Netflix redux: it’s not the content, stupid, it’s the connectivity (1)



“We are now ready to take our place as the most technologically advanced nation on the planet.” – Stephen Harper, Digital Canada 150, April 2014, p.4

In my previous post I argued that the showdown last month between Netflix and the CRTC has a silver lining: it has pointed the way to a new role for the Commission. That role would acknowledge that the job of trying to regulate “broadcasting” content in the Internet age has become a mug’s game. On the other hand, Canadians have never had world-class broadband connectivity, no matter how much the Harper gang try to spin the story. Speeds here are too slow, service is lousy and prices are way too high. Hence the new role: make connectivity – not content – the Commission’s top priority.

Ottawa has given us low expectations to go with our low bandwidth

What should Canada be aiming for in the broadband future?

We’ll start with Canada’s official expectations. The federal government announced last April in its Digital Canada 150 document what it thought was a reasonable goal for residential broadband speeds. The 26-page brochure said that by 2017, “[o]ver 98% of all Canadians will have access to high-speed Internet at 5 megabits per second …” (p.7). In my post at the time (Digital Canada 150: why the Tory plan is risky not just foolish), I pointed out that this target wasn’t even in line with the benchmark set by the government’s own regulator, the CRTC – 5 Mbps by 2015, two years earlier – let alone in line with the approaches being mooted in the US and  the UK.

I want to highlight one other important feature of the April policy document: the determination to lower expectations instead of raising them. The passage I just cited goes on to claim that 5 Mbps is

“a rate that enables e-commerce, high-resolution video, employment opportunities and distance education— providing rural and remote communities with faster, more reliable online services.”

Notice first of all the inevitable allusion to rural communities without any mention of the rest of the population. The Harper gang have been playing the media consumer welfare card over the last year, in connection with pick and pay TV, roaming fees and the “Netflix tax” in particular (it all started with UBB in 2011). But their opportunism will never extend to urban Canadians who fall on the wrong side of the digital divide thanks to low income, low awareness or some combination. That would require a commitment to policy reform that just isn’t part of the Tory DNA.

But the real problem here is that while the 5-meg target might be designed to give comfort to our incumbents, it certainly won’t do so for their customers. Consider these three trends. One, more and more households are connecting multiple devices to their access line. You can just barely watch real hi-def on a nominal 5-meg connection; once you add another Web-enabled TV in the family room, fuggedaboudit. More bandwidth please.

Two, video is accounting for an increasingly large chunk of Internet traffic. Cisco’s last VNI update (June 2014) reports that, on a global basis, “Internet video streaming and downloads … will grow to more than 76 percent of all consumer Internet traffic in 2018” (pdf uploaded here, p.10). And we already know that in Canada, Netflix alone is occupying over 30% of all downstream bandwidth in the peak evening period. Result: we need more bandwidth.


Three, the efforts by TV makers to get us buying ultra hi-definition (UHD) sets, in the 4K flavor, may start to pay off in 2015. As Molly Wood explains in her recent NY Times piece (Sharper Image From 4K TVs Is a Gimmick Worth Having), 3D TVs and other gimmicks may not have sold, but a much sharper picture at an affordable price offers a good value proposition for mainstream consumers. Result: more TV online, so we’ll need more bandwidth.

(Meanwhile, here’s some recommended reading for Ottawa’s low-bandwidth policy pew-cloudwonks: the Pew/Elon report released last week on Killer Apps in the Gigabit Age. The HTML summary starts off by saying that the “age of gigabit connectivity is dawning and will advance in coming years. The only question is how quickly it might become widespread.” I was a participant in this edition of the Pew/Elon survey and posted my preliminary remarks on the subject back in February.)

tom-wheelerTom Wheeler for prime minister

Now let’s see what a motivational pitch sounds like when the pitch is being made by the chairman of the FCC and he’s setting his broadband goals up high instead of down low where the incumbents like them.

On October 1, FCC Chairman Wheeler took up the question of realistic broadband targets for US policymakers at the annual conference of the National Association of Telecommunications Officers and Advisors. Notice several nuances that distinguish Wheeler’s attitude from what we have to tolerate in Canada. These include an emphasis on future-proofing; a departure from the currently received official target; and, most refreshingly, a willingness to admit all is not rosy in American broadband:

“You, in your positions in your communities, and my colleagues and I, in our positions at the FCC, have responsibilities, not just to the consumers and networks of today, but also to the consumers and networks of tomorrow. Here is the reality confronting us:

“We need faster networks in more places. I don’t know about you, but I’m tired of seeing the charts of where the U.S. ranks in comparison to the broadband speeds of other nations. Table stakes for the 21st century is 25 Mbps, and winning the game means that all consumers can get at least 100 Mbps – and more.”

This is a particularly bold statement coming from Wheeler given the self-serving contributions of the telco and cable incumbents to this debate a month earlier. As the headline put it in Ars technica

AT&T and Verizon say 10Mbps is too fast for “broadband,” 4Mbps is enough. Cable lobby also implores FCC not to change definition of broadband

AT&T wrote in an FCC filing that ”Consumer behavior strongly reinforces the conclusion that a 10Mbps service exceeds what many Americans need today to enable basic, high-quality transmissions.” Our very own incumbents would be right at home here. We’re just giving people what they want: lousy network access at high prices in a near-monopoly market, then telling the world our customers are delighted.

Taking bull by horns, Wheeler pointed out just how bad the Americans have it:

“Three-quarters of American homes have no competitive choice at 25 Mbps. That includes almost 20 percent who have no option at all at those speeds!”

Unlike our leaders, Wheeler does not waste time bragging about what a great job he’s doing. To my mind, this self-congratulatory attitude qualifies as the biggest single obstacle we have to communications policy reform in Canada.

Part 2: the latest evidence on how poorly we’re doing…