranking cannot be confirmed since the price per Mbps of the other countries reported to have lower-priced services is still based on simple averages that may not reflect the subscription levels in each country. In other words, GIGO (garbage in-garbage out).