“The Economist” concludes Canada has “most affordable” Internet– what is wrong with this picture?

The Economist’s Intelligence Unit released a study yesterday concluding that Canada, amongst the countries studied, has the world’s most “affordable internet”. This greatly surprised us at PIAC and we beg to differ.

The Economist study defined affordability as: “the cost of access relative to income and the level of competition in the Internet marketplace.”

However, a closer look at the data shows that the only aspect of internet service where Canada truly leads the pack is “average revenue per user”– a measure of how much Canadians spend on internet service. In other words, the study counterintuitively concluded that Canada’s internet is the world’s most affordable even though Canadian internet companies make more money from Canadian consumers than any other internet providers in any other country. The strange conclusion that our internet is the most affordable appears to stem in part from the study’s measure of income, which is then compared to the access cost. Income is based on average income – meaning that, relatively speaking, access costs may appear affordable relative to Canadians’ average income but it may well not be affordable to Canadians living below the average income threshold.

More importantly, the Public Interest Advocacy Centre defines affordability quite differently than the Economist’s Intelligence Unit.  In our first report on communications affordability in Canada in 2015 we stated that:

a [communications] service can be described to be affordable where its cost does not require a household to cut back its expenditures on other basic necessities such as food, shelter, clothing, transportation and health care. This relative threshold can be quantified as a percentage of household income. We suggest that communications services are “affordable” where, as a guideline, they make up about 4% to 6% of a household’s income.

PIAC also noted:

However, affordability in our view must also incorporate a subjective quality because it is related to control – the ability of an individual or a household to control their expenditures in order to fulfill their needs. Therefore, because affordability concerns a household’s control over their budget, affordability is also about choice which allows a household to access a service offering which meets their needs. An assessment of affordability, therefore, should take into account the choice and preferences of low- income consumers in meeting their needs.

The Economist’s index measure of affordability is an economist’s blunt one that only judges by relative, average, objective measures. PIAC, however, considers the essentiality of these services and understands subjectively how low-income Canadians struggle to afford communications. We surveyed low-income Canadians. They told us that communications is essential to them and what’s more, 17% told us they have gone without essential goods like food, medicine or clothing to pay their communications bills. We published our findings and took those findings to Canada’s telecommunications regulator, the CRTC. The CRTC heard our submissions and called on Canada to take action to address challenges with affordability:

Over the course of the BTS [Basic Telecommunications Services] proceeding, however, the CRTC heard from Canadians forced to make difficult spending decisions due to the cost of broadband Internet access services. Given the economic, socio-cultural and civic importance of broadband, the CRTC concluded that any Canadian left behind in terms of broadband access is profoundly disadvantaged, and that coordinated national action is necessary to address this problem. The risks of non-action are too great: missed opportunities for innovation, creativity and engagement; reduced competitiveness; weakened domestic prosperity; and diminished prospects for Canadians.

PIAC hopes to see such action in the 2017 Federal Budget, as well as in federal and provincial government initiatives going forward. After examining the affordability of communications services in our two reports in 2015 and 2016, PIAC advocated for, in the CRTC hearing noted above, the establishment of a National Affordability Plan to ensure broadband Internet service is both available and affordable for low-income households in Canada. PIAC also suggested the CRTC spearhead affordability initiatives, with federal and provincial political support and coordination. Sadly, the CRTC refused to take responsibility for communications affordability in Canada and instead asked the federal and provincial governments to take the lead.  Nonetheless, PIAC continues to advocate for a flexible end-user subsidy, which we believe would most effectively address the affordability of communications services by allowing low-income Canadians to make telecommunications choices that best suit their needs.

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