Government support for broadband


The federal government’s budget released on January 27, 2009 announced a total of $225 million in funding for broadband infrastructure projects.

The money is to be spent over three years, with $100 million allocated to each of the first two years (fiscal 2009-2010 and 2010-2011). Details in the budget document were limited to the following:

· Industry Canada is responsible for developing and implementing a strategy;

· The goal is to provide broadband coverage to all currently unserved communities; and

· The focus will be on encouraging private development.

Previous federal government initiatives included the Broadband Rural and Northern Development (BRAND) project and the National Satellite Initiative (NSI). 

BRAND had a total budget of $105 million when it was launched in September 2002. This initiative supported broadband projects in 884 communities, using a variety of wireline and wireless (satellite and microwave) technologies.

NSI had a total budget of $155 million when it was announced in October 2003. The NSI was expected to deliver broadband to an additional 52 communities in the northern parts of Canada. The combined funding for these two initiatives amounted to $260 million.

As a result of the past initiatives of the federal and other levels of government, as well as private sector investment, the number of unserved communities decreased from nearly 4,800 in 2000 to about 2,000 unserved communities today.

Some key issues for the newly announced funding are:

· How will the $225 million be allocated among the 2,000 communities in order to extend service to all unserved communities?

o Previous $260 million in spending extended service to fewer than 1,000 communities based mostly on an applications process

o Remaining unserved communities are most likely less economically viable than those already served

· How will “broadband” be defined in terms of minimum bandwidth?

o Broadband was defined as 1.5 mbps by the National Broadband Task Force Report in 2000, comparable to what many urban users could get, but service speeds have at least tripled since then

· What conditions or criteria will have to be met to qualify for funding?

o Initiatives funded by BRAND were limited to private sector organizations (municipalities were not eligible), and competing service provides had access to any funded infrastructure

It is also instructive to consider elements of the proposal in the United States to fund broadband infrastructure, the details of which were released January 16, 2009:

· House of Congress bill proposed $6 billion to expand and upgrade broadband services

o various industry and consumer groups argue at least $12 billion is needed to deliver ubiquitous broadband

o amendments being considered by the Senate could increase this to up to $9 billion

· One half of the funding must be awarded by September 2009

· Infrastructure that receives funding must be available on an “open access” basis which is up to the FCC to define

o Variously interpreted as granting competitors mandated access to the network or adherence to network neutrality rules

o Senate representatives may propose amendments

· $2.85 billion to be allocated by the National Telecommunications and Information Administration (NTIA)

o $1.85 billion would fund wireline-based services; the rest would be for wireless

o 75% of the funding for wireline-based services would be allocated to services providing at least 45 Mbps downstream and 15 Mbps upstream

o Minimum broadband speeds of 5 Mbps downstream and 1 Mbps upstream required in unserved areas

o 75% of the funding for wireless-based services would be allocated to services providing at least 3 Mbps downstream and 1 Mbps upstream

· $2.85 billion to be allocated by the Rural Utilities Service of the Agriculture Department

· Remaining $350 million allocated to data collection and mapping of broadband availability


Broadband Internet - update on universal service status

As the economy of Canada and other countries slide into recession, governments are planning investment in infrastructure projects, and broadband internet is on many lists. The most recent weekly address by the United States President-elect Barack Obama promised to upgrade that country's broadband infrastructure and lift the United States from its rank of 15th internationally in broadband penetration.

Canada ranks 10th among OECD countries, according to that organization’s statistics for June 2008. This is down from a 6th place ranking in 2005. 

Increasing access to broadband service, particularly in rural areas, is cited as a key concern.  The CRTC reported availability to 93% of households in 2007. Virtually all of the households in urban areas have access, compared to 81% of those in rural areas.

Already in 2008 there have been a number of announcements by both federal and provincial governments regarding initiatives aimed at increasing the reach of broadband networks to more rural and remote communities.

Federally, funding continues to be available through the Canada Strategic Infrastructure Fund; a program that is spending $5.2 billion over ten years and scheduled to end in 2013. Funding specifically for broadband was among the Conservative party promises during the run-up to the October 14th election. According to the announcement, a re-elected Conservative government would spend $100 million annually over five years on “completion of the country’s broadband network.” Details on this initiative could be among the infrastructure programs expected in the federal government’s budget to be released at the end of January 2009.

A number of provincial governments have also been working towards increasing broadband availability. In 2008, Nova Scotia, Prince Edward Island and Saskatchewan announced initiatives that promise to deliver broadband to all communities in these provinces.

Nova Scotia and PEI expect broadband to be accessible in all communities by 2009, at a cost of $10.7 million in Nova Scotia and $8.2 million in PEI. In the latter case, this funding is entirely private-sector investment by Aliant, the incumbent telephone company.

Saskatchewan is investing more than $80 million as part of a program to deliver 100% broadband coverage within three years. SaskTel, the incumbent telephone company owned by the provincial government, will also be seeking federal government funding to assist in reaching this goal.

The government of Manitoba has ongoing initiatives aimed at bringing broadband to all residents by 2010. Broadband Communications North was an initiative in the 2007 budget that targets expanding broadband service to 15 northern communities. An additional 15 communities will be connected in other parts of the province during the next two years.

The Québec government announced as part of its budget in March 2008 a new program, Communautés rurales branchées. This program will provide $20 million in funding for projects that assist in achieving the goal of making broadband internet accessible across the province. It estimated that 90% of all addresses currently have access.

Ontario’s provincial budget of March 2008 included $30 million in funding over four years to improve broadband service in rural areas of southern Ontario as part of the Rural Connections Broadband Program. Under this program, municipalities can receive funding for up to one-third of a project’s costs, to a maximum of $1 million.

Alberta invested $193 million over three years towards the establishment of the Alberta SuperNet, an ultra-highspeed, high-capacity network spanning 15,000 kilometres and connecting 429 communities. The funding is directed at providing points of presence in the communities, with “last mile” retail services provided by internet service providers that connect to the network. SuperNet has the potential to reach 95% of Albertans. In addition to this project, the Alberta government announced Rural Connections: Community Broadband Infrastructure Pilot Program on October 31, 2008. This program has $9 million in total funding, provided through the federal government’s Community Development Trust Fund.

New Brunswick completed a major broadband expansion project in 2006, the result of which was connectivity for more than 90% of residents in 327 communities, all First Nations communities, 98% of schools, all health care centres and 95% of businesses. Total investment for the three-year initiative was $44.6 million, shared by the federal government at $16.5 million, the provincial government at $12.5 million and Aliant at $15.6 million.

The government of Newfoundland and Labrador expects to complete the final instalment of the $15 million investment in building a fibre optic link across the Gulf of St. Lawrence. This is part of the government’s Innovation Newfoundland and Labrador: A Blueprint for Prosperity. The government’s 2008 budget included funding to investigate the feasibility of a fibre optic network in Labrador.

The government of British Columbia provides funding through its Network BC office, which to date has resulted in the expansion of broadband connectivity from only 135 communities to 320, out of a total of 366 communities. Recent announcements include the Connecting Citizens Grant Program, which will provide $2.2 million in the first year and $3 million in subsequent years for last mile infrastructure to homes and businesses in rural and remote areas; and an additional $22.5 million to assist First Nations to invest in broadband infrastructure.

Closing the rural-urban “digital divide” should be possible within the next few years given the numerous initiatives completed and underway at the provincial level. Additional infrastructure investment from the federal government could bring the goal of universal broadband even closer to reality.


Internet Subscriber Growth – Cable vs. DSL

According to a recent article, cable companies in the United States are adding high-speed internet subscribers at a much faster rate than telephone companies. Information compiled for the story indicated that cable modem net additions outpaced those for DSL by a margin of 3 to 1 in the second quarter of 2008.

The Canadian market is exhibiting similar patterns in terms of subscriber net additions. In the third quarter of 2008, the four largest cable companies had net additions of almost 105, 000 high-speed subscribers relative to the second quarter. This is about 1.5 times the 70,000 DSL subscribers added by the four largest telcos. (For the most part, these are residential high-speed subscribers, although it includes some commercial subscribers, particularly for the telcos. There is also a one month difference in the reporting periods for two of the cable companies.)

On an annual basis, Canadian cable companies’ net additions have been widening the gap relative to those reported by the telcos, as shown in the chart.

In the early part of 2007, year-over-year cable subscriber additions were only somewhat higher than for DSL, accounting for about 53% of total high-speed additions. One year later, cable subscriber additions accounted for nearly two-thirds of the total. By the third quarter of 2008, cable net additions were increasing at the rate of 1.9 for each DSL subscriber added.

Analysis of the relative growth in subscribers in the U.S. suggested that slower download speeds available from DSL services was a contributing factor to the gap in subscriber additions. DSL services in the U.S. provide download speeds that top out at about 7 Mbps, compared to 30 Mbps available from competing cable companies.

High-speed internet services in Canada offer download speeds across a wide range, as indicated in the following table.


Highest Speed (Mbps download )

















Bell’s 16 Mbps is based on fibre to the node deployments in Toronto and Montreal. This is similar to the network used to support AT&T’s U-verse service. In other areas, the top speed of Bell’s DSL service is 10 Mbps.

Telcos in the U.S. that have deployed fibre-rich internet services also provide higher speeds. Verizon’s fibre to the home service, FiOS, offers download speeds of between 30 and 50 Mbps, while AT&T’s fibre to the node service can support speeds of up to 18 Mbps.

Telcos in Canada have not deployed internet service based on fibre to the home to any great degree. However, Canadian telcos have been deploying fibre deeper into the network, as evidenced by Bell’s 16 Mbps service.

The adoption of higher speed internet services in Canada has been relatively slow compared to other industrialized countries, according to a recent report released by Akamai. Statistics in Akamai’s The State of the Internet – Third Quarter 2008 indicate that 21% of internet connections in Canada connect at speeds of 5 Mbps or higher. This puts Canada twelfth in the standings, down from a tenth place ranking in the previous quarter. It is also lower than the U.S. ranking, where 26% of connections are at speeds of at least 5 Mbps. However, 74% of Canadian internet connections have at least a 2 Mbps speed, compared to only 64% of those in the U.S.



Targeted advertising from the internet to TV

Advertising on internet sites has become a big business. The Interactive Advertising Bureau of Canada (IAB Canada) estimated that online advertising will be worth $1.5 billion in Canada in 2008. This represents an increase of more than 20% from 2007.

Source: IAB Canada

The 2008 estimate for Canada is in line with figures recently reported by Google. Google’s third quarter revenues were 31% higher in 2008 than the previous year. During the first nine months of 2008, the company earned $15.6 billion (U.S.); approaching the $16.4 billion (U.S.) the company earned from online advertising in all of 2007.

Projections for online advertising growth in 2009 are also strong. According to figures reported by IAB Canada, industry observers are predicting growth rates ranging from 12% to 19% in the United States. In contrast, the advertising market for traditional media is not expected to perform as well as previous years, largely due to slower growth in the economy.

Most online advertising is targeted. The ads are based on other information or images displayed or input from the user. For example, ads displayed with search results are based on the key words used in the search. Targeting the ad makes it more relevant, which increases the probability of a consumer response.  Plus, online measurement tools give the advertiser detailed feedback on what worked.

Interest in targeted advertising for the traditional television platform is heating up. Initiatives are underway to develop the technology and business models to insert targeted ads in television programming. Canoe Ventures is a joint venture of six major cable system operators that serve about 53 million cable subscribers in the United States (Time Warner, Comcast, Cox, Charter, Cablevision and Bright House). Canoe is focused on bringing the benefits of targeted advertising to the television medium. In an interview published November 10, David Verklin, the CEO of Canoe, revealed plans to release within four months the first product, described as “a creative versioning tool that will enable cable TV networks to divide national inventory into demographic footprints.”

On the technology front, more than a dozen vendors will be working with CableLabs and the Society of Cable Telecommunications Engineers (SCTE) during the week of November 10th, in large-scale tests of components for delivering and measuring targeted advertising for cable operators. CableLabs is spearheading related work as part of its advanced advertising project.

The specification being tested (SCTE 130) is designed to enable advertising systems deployed across different cable systems to interoperate. This flexibility is important to meet the needs of the numerous players involved – cable operators, equipment vendors, programmers and advertisers.

The work being done in the U.S. can have direct application in Canada. Canadian cable operators rely on many of the same vendors, and technical specifications developed and tested by CableLabs and SCTE in the past have been widely adopted here.

Two regulatory proceedings recently announced by the Canadian Radio-television and Telecommunications Commission (CRTC) will also bring more attention to targeted advertising on television. Broadcasting Public Notice CRTC 2008-102 invites comments on a range of issues related to targeted advertising, including how it should be defined, technological developments, business models and the implications for regulation. Broadcasting Public Notice CRTC 2008-101 includes issues related to targeted advertising on the video on demand platform. The CRTC separately announced in Broadcasting Public Notice CRTC 2008-100 that it will amend the regulations to allow cable operators and other licensed distributors to insert different advertisements in a program, with the agreement of the programmer; an initial step towards bringing targeted advertising to Canada.


Broadband Internet - usage caps


A recent survey of broadband internet customers in the United Kingdom found that nearly half (47%) did not know what usage limits apply to their service and 39% believed they have an unlimited service.

As it turns out, all but one of the nine UK broadband internet service providers (ISPs) analysed imposed some limits; however, only two had explicit usage caps - AOL at 40 gigabytes (GB) per month and Plusnet at 30 GB per month. The remaining six ISPs advertise "unlimited" service but details provided in the ISPs' conditions of service indicate that customers may face restrictions if they are heavy users or during peak periods. For more information on the survey and analysis, go to

The issue of usage caps among broadband ISPs has been drawing attention in other countries as well. In the United States, Comcast implemented usage caps of 250 GB per month as of October 1, 2008. The move to implement explicit caps was taken following a decision by the Federal Communications Commission (FCC) that the company transition from its existing network management practices. Time Warner began testing usage caps in one market in June 2008. Lower speed services were capped at 5 GB while the highest speed service has a 40 GB cap, with an overage charge of $1 (US) per GB.

In Canada, the major cable companies have implemented usage caps on their broadband internet service, as has the largest DSL provider, Bell Canada. The level of the cap varies by the service level, ranging from as little as 2 GB per month for the lower speed services to about 100 GB at the highest speeds. One service, Shaw's Nitro, has a cap of 150 GB per month. The caps that apply are disclosed on the companies' websites as part of the pricing and packaging information. In the case of Rogers and Vidéotron, there are additional charges that will be applied for subscribers that exceed their caps. Bell Canada offers its subscribers a flat rate plan for an additional 30 GB (see the table below for specifics).


Service Level/Company

Usage Limits


Overage Charges


Lower Speed (Lite) Services



Rogers - Ultra Lite

2 GB*

$5 per GB (max. $25)

Rogers Lite

25 GB*

$2.50 per GB (max. $25)

Shaw Lite

10 GB

Not available

Cogeco Lite

10 GB

Not available

Vidéotron Basic

2 GB

$7.95 per GB (max. $50)

Bell Canada Essential

2 GB

$10 for up to 30 GB

Standard Speed Services



Rogers Express

60 GB

$2.50 per GB (max. $25)

Shaw High Speed

60 GB

Not available

Cogeco Standard

60 GB

Not available

Vidéotron High Speed

20 GB down, 10 GB up

$7.95 per GB (max. $50)

Bell Canada Essential Plus

20 GB

$10 for up to 30 GB

Higher Speed Services



Rogers Extreme

95 GB

$1.50 per GB (max. $25)

Rogers Extreme Plus

95 GB

$1.25 per GB (max. $25)

Shaw Extreme-I

100 GB

Not available

Shaw Nitro

150 GB

Not available

Cogeco Pro

100 GB

Not available

Vidéotron Extreme 100

100 GB

$1.50 per GB

Vidéotron Extreme Plus

20 GB down, 10 GB up

$7.95 per GB

Vidéotron Ultimate HS 30

30 GB

$1.50 per GB

Vidéotron Ultimate HS 50

50 GB

$1.50 per GB

Bell Canada Max 10/16

100 GB

$10 for up to 30 GB

Source: individual company websites, as of October 27, 2008

* Customers who subscribed to these services prior to January 2008 have a 60 GB limit.

Canadian broadband internet subscribers who are heavy users have the option of purchasing service levels with usage caps that are higher than in many other countries where caps have been imposed.

Information compiled by the OECD indicates that, as of October 2007, Canada had the highest usage caps, averaging 65 GB, among seven countries for which sufficient data was available (see chart). Three countries - Australia, Belgium and New Zealand - had caps below 20 GB on average.

Source: OECD