VZCZCXRO2748
PP RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
DE RUEHOT #0300/01 1071358
ZNR UUUUU ZZH
P 171358Z APR 09
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 9341
RUCPDOC/USDOC WASHDC
RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 OTTAWA 000300 
 
STATE FOR E, EB/DCT, WHA/EX, WHA/CAN 
 
STATE FOR EEB/CAP/BA (FINTON) 
 
COMMERCE FOR ITA/OTEC (BENNETT) 
 
STATE PASS FCC (TANNER) 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ECPS CA
 
SUBJECT: Broadband Deployment in Canada 
 
Ref:   SECSTATE 27310 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY 
 
¶1.  (SBU) Summary:  Canada moved quickly to achieve extensive, 
cross-country broadband deployment early this decade and leads the 
G7 in national connectivity rates. This achievement is particularly 
impressive given the size and geography of Canada and it showcases 
the government's commitment to broadband access.  However, Canada's 
continued expansion and adaptation of broadband technologies is 
hindered by the competitive structure of the Canadian market, 
characterized by a limited number of carriage providers, low 
population density, and barriers to investment.  End summary 
 
Extent of broadband deployment in Canada 
---------------------------------------- 
 
¶2.  (U) According to 2006 Government of Canada data, broadband 
service is available to 93 percent of Canadian households; 75 
percent of Canadians have a home computer; and 60 percent of 
households are broadband subscribers. Approximately 87 percent of 
households in Canada have a choice between telephone- or cable-based 
broadband. 
 
The evolution of Canada's broadband penetration 
--------------------------------------------- --- 
 
¶3.  (U) Canada has a low population density - approximately 2.05 
people per square mile - and most of Canada's 30 million people live 
within 100 miles of the United States border. Most of this 
population is easily reached by telephone or cable infrastructure. 
However, Canada's relatively small population density outside of the 
major cities of Toronto, Montreal, and Vancouver, provides weak 
commercial incentives for telecommunications investment. 
Consequently, the Government of Canada embarked on an aggressive 
strategy to stimulate broadband expansion in the country in the late 
1990s. 
 
¶4.  (U) The Canadian strategy combined regulatory and market-based 
initiatives, set out in broad strokes in the 2001 Report of the 
National Broadband Task Force.  Government spending was loaded at 
the front end of the initiative and gradually reduced to a few 
programs to assist incremental expansion in underserved areas. 
 
¶5.  (U) Canada also brought the private sector on board through 
regulatory incentives and licensing schemes such as: making certain 
telecommunications licenses conditional on broadband investment; a 
two-percent levy for connectivity improvement paid by satellite TV 
license holders; and the condition that spectrum license holders 
must also provide WiMAx mobile broadband service. 
 
Incentives for internet deployment in stimulus packages 
--------------------------------------------- ---------- 
 
¶6.  (U) Since most of the government initiatives took place between 
2001 and 2007 (and 93 percent household coverage was achieved by 
2006), there has been little recent government spending on broadband 
infrastructure.  While Canada's 2009 federal budget included various 
types of science and technology supports, there was no appreciable 
targeting of broadband expansion.  In July of 2008, an interagency 
group of Canadian officials told visiting FCC Commissioner Copps 
that they were pleased with Canada's progress and had no plans for 
additional, significant initiatives to expand broadband 
availability. 
 
Deployment of broadband to rural and underserved areas 
--------------------------------------------- --------- 
 
¶7.  (U) The Canadian regions of Yukon, Nunavut and Northwest 
Territories comprise 41 percent of Canada's land mass, but only 0.4 
percent of its population. The land is rugged and difficult to 
Qpercent of its population. The land is rugged and difficult to 
service with infrastructure of any kind.  As a result, comprehensive 
broadband penetration in Canada's far north and other remote areas 
has not been realized.  Nevertheless, the government predicts that 
the access gap will close as technology improves and fixed wireless 
and satellite services become less expensive. 
 
Limitations arising from the Canadian market structure 
--------------------------------------------- --------- 
 
¶8.  (U) Canada's incumbent telecom and cable broadband 
infrastructure is controlled by a small number of companies. 
 
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Although access to the 'last mile' of networks and to telephone 
broadband equipment is being slowly de-regulated, Canada's small 
population and large size make it a costly market to service.  As 
well, federal restrictions on foreign ownership of 
telecommunications (and satellite) industries shrink the pool of 
potential new competitors in the marketplace even further. 
 
¶9.  (U) While Canada's broadband deployment is impressive for so 
large a country, Canada lags behind its OECD counterparts in service 
and price.  The average broadband connection in Canada is about 7 
mbps, below the OECD average of 9 mbps.  According to the OECD, 
Canada also fares poorly in internet cost versus speed, ranking 27 
out of 30 for average monthly broadband charges.  Canada also 
imposes download caps on subscribers.  Typical limits on Canadian 
internet connections are 60 GB per month, with higher-end plans 
offering around 100 GB. 
¶10.  (U) Local-loop unbundling is a practice that allows smaller 
ISPs to rent out portions of a large phone company's network and 
then attach their own equipment to provide customers with internet 
access.  While Canada's regulations permit local-loop unbundling, 
its telecommunications firms have tended to erect barriers that 
limit practical access by smaller firms to the main network. 
¶11.  (U) As wireless technologies play a more important role in 
internet connectivity, Canada's relatively expensive and 
underdeveloped wireless services have also become more of an 
impediment.  For example, Apple's iPhone was introduced in Canada 
one year later than in the US and UK, and there is only one company 
able to provide necessary GSM support service.  Canada's mobile data 
costs are among the highest in the world and the World Economic 
Forum dropped Canada's 'network readiness' status from 5th place in 
2005 to 13th place in 2008. 
 
Future prospects and US commercial opportunities 
--------------------------------------------- --- 
 
¶12.  (SBU) Comment: The government's official strategy is to 
increase reliance on market forces "to the maximum extent feasible" 
in order to promote competition while maintaining advanced services 
for customers.  Canada has promised a gradual transition to 
deregulation of networks and telephone-based broadband equipment 
once equivalent commercial alternatives are sufficiently available. 
However, the hands-on regulatory environment that helped Canada 
rapidly expand its broadband deployment may now impede growth and 
adaptation in the sector.  Given the factors limiting competition, 
it is by no means certain whether affordable consumer access to new 
technology and next-generation networks can be sustained without 
significant government intervention.  The government is currently 
re-assessing its role in telecommunications and is leaning towards 
stronger deregulation, including consideration of permitting foreign 
investment in telecommunications carriers.  End comment.