Executive Summary
Canada can no longer be smug about its international ranking in the telecom sector. Once highly touted as a world leader in high-speed Internet and access to emerging online services, Canada has lost its world-leading position over the last several years, particularly with respect to the last mile, which connects households to infrastructure that is capable of supporting the many and varied emerging technologies and services.1
The last mile is significant because it is the last opportunity for incumbent telcos (telephone companies) and cablecos (cable companies) to maintain dominant market power in a sector where they have had to face increasing competition over the years. These incumbents, which initially installed the infrastructure when they were monopoly service providers, have until recently been reluctant to replace the old copper wires and coaxial cables with Fibre to the Home (FTTH), claiming there is no money in it.
More recently, facing new demand from customers who are watching video Over-The-Top (OTT)2 on the Internet, cablecos in a number of major markets have deployed upgraded high-speed cable technology without replacing the last mile coaxial cable. The telcos responded by upgrading their Digital Subscriber Loop (DSL) technology and then installing FTTH to create more capacity than cable can offer.
This recent incumbent activity is welcome progress—but there is room in the market for more players to bring the benefits of competition to this telecom sector. Canada needs to encourage a competitive landscape for the development of this last mile in rural and remote districts as well as in high-density urban neighbourhoods and single-family residential suburbs. The incumbents should lose their sense of entitlement and be prepared to compete with the best to provide the best.
This paper explores the role the Canadian policy and regulatory environment can play in encouraging this kind of competitive environment as well as third-party competitors, the option of customer-owned fibre, co-op ventures and the need for spectrum to support service to Canadians in rural and remote regions.
To further assess the appropriate model for Canada in its quest to rebuild the last mile, this paper will review a number of telecom environments around the world including the United States, the Nordic countries, Asia, Australia, New Zealand, Lithuania and Russia. These countries were selected to explore four key themes.
1. Nordic Countries, United States— Municipal and Local Electrical Utility Networks
- Municipal and electrical utility networks led the way and were followed by competitive private sector suppliers and then the incumbents.
- In many cases, these networks provided FTTH in the rural areas and small towns that the incumbents usually upgraded last, if at all.
2. South Korea, Japan, Taiwan—FTTH Leaders
- They combined competitive markets, government co-ordination and early incumbent commitment to install fibre.
3. Australia, New Zealand— Nationalized Last Mile and Structural Separation
- They opted for more radical solutions, with Australia nationalizing the last mile, and New Zealand ordering the divestment of the last mile.
4. Russia and Lithuania— Emerging Telecom Leaders
- Private sector competitors are making strong headway in Russia and a strongly committed incumbent is installing FTTH in Lithuania.
By examining the various models in existence, we should be able to develop a hybrid model that will work in our unique Canadian environment. We live in a global, fast paced, accessible world, and if we wish to be regarded as serious contenders, we need to upgrade that last mile now.
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