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Canada Broadband Overview

Since the early 1990s the Canadian telecommunications market has been undergoing a process of progressive liberalisation. Competition was introduced firstly in the long-distance market, then the cellular market followed by the local fixed-line market. Canada made an early start with broadband and its initial development was managed relatively well, attaining the second highest broadband population penetration in the world by the end of 2001, at 6.4 per cent. However, over the last 7 years Canada has lost its position as an early world broadband leader.

This trend led to calls for a lighter-handed regulatory framework, and as a result several reforms were legislated in 2007 which resulted in the Canadian regulator issuing decisions in relation to numerous local residential fixed-line markets across Canada. Broadband deployment continues to progress under active government encouragement, with over 95 per cent of Canadians living in communities served by high-speed Internet access in 2008. High penetration rates of PCs and cable TV networks have been major contributing factors to broadband growth, and the rapidly increasing demand for cable VoIP is in turn fuelling the demand for cable broadband. The growing demand for converged voice, data and TV services is driving the deployment of Next Generation Networks, in particular IP-based networks. Although many of these developments have been led by the cable companies, the ongoing decline in traditional fixed line revenues is compelling the incumbent telcos to modernise their network infrastructure.

The Canadian broadband market is remarkable because the ratio of DSL to Cable modem subscribers nationally is close to 50:50. Over the last 5 years, Cable modem subscribers have had the overall majority, but DSL operators such as Bell Canada and SaskTel have invested large sums of money in FTTN+VDSL services that allow them to offer the same services as their cable counterparts. Hence the current broadband service market in Canada is seeing a gradual convergence of services and broadband speeds between the two technologies.

The Canadian telecom industry is highly consolidated despite its size and division into 13 provinces and territories. The holding company BCE (Bell Canada Enterprises) owns and largely controls the incumbent telcos serving the majority of Canada’s population. BCE Bell Canada is the main remaining asset of BCE, a former conglomerate operating in a variety of businesses. In 2007, BCE accepted a purchase offer from a group led by the Ontario Teachers' Pension Plan, but in the wake of the 2008 economic crisis, the resulting corporate structure (including the debt load that would have been assumed) was deemed to not meet necessary solvency criteria, and the takeover was cancelled.

Bell Canada is the largest Canadian telecommunications company operating an extensive local access network that provides local telephone services to business and residential customers over 13 million local telephone lines. Including Bell’s subsidiaries such as Bell Aliant, Northwestel, Télébec, and NorthernTel it is the incumbent local exchange carrier for telephone services in most of Canada east of Manitoba and in the northern territories, and a leading competitive local exchange carrier (CLEC) in the western provinces. Aliant Telecom is a holding company comprising the incumbent telecoms operators in Canada's Maritime Provinces. They include NBTel, MTT, NewTel and Island Tel serving New Brunswick, Nova Scotia, Newfoundland and Prince Edward Island regions respectively. Bell Canada launched ADSL services in 2005 under the brand ‘Sympatico’. In August 2008, Bell Sympatico changed its name to Bell Internet. Bell Canada also has a share in the mobile market through its wireless subsidiary, Bell Mobility.

The second largest holding company is the Telus Corporation, which owns the incumbents in British Columbia and Alberta. Telus Communications (Alberta) was created in 1990 by the government of Alberta as a holding company in order to facilitate the privatization of a crown corporation, the Alberta Government Telephones Commission (AGT). In 1995, it acquired Edmonton Telephones (Ed Tel) from the City of Edmonton, making Telus the owner of all telephone services in the province. In 1996, both AGT and EdTel were rebranded under the new Telus consumer brand.

In 1999, Telus Corporation was created by the merger of Telus (Alberta) and BCTel with the new entity retaining the Telus name. As a result of the merger Telus became Canada's second largest teleco with a 22 per cent of market share compared to Bell Canada's 42 per cent. In 2000 Telus merged with the the high performing Clearnet Communications, a cellular company based in Toronto, Ontario, giving Telus a foothold in the highly competitive central Canadian market (Ontario, Quebec). Telus provides a wide range of communication products and services including data, Internet protocol (IP), voice, entertainment and video. Telus utilizes a CDMA 2000-based mobile phone network.

Canadians have a long list of mobile service providers to choose from - almost all of which are subsidiaries of the major holding companies or large cable companies. In most regions the market is dominated by three operators: Bell Mobility, Rogers Wireless and Telus Mobility. Indeed, in most provincial markets the incumbent wireline provider dominates the wireless market.

However, following the much anticipated Advanced Wireless Services auction in mid-2008 in which 40 per cent of available spectrum licences were reserved for new entrants, 2009 should see increased wireless competition in each province and territory. The Canadian mobile market is one of the least developed in the Western world, with a penetration rate of just 63.9 per cent at the end of 2008. Despite this high potential for growth, performance in Q4 2008 was poor with the smallest fourth quarter gain since 1997. However, the declining cost of smartphones has brought market penetration of such devices to 21 per cent up from 12 per cent last year. This is good for mobile Internet, email and software providers, as Canadians increasingly use features other than voice on their mobile phones.

Canada’s mobile market stood at 21.63 million customers at 31 December 2008. Rogers Wireless led the way with 7.94 million subscribers ahead of Bell with 6.5 million and Telus with 6.13 million subscribers. The other high profile operators, MTS and SaskTel are both regional (operating in Manitoba and Saskatchewan provinces) and with 0.4 million and 0.5 million connections respectively they have little national market presence.

Rogers Wireless, formerly known as Rogers AT&T Wireless, is a wholly owned subsidiary of Rogers Communications. Rogers purchased Fido in November 2004, creating Canada's largest wireless carrier, surpassing Bell Mobility in subscriber volume. Rogers also owns Canada's only GSM network as well as operating a GSM/GPRS network with Enhanced Data for EDGE technology. Rogers uses its GSM/GPRS/EDGE network with a large proportion of its subscriber base, but the primary focus for development and new customers has been on its UMTS/HSDPA/EUL network. Rogers Wireless claims to be the only Canadian Wireless Provider to offer a complete, independent coast-to-coast network spanning all Canadian regions excluding the Territories. Its subscribers also have UMTS/HSPA roaming capability in 50 countries as well as access to services in the US through roaming agreements with various US-based wireless operators.

In December 2008 Rogers Wireless announced that it had upgraded its network to 3G and activated 130,000 iPhones in Q4 2008. It has doubled the speed of its HSPA network, offering subscribers up to 7.2 Mbps downlink speed. Rogers Wireless has said that the network can be considered 3.5G and it ranks among the fastest mobile broadband services worldwide. It is by far the fastest mobile network in Canada.

Bell Canada’s wireless subsidiary, Bell Mobility, provides mobile communications services nationwide under the Bell Mobility, Solo Mobile and Aliant Mobility brands. The company also has a joint venture with The Virgin Group to offer mobile services under the Virgin brand across Canada. Bells network covers approximately 95 per cent of the population of Ontario and Quebec, approximately 90 per cent of the population of Atlantic Canada and the major cities in the provinces of Alberta and British Columbia. In 2005, Bell Mobility launched 3G services with the completion of its new leading-edge mobile data network, EV-DO. In late 2008, Bell announced that it is planning to invest in nationwide HSPA coverage. Bell plans to continue to expand and enhance the national 3G CDMA EVDO service, and will also overlay this network with HSPA technology. Customers can select between EVDO and HSPA. HSPA will offer Bell an efficient upgrade path to 4G LTE in coming years.

Telus operates Canada’s only iDEN network, and a nationwide digital PCS (CDMA) network, including 1X and high-speed (EVDO) data capabilities. The network is available to 66 per cent of Canadians and enables roaming in 230 US cities. In November 2007, Telus acquired a 22 per cent stake in Emergis for CAD 763 million. In late 2008, Telus signed an agreement to create an overlay HSPA network that will run alongside their existing CDMA network. The new network should be complete by the beginning of 2010.

In October 2008, Quebecor announced that it will spend as much as CAD 1 billion over four years to launch a wireless network and to compete with the country’s three big mobile phone companies. Its HSPA network should also be running by early 2010.

Aspiring cell phone carrier Globalive Wireless announced in March 2009 that is planning to make use of the spectrum licenses it acquired in early 2009 by launching networks in Toronto and Vancouver by the end of 2009. In 2010 the company will extend its network to other cities and provinces, with the goal of establishing a nationwide presence. Globalive wireless is a joint venture in which Arab mobile service provider Orascom Telecom has a 65 per cent indirect equity ownership.