Why Is Broadband Internet So Expensive in Canada?

Why Is Broadband Internet So Expensive in Canada?

Why Is Broadband Internet So Expensive in Canada?
Reading Time: 5 minutes

There can be no doubt that Canada has excellent internet service, with some of the fastest speeds available anywhere. However, internet service comes at a high cost. Canada currently ranks second on the list of most expensive countries for internet among the G7 nations, and prices are continuing to climb at an unprecedented rate. But why?

Are Broadband Internet Plans Actually More Expensive in Canada?

The short answer is yes, broadband internet is considerably more expensive in Canada than in most other countries around the world. Canada has the second most expensive internet service among developed nations and has ranked either 2nd or 3rd for the past five years in a row. Canadian mobile internet and data rates are also among the most expensive in the world. So, what’s going on here?

Canada among top five highest costs for 100Mbps internet speed

Not only does Canada have the second most expensive broadband internet among the G7 nations (behind only the United States) but Canada is actually among the top five most expensive countries in the world for internet service with speeds over 100Mbps. In other words, high-speed internet in Canada is prohibitively expensive.  

But Canada is known to be a great place to live, and the internet is a major part of our lives these days. So you would expect a wealthy, developed country like Canada to have affordable, reliable, high-speed internet, right? So, why is this not the case?

Why Is Internet Service So Expensive in Canada?

Well, as mentioned, there are several  reasons for why broadband internet is so expensive in Canada compared with other countries in the world. Let’s take a closer look and see why internet is so expensive in Canada. 

1. Low Population Density

The first issue affecting the cost of internet service in Canada has to do with the sheer size of the country. Canada is the second-largest country on Earth but only has a population of around 36 million people. To put that in perspective, there are cities in Asia, such as Tokyo, that have more people than all of Canada. 

So, the low population density means that people are spread out far and wide; therefore, it costs a ton of money to install the infrastructure required to reach between communities and  urban centers. Also, the cost of transporting the equipment necessary to provide high-speed internet over long distances is equally high, and this is certainly one of the reasons why internet is so expensive in Canada, but it’s not the only one. 

2. Large Investments

Independent internet service providers (ISPs) are very slowly gaining a little bit of ground in the Canadian marketplace. But, by and large, the industry is dominated by a couple of major players who have made huge investments in network infrastructure over the past two decades. Because those corporations want to recuperate their investments, they charge exorbitantly high prices for internet, and that’s another reason that contributes  to the soaring costs. 

3. Limited Competition

Presently, there are over 250 different internet providers in Canada, but the top five (Bell, Rogers, Telus, Shaw, and Videotron) are taking a massive 73.3% of national internet revenue and 87.3% of the total revenue from telecommunications, including home phone and television service. 

Because consumers are not shopping around, these companies pretty much have free reign and can price fix the cost of internet service in Canada; this is, without any doubt, one of the top  reasons why internet service remains so expensive in Canada.  

4. High Barrier To Entry

The big five ISPs in Canada are all facility-based service providers, meaning that they own and operate the infrastructure that powers Canada’s internet. On the other hand, most of the smaller ISPs in Canada are wholesale-based service providers who have to rent the networks and equipment from the big ISPs. 

But if  that’s the case, you would think that internet service would be cheaper than  the big ISPs who own all the gear, since  they aren’t paying any rental fees for using the network and equipment. However, those big ISPs also have to install, repair, and maintain this massive network sprawling across Canada, and so to recuperate their costs, they charge higher fees. 

Why Do Big Telecom Companies Dominate Internet Services Amid Cheaper Options?

This is the golden question that’s at the heart of the issue. With so many much cheaper options available, why do Canadians continue to pay these outlandish prices to the biggest, most expensive telecom companies? It turns out that there are four reasons for this , and it all has to do with psychology. Let’s unpack  this. 

1. Fear of Change

People are afraid of change. It’s human nature. Even if people know that making a change will benefit them, they are still skeptical about altering their lives and daily routines. Mostly because people intuitively understand that making a wrong choice can have dire consequences. The fear of change is hardwired into our brains, and so people seek social proof, and other means of justifying their irrational behaviors, because keeping the status quo is much less risky. 

2. Trust in Big Establishments

For whatever reason, people seem to trust the biggest establishments and richest corporations. It could be that people assume if a company is big and successful, then it must be good; after all, if a ton of other people like them, then they can’t be that bad, right? That may or may not be the case. Certainly, not every big company is good and well-intentioned. In fact, the largest corporations are often the greediest and most profit-driven, which is why they’ve become the richest. Nevertheless, the fact remains that people trust familiar names and faces.  

3. Fear of Lower Quality

Just as people are afraid of change, so too are they afraid of losing out. People know that the big ISPs have fast, reliable internet, and so if they have to pay a ton of money for it, that’s still better than saving a bit of money but having terrible internet service. 

In truth, many of the smaller ISPs in Canada are literally using the exact same networks as the big ISPs, the small ISPs are renting those same networks, and so the quality of service with a smaller ISP is just as good and, in some cases, even better than the speeds offered by the large players in the industry. 

But people are afraid of making a bad decision. The large telecommunications companies like Bell, Rogers, and so on, know this, so prices continue to rise, and consumers continue to pay their bills, even though they know that there are other, lower-cost alternatives available for high-speed broadband internet in Canada. 

4. Force of Habit

Finally, humans are creatures of habit. People are comfortable in their routines, and anything that disrupts their normal day-to-day is subconsciously viewed as a threat to be avoided at all costs. Bell actually invented the telephone, and so for as long as telephones have existed, people have been paying Bell Canada for home phone service. 

For almost 80 years, Rogers had a monopoly on cable television service in Canada. So, people are simply accustomed to paying these big corporate behemoths because they always have, and their parents did, and their grandparents, too. For some people, leaving one of these big ISPs would feel like a break from tradition, and Canadian’s love traditions, so the big companies continue to reign supreme.

What is the wholesale services framework?

The wholesale services framework is a federal mandate from the Canadian Radio Television Telecommunications Commission (or CRTC) that states that the bigger facility-based service providers need to allow the small ISPs access to their networks. The goal behind this is to prevent any single  company from having a monopoly. Although the wholesale services framework has been around since the 90’s very little has changed. Sure, Bell and Rogers might not be the only companies offering broadband internet service, but as far as Canadians are concerned, they might as well be. 

Conclusion

The cost of high-speed broadband internet service in Canada is among the most expensive in the world. As is the cost of mobile data and telecommunications services in Canada. The low population density, high barrier to entry, lack of real competition, and a whole host of psychological reasons contribute to Canada’s soaring internet costs. But, despite plenty of smaller, less expensive ISPs, Canadians don’t seem to want to change service providers. So for the time being, it looks as though they’ll continue to pay a premium for internet service.

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