Why do Canadian broadband rates vary so much?

When comparing the price of internet services with those in other countries, Canadians think they're paying too much for too little — but in some ways, it's the variance in rates across the country that really stands out.

Compared with similar telecom services like wireless and television, the cost of broadband internet across Canada varies greatly between provinces. Western Canadians tend to pay the least, while prices in Nova Scotia and Prince Edward Island are the highest.

But those same Atlantic customers have more unlimited plans available, while customers in Ontario and Quebec are likely to pay the most per gigabyte of data.

Because of the cost of establishing a broadband network, each region is typically served by just two major service providers. As a result, prices vary depending how much providers are willing to eat into their profit margins to attract new customers.

"These disparities are influenced by the competition," says Catherine Middleton, a professor at Ryerson University’s Ted Rogers School of Management. "For example, Bell competes against Rogers in Ontario, but against Videotron in Quebec, with different plans for different markets."

Competitiveness between Shaw and Telus has helped to drive down prices in the west, says Michael Geist, a law professor at the University of Ottawa and Canada Research Chair in Internet and e-commerce law.

"Ontario gets the worst when it comes to competitiveness," Geist told CBC News, "It tends to be the least competitive when it comes to getting bang for your buck."

As well, that kind of competition not only drives down price, it drives up speed and network caps.

Need for speed

According to the Ookla Net Index, which is based on speed test data from around the world, Nova Scotia and New Brunswick are the most expensive places for internet in Canada, both costing an average of over $60 a month.

In terms of cost relative to per capita GDP, Canada ranks 22nd among 64 countries measured, with the average internet plan costing $54.

But for speed, Canadians aren’t getting the same value others are — average Canadian internet speeds are only good enough to rank 33rd in the world.

Ookla data also doesn’t include the pervasive use of bandwidth caps, with most Canadians paying an average of 50 cents per gigabyte of data.

Plans in Western Canada are among the cheapest, with the most expensive plans often cheaper than the cheapest plans available in Nova Scotia.

Capping bandwidth

Unlimited plans are becoming increasingly rare among the country’s major internet service providers, especially cable providers.

Eastlink and Rogers are the only major cable internet providers that offer unlimited usage for mid-tier plans. Eastlink’s plan costs $64 per month and is at a slow speed relative to the provider’s other plans. The company recently phased out unlimited bandwidth on the faster plans.

In Ontario and Quebec, Bell offers unlimited plans at an extra cost — $10 for those with bundled service — but that puts the price higher than plans with the same download speeds elsewhere in the country. For those without bundled service, the cost for unlimited is $30, which increases the cost of some of the lower monthly plans as much as 50 per cent higher.

In order to compete with Bell, Rogers recently unveiled unlimited internet for a limited time in Ontario. Similar to Bell's offer, there is an additional cost of $10 for those with bundled service or $30 without bundled service. The bundled pricing puts Rogers' Express package roughly on par with Eastlink's unlimited plan.

In Western Canada, Shaw does offer unlimited usage on its more expensive 100 and 250 mbps plans, but they cost $195 per month, more than any other unlimited plan.

Last year, Telus reduced its bandwidth caps on all of its plans, but it still remains one of the best deals in the country based on price per gigabyte of data.

The problem with limits

A survey by the Public Interest Advocacy Centre showed that 74 per cent of Canadians say bandwidth caps are important when choosing an ISP, and 78 per cent say they’re satisfied with their current monthly data caps.

'What you’re forced to do is watch the meter.' —Law professor Michael Geist

However, 42 per cent weren’t very familiar with the concept of data caps and how it affects their monthly bill.

As more content moves online through streaming, digital delivery and cloud computing, bandwidth caps will become increasingly under pressure. Online backups can take up a majority of space as users hope to keep data safe in the cloud.

But as more services use the internet, more and more bandwidth is necessary, making  it riskier for companies to bring bandwidth-heavy services to Canada, especially those "over the top" services that offer content usually offered by cable providers.

Last year, Netflix’s chief content officer famously referred to the Canadian internet situation this way: "[It's] almost a human rights violation, what they’re charging for internet in Canada."

Not long after its Canadian launch, the online video service created an option to stream in lower quality, so users would be able to use less bandwidth to watch TV shows and movies.

In essence, lower bandwidth caps limit the number of content services a user would subscribe to.

And while there are other rights issues that may make it difficult for some companies to offer content streaming in Canada, bandwidth caps shrink the possible consumer base.

"What you’re forced to do is watch the meter," says Geist, "It creates real disincentives."