Industry Canada’s decision to make more wireless broadband spectrum available to Canadian telecoms will buy them some much-needed breathing room.
But an explosion in smartphones, tablets and video streaming is straining the ability of telecoms everywhere to keep pace with the insatiable demand for more data at faster speeds.
By the end of this year, the number of mobile-connected devices will exceed the Earth’s population, according to a February 14 Cisco Visual Networking Index mobile data forecast.
That might be good for Apple (NGS:AAPL), but for telecoms like Telus (TSX:T) that provide the transmission infrastructure needed for those devices to make phone calls or play movies or games, it’s a problem.
“The appetite that consumers have for data seems to be almost insatiable,” said Telus CEO Darren Entwistle.
The demand for more data at faster speeds is outstripping the ability of telecoms and Internet Service Providers (ISPs) to install the basic infrastructure that moves that data – something that has fuelled a fight for broadband spectrum in Canada and which is resulting in metering and data caps for both wireless and broadband Internet service.
Although the biggest stress is on Canada’s wireless networks, even ISPs are struggling to keep up with the demand for more bandwidth on the Internet.
“I think every ISP is in the same boat, where the consumer wants more and more data for the same prices they’ve historically been paying, and we have to just keep investing to try to deliver that data,” said Chris Allen, president of the ISP ABC Communications and a director for the BC Broadband Association.
The problem is two-fold. On the wireless side, the boom in smartphones and tablets is stressing cellular networks, which were designed to transmit voice data, not high-definition video and games.
On the landline side, the move from DVDs to streaming high-definition video is increasing the amount of data moving across the Internet.
The problem is not so much the backbone – Canada has an ample supply of fibre optic cable in the ground – it’s the choke points, especially in the wireless infrastructure, and widening those choke points is expensive.
Telus is spending roughly $1.6 billion over the next three years in B.C. alone on broadband wireline and wireless infrastructure, including $90 million to extend LTE service to another 20 B.C. communities.
ABC Communications and other smaller ISPs are having a harder time upgrading the infrastructure needed to keep pace with the data demand. In remote areas of B.C., ABC uses WiMax – a kind of Wi-Fi on steroids – to beam broadband Internet from towers on mountaintops straight to customers’ homes, each of which needs a small receiver, like a satellite dish.
Netflix and other video- streaming services are straining the network. At peak times, customers in small communities like Clinton experience freezes while watching movies on their computers or TVs.
“We’re several years behind where the urban markets are,” Allen said.
If telecoms and ISPs think the bandwidth consumption is a problem now, 4K TV promises to make it worse. The new super-high-definition TVs have four times the data requirements of regular HD TV.
Canadians have had to get used to data caps for wireless service, which has resulted in some users shifting smartphone and tablet surfing from their cell service to the Internet (via Wi-Fi) whenever they can.
“This has helped ease cellular wireless congestion, but at the cost of the wireline congestion,” Deloitte’s 2012 TMT [technology, media and telecommunications] report states. “According to one study, the demand for data per subscriber is growing at over 30% year-on-year to almost 15GB [gigabytes] per month.”
ISPs already have data caps, although they’re so high that most users never exceed them and, therefore, don’t feel the pinch when they get their cable and Internet bills.
But that could change, Deloitte warns, when data demands begin to exceed capacity. ISPs may also resort to “speed enforcement” – one version of which is throttling, in which ISPs can limit bandwidth for specific sectors, like gaming or bit-torrent file sharing, both of which eat up a lot of bandwidth.
Rogers has used throttling on file sharing, but was recently ordered by Canadian Radio-television and Telecommunications Commission [CRTC] to stop the practice, which is considered a violation of net-neutrality principles.
One way to address the data crunch is to simply move more data across existing networks with additional spectrum, and there just happens to be some available. When television in Canada moved off the airwaves, it freed up the 700MHz spectrum.
A billion-dollar battle between the big three telecoms and small mobile phone companies has been brewing over the 700MHz spectrum, and just last week, Industry Canada revealed how it plans to sell it off.
There will be no special set-aside of the 700MHz spectrum for small independent carriers. It will be auctioned off; however, it will be capped and telecoms will lose it if they don’t use it. The capped auction approach was the one recommended by Telus. •
