Mathew Ingram: Canada shows the way to boosting high-speed internet

There are plenty of areas where Canada falls short of other nations - in the size of its armed forces, for example, or its per capita income. But when it comes to high-speed internet access, the Great White North is right up there with the best. In fact, Canada is number six when it comes to broadband penetration, according to Organisation for Economic Co-operation and Development statistics.

New Zealand, however, is down near the bottom of the rankings - 22nd out of 30, to be exact. And that's despite almost doubling the proportion of the population with high-speed access over the past year or so. The nation still comes in behind Australia (at 17), France (14) and Italy ( 19), and is well behind the United States, which is in 12th place.

For the past several years, in fact, New Zealand has been pulling up the rear. Colin Jackson, president of Internet NZ, has been quoted as saying that this "is a great shame for all of New Zealand. It's sad to see us so far down in the rankings."

Some industry watchers say the low levels of penetration are disturbing because Kiwis are traditionally early adopters of technology, and the country has had high-speed access longer than several other countries on the list.

Why the dramatic difference between Canada and New Zealand? There are a number of theories. If you look at the OECD rankings, you might be tempted to conclude that cold, northern countries do better; in the top 10 are Sweden, Norway, Finland, Denmark and Iceland, plus Canada.

Of course, these countries are also fairly small (apart from Canada), which probably made it easier to string the fibre-optic cable required for high speed. That doesn't really explain why New Zealand is so low, however.

One possible reason is the level of competition between providers of high-speed access. Something that stands out from the OECD ranking, which breaks broadband down into cable and DSL, is that many of the countries in the top 15 are split between the two forms of access.

Although DSL has a greater share in most cases, it doesn't completely dominate in most countries. In Canada, the two are almost even. In New Zealand, however, broadband access is virtually all provided by DSL.

Although TelstraClear provides cable access in Wellington and Christchurch, the distances between major centres, a sparse population and the difficult terrain has led to low levels of cable penetration. The result is that Telecom has had a virtual monopoly on high-speed internet.

Although the company is regulated and allows other internet service providers to use its network, it has limited the speeds available, and prices have remained relatively high.

In Canada, by contrast, most provinces and regions have a strong telecom company and a strong cable company that have competed for the growing high-speed internet market. While Canada has not had the cheapest broadband access, adoption and penetration rates have been faster than in many other countries.

In several cases, when cable or telecom players introduced usage caps or other restrictions, which are common in New Zealand, they quickly removed them for competitive reasons, and have continued to boost speeds as well.

The average high-speed account in Canada offers 3 megabits per second down and 800 kilobits up, while New Zealand's average is 1.5 megabits down and 128 kilobits up. Even those speeds are relatively new - as of 2004, 256-kilobit service was still the most common. It's a speed that most other countries wouldn't consider broadband.

Some telecoms experts say Canada wound up, whether by policy or by accident, with the right mix of regulation and competition. Telecoms companies - which are federally regulated - were not overly hamstrung in their efforts to compete with cable, which made for a relatively healthy market. In the United States, however, high-speed proponents complain that regulations have prevented phone companies from competing aggressively, and that has held back broadband penetration.

The key, many market watchers say, is the unbundling of the "local loop", which gives competitors access to the line from the phone company's central switch to a customer's home.

In the United States, telecom players have resisted this move, while in New Zealand the Government looked at local-loop unbundling and rejected it in 2003. In Canada, regulators unbundled the local loop, in part to try to foster local telephone competition, but the move also helped spur DSL competition.

Is faster and cheaper high-speed internet reason enough to pack up your family and move to Canada? Probably not. But many New Zealanders are concerned that their country's lack of broadband penetration could hold the nation back at a time when the "knowledge economy" and internet-based businesses are growing quickly.

And growth rates will have to pick up substantially if New Zealand wants to get into the top 10; even though broadband usage has doubled, the country is still stuck in 22nd place, right where it was a year earlier.