Benchmarking Connectivity in British Columbia by Northern Development Initiative Trust

Benchmarking connectivity in British Columbia Why access to broadband matters Prepared for Northern Development Initiative Trust

September 2017

kpmg.ca

© 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Table of contents 03 Executive summary 08 Understanding this document 10 Canada relative to the rest of the world 13 Broadband in BC 16 Critical roles of broadband in British Columbia 17 Broadband in the economy 20 Broadband in healthcare 23 Broadband in public safety 25 Broadband in education 27 Broadband in culture

28 How BC compares with similar Canadian and US jurisdictions 29 Access 40 Affordability 48 Speed

51 Broadband, internationally

Benchmarking connectivity in British Columbia

Disclaimer This document has been prepared by KPMG LLP (“KPMG”) for Northern Development Initiative Trust (“the Client”) pursuant to the terms of our engagement agreement with the Client dated July 11, 2017 (the “Engagement Agreement”). KPMG neither warrants nor represents that the information contained in this document is accurate, complete, sufficient or appropriate for use by any person or entity other than the Client or for any purpose other than that set out in the Engagement Agreement. This document may not be relied upon by any person or entity other than the Client, and KPMG hereby expressly disclaims any and all responsibility or liability to any person or entity other than the Client in connection with their use of this document.

Benchmarking connectivity in British Columbia

Executive summary The internet is a social and economic enabler that has been declared a basic human right by the United Nations.1 Despite Canada’s huge landmass and relatively low population density, Canada has made good progress towards providing broadband to its population. In fact, The Economist ranks Canada eighth out of 75 countries worldwide in terms of the availability, affordability, relevance and readiness of its broadband platform.2 The Canadian Radio-television and Telecommunications Commission (CRTC) has set an ambitious target of providing 50 Mbps download speeds to 90% of the population by 2021. In 2008, the BC government recognized the demand and need for improved broadband and had set its own mandate of achieving 1.5 Mbps download speeds for all of BC by the end of 2021.3 As technology continues to improve and become more affordable and accessible, the number of social and economic services enabled by broadband are likely to continue to proliferate. Many residents depend on a reliable broadband connection to conduct business, and access healthcare, education, and public services. In turn, government mandates continue to evolve in order to keep pace with the growing consumer demand curve for fast, accessible or affordable internet. In 2017, Northern Development Initiative Trust engaged KPMG LLP (“KPMG”) to bring BC’s connectivity performance into focus by comparing BC’s performance to other jurisdictions with similar challenges. This document presents these comparisons as well as exploring some of the benefits achieved by broadband connectivity, particularly when brought to rural areas that are generally less connected. Increased broadband connectivity improves access to core healthcare, social and economic services found in more urban centres. Note that the primary source of data used in this document is based on the CRTC’s Communications Monitoring Report, published in December 2016, which reported on 2015 figures in Canada. This was the most current and credible data source available to KPMG at the time of writing this document. We expect the CRTC to publish new data around the end of 2017, which may materially change some the observations in this document.

1. Brookings Institute, The internet as a human right, November 2017 2. The Economist, The Inclusive Internet: Mapping Progress 2017 3. Network BC Connectivity Map, government of BC website as of September 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

BC’s broadband performance ranked relative to comparator jurisdictions KPMG’s analysis is structured across three key themes – access, affordability and speed. For the purposes of this document, access metrics focus on understanding the percentage of the population that has access to various advertised download and upload speed thresholds. Affordability metrics provide visibility into the cost of broadband plans from an end-consumer point of view, both in absolute terms and as a portion of income. Speed metrics measure the quality of internet access by measuring the download and upload speeds in a real-world setting received by end-consumers. It is the combination of these three metrics that drive the economic and social value that can be unlocked through connectivity. As BC works towards enabling a more diverse and tech-rich economy, broadband connectivity is a fundamental enabler of innovation and skills development. BC has an ambitious innovation agenda and frequently compares itself to leaders in this space. To that end, this document measures BC’s overall performance against leading comparable jurisdictions in Canada (Alberta, Ontario and Québec) and the US (Washington and Oregon). It should be noted that both the US and Canada are leaders in broadband connectivity globally, with the US and Canada ranked as second and eighth place, respectively.4

BC’s broadband performance Performance metrics

vs. Ontario, Alberta and Québec Urban

vs. Washington and Oregon

Rural

Access

Affordability

Speed

Better than most

Comparable

Worse than most

Highlights Significant progress in BC but gaps remain BC has made great strides towards connecting both rural and urban areas and bringing “last mile” connections to many communities, including First Nations communities, through public/private partnerships and initiatives. Even though BC underperforms the Canadian average at lower speeds (e.g., 1.5, 5 and 10 Mbps), more than 92% of BC’s population has access to 10 Mbps speeds, which enables a number of advanced internet services. –– BC leads all provinces in providing access to CRTC target download and upload speeds. According to the CRTC, as of 2015 data, BC leads all provinces for access to high speed internet, with 88% of the population having access to speeds of 50 Mbps. This is considered as the “minimum” download speed required to keep pace with the rise of internet intensive devices and services. This is a significant accomplishment since BC arguably faces a more challenging geographic landscape and population distribution when compared to other Canadian provinces and comparable US jurisdictions. However, as expected, there is room for improvement especially as most of the areas without access to these speeds are in rural and remote areas. Over the same time period, the US states in our study had provided 50 Mbps coverage to more than 90% of their respective populations. –– However, relative to comparator jurisdictions, gaps remain for access to broadband. 8% of BC’s population6 (more than 141,000 households)5 did not have access to internet speeds of 10 Mbps or more in 2015, which are the required speeds to access videoconferencing technology, a critical enabler of services like telehealth, online education as well as many business uses. 5% of BC’s population6 (over 87,000 households)5, did not have access to 5 Mbps or over in 2015 which is the minimum recommended for usage of advanced internet services (e.g. cloud technology) without facing major internet quality issues. 3% of BC’s population7 (more than 52,000 households)8 did not have access to “basic” broadband speeds of 1.5 Mbps in 2015 necessary to be part of the “digital economy”, enabling

4. The Economist Intelligence Unit (https://theinclusiveinternet.eiu.com/) 5. Statistics Canada, Household size, by province and territory (2011 Census) 6. 2015 figure, CRTC Communications Monitoring Document 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

services such as internet browsing, email access, and use of social platforms. With the introduction of new satellite technology, Network BC anticipates 100% of BC households will have access to 1.5 Mbps download speeds by the end of 2017. –– There is a high demand for broadband in BC. For basic broadband services (1.5 Mbps download speeds), BC sees the highest subscription rates (percentage of population that purchases broadband plans) when compared to any other Canadian or US jurisdiction.9 This signals BC residents’ appetite for internet access when it is made available to them.

Digital divide exists between urban and rural areas In order to fully participate in the digital economy, access to high speed internet is important, but affordability of this access is equally important. Providing the same level of access, quality and affordability in rural areas as seen in urban areas is a key challenge facing BC today. –– Affordability is an issue in rural BC. For the lowest-priced 5 Mbps broadband plans, BC’s rural areas paid $58 dollars per month in 2015, which was up 16% from 2014.10 In contrast, rural areas in Alberta and Ontario pay $30 per month.10 This signals that affordability issues are on the rise in BC considering these lowertiered plans are most often subscribed to by lower-income households. –– The “urban-rural” divide in price is the most dramatic in BC. BC’s rural areas pay an average of $33 more per month than their urban counterparts when looking at the lowest priced 5 Mbps broadband plans.10 This is the largest discrepancy when compared to Alberta, Ontario and Québec, which saw an average discrepancy of $10 per month.

” Meeting the nation’s broadband challenges will require billions of dollars over many years to come. Closing all of the gaps will require coordinated and collaborative action on the part of multiple stakeholders, including the private sector, community and non-profit organizations, the CRTC, and governments at all levels...” CRTC Submission to the Government of Canada’s Innovation Agenda, December 2016

–– Urban-rural divide exists in BC for “actual” download speeds received by end consumers but the size of the divide is not as dramatic as seen in other provinces. Overall, BC leads the selected Canadian provinces in terms of actual median download speed received by a household.11 Looking deeper, the difference between download speeds for urban and rural areas is not as significant as seen in Ontario and Alberta. BC’s strong performance demonstrates the quality of the current infrastructure.

7. 2015 figure, CRTC Communications Monitoring Document 2016 8. Statistics Canada, Household size, by province and territory (2011 Census) 9. CRTC, Communications Monitoring Document 2016 and FCC, Internet Access Services: Status Document (December 2015) 10. CRTC, Communications Monitoring Document 2015 and 2016 11. M-Lab, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Why broadband matters This document outlines the increasing social, health, and economic value enabled by broadband internet from connecting patients living in remote areas to doctors, improving search and rescue times in rural and remote areas of BC, enabling the development of digital skills so citizens can thrive in the digital economy and driving higher education for people who do not have the flexibility or means to access education institutions in person. In this, broadband connectivity is a question of quality of life and competitiveness for the province. In a recent decision, the CRTC proclaimed that “Modern telecommunications services are fundamental to Canada’s future economic prosperity, global competitiveness, social development and democratic discourse. In particular, fixed and mobile wireless broadband internet access services are catalysts for innovation, and underpin a vibrant, creative, interactive world that connects Canadians across vast distances and with the rest of the world.” The “digital divide” between urban and rural/remote centres across BC generally indicates that there are pockets of BC citizens that cannot effectively participate in the digital economy. The implications of this gap extend to quality and accessibility of healthcare and education, level of safety and security, access to government services and ability to participate fully in the economy. But there is a cost associated with moving from third/fourth place rankings to first place rankings (relative to comparator jurisdictions) across our three key metrics. As broadband continues to enable more and more economic and social benefits and services, it will be up to the people, the government and the private sector to determine what is the appropriate level of investment and set of technologies to deliver high speed, affordable internet to every household in BC.

Benchmarking connectivity in British Columbia

Understanding this document Purpose of this document The purpose of this document is to provide an objective analysis of BC’s residential broadband landscape relative to select comparable jurisdictions, and to provide information about the social and economic benefits of broadband connectivity. KPMG LLP (KPMG) was engaged by Northern Development Initiative Trust to collect quantitative data to perform an objective analysis of BC’s broadband connectivity against its peers, using a range of metrics to describe the availability, affordability and speed of broadband. KPMG was also asked to compile qualitative and quantitative information to describe the benefits of broadband connectivity across a range of impact areas including healthcare, public safety, the economy, education and culture. It should be noted this document focuses on wireline, fixed wireless and satellite broadband (i.e. DSL, cable, fibre, coaxial, and satellite) and does not include analysis on the mobile broadband landscape and infrastructure. KPMG performed field work, research and analysis from July 10 to September 8 of 2017.

Methodology

the benchmarking analysis conducted later in this document focuses on other Canadian and American jurisdictions that are more similar to BC, using attributes such as coastline, population, population density, geography, and climate. Furthermore, the UK and Australia were used as case studies for the purposes of capturing market trends, policies and key learnings that are applicable to BC and Canada.

Resources used KPMG relied on a number of resources to complete this document. They included, but are not limited to the following: –– Australia’s National Broadband Network –– BC Search and Rescue Organization –– Bureau of Economic Analysis –– CBC –– Canadian Internet Registration Association –– Canadian Radio-television and Telecommunications Commission

KPMG collected quantitative and qualitative data from government and other reputable sources. We also conducted a range of one-on-one interviews with persons from select organizations in BC to provide a variety of perspectives around the challenges, opportunities and benefits of broadband connectivity in our province. KPMG synthesized the data through internal objective analysis.

–– Federal Communications Commission

The challenges associated with benchmarking

–– Statistics Canada

Benchmarking broadband quality, particularly with an international lens, is difficult; factors such as geographical area, population, urbanization, climate, culture and government can play critical roles in the relative ease and expense of broadband distribution and these traits naturally vary from country to country. Although international comparisons are insightful in providing context as to where Canada stands relative to other OECD nations,

–– First Nations Health Authority –– M-Lab –– Network BC –– Northern Development Initiative Trust –– Pathways To Technology –– The Economist –– The Globe and Mail –– University of Victoria –– Vancouver Island Health Authority and Ministry of Citizens’ Services –– World Bank

Benchmarking connectivity in British Columbia

The document that follows is based on the work completed through the process described above. It should be noted KPMG relied on the aforementioned data sources, specifically from the CRTC, FCC, StatCan and M-Lab, for quantitative broadband data (e.g. metrics pertaining to speed, access and affordability) and did not verify the accuracy of the data. The quantitative analysis performed in this document reviews residential broadband connectivity only. It therefore does not assess connectivity strengths or weaknesses for commercial plans. This was done because data collection agencies typically gather residential data only, and commercial plans will have much less representation in rural areas where there is relatively limited business activity. However, the benefits of broadband, are explored both from a residential and a commercial perspective in this document. To increase consistency in analysis, urban areas are quantitatively based on StatCan’s definition as areas with over 400 people per square kilometre. Similarly, rural areas are described as areas with fewer than 400 people per square kilometre. In closing, the document below does not constitute an audit. Accordingly, KPMG does not express an opinion on BC’s broadband landscape and the information contained in this document.

Regulatory landscape The CRTC, who is ultimately held accountable to the Parliament of Canada, is the main government agency involved in regulating Canada’s broadband landscape. Due to the competitive nature of the Canadian broadband market, the CRTC “does not intervene in the rates, quality of service issues, or business practices of Internet service providers as they relate to retail customers.”12 the CRTC’s main mandates primarily focus on – but are not limited to – regulating the wholesale customer market, setting national broadband targets and providing funding to improve broadband access to achieve its mandated targets. Each province may have its own provincial ministry or agency that focuses on improving broadband connectivity via provincial and/or federal funding programs outside of the CRTC. For example, in BC, Network BC’s (part of the Ministry of Citizens’ Services) primary mandate is to focus on bridging the connectivity divide between urban and rural areas.

What is “broadband”? Broadband internet, or the combination of “broad bandwidth”, is wide bandwidth transmission that is always on and always faster than dial-up technologies. Broadband internet can be delivered through an array of technologies, including: Digital Subscriber Line (DSL), fibre, fixed wireless, cable (also called “coaxial cable”) or satellite – however, satellite is excluded in most quantitative access measurements by the CRTC.

Glossary of broadband terminology Three main parameters for measuring broadband are: access, affordability, and speed. Access: Access is defined by the % of the population with access to certain download and upload speed thresholds. Affordability: The affordability of residential internet service plans can be considered both in absolute terms, and as a proportion of income. Speed: Internet speeds are measured in bits per second, and are broken out by download and upload speed. Download speed is the speed at which data (e.g. files, pictures, and movies) is being delivered to you from the internet. Upload speed is the speed at which data is travelling from you to the internet. Here, a common unit is “Megabits per second” or Mbps, which is a million bits per second. Last mile: Last mile infrastructure refers to the last leg of infrastructure that connects the end customer to the broadband backhaul. Backhaul: Backhaul infrastructure connects “last mile” infrastructure to the larger broadband network creating an “information super highway” across geographic areas.

12. CRTC, Internet – Our Role, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Canada relative to the rest of the world To put this document’s benchmarking analysis into perspective, it’s important to look at Canada’s internet performance relative to the global stage. The Economist (in partnership with Facebook.com) ranked Canada as having the eighth best internet connectivity in the world13 (out of 75 countries).

Global ranking in 2017

Country

1 3 4 5 6 7 8 10 11 12 13 14 15

Singapore United States United Kingdom Japan South Korea France Netherlands Italy Australia Germany Poland Spain Russia

Sweden

Canada

Note: The Economist’s ranking includes mobile internet connectivity in their scoring. Scores are assessed on “relevance, readiness, affordability, and availability”. Source: The Economist, The Inclusive Internet: Mapping Progress 2017

13. The Economist, The Inclusive Internet, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Below is an illustrative diagram showing Canada’s internet performance against other leading countries: the US, UK, and Australia. It is worthwhile to note that there is often a trade-off among access, affordability and speed as internet service providers pass investment costs on to their customers. The UK, a small, densely populated nation, showcases dominant internet quality over Canada; internet service in the US, although more expensive than Canada, offers superior speed and access. Australia (amidst a challenging national broadband initiative) demonstrates the weakest connectivity, showing strengths in affordability only.14 It is the combination of these three metrics that drive the economic and social value that can be unlocked through connectivity.

Canada’s ranking on key internet performance metrics versus select leading countries – 2017 Access15

Affordability

Speed

UK & US

Canada

USA

Australia

Canada

Australia

Canada

Australia

Source: The Economist Intelligence Unit (https://theinclusiveinternet.eiu.com/).

Why the following countries were selected for comparison with Canada with respect to access, affordability and speed:

Australia

The United States is similar to Canada in geographic size and diversity. Our analysis also compares select west-coast states with BC and similar Canadian jurisdictions

The UK is a leading jurisdiction in broadband connectivity that offers insights into progressive broadband policies

Australia is assessed based on similar geographic features, native population, population density, and as a case study for government intervention in broadband connectivity

14. Akamai State of the Internet, Q3 2016 Document 15. The Economist refers to access as availability © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

A guide to broadband speeds Minimum speed

1 – 4 Mbps

4 – 6 Mbps

Home use

Business/Commercial use

–– Music streaming SD video download

–– Telecommuting

–– Basic email and web browsing (small/medium files) –– Internet TV services (e.g. Netflix)

15 – 50 Mbps

–– File sharing (small/medium files)

–– Basic telemedicine and education services –– HD TV programming

6 – 15 Mbps

–– Basic email and web browsing (small/medium files)

–– Online gaming

–– Low-Definition Telemedicine (healthcare via telecommunication)

–– Video-on-Demand

–– Remote education (e.g. distance education programs)

–– Enhanced telemedicine

–– HD video surveillance

–– Richer remote education

–– HD video conferencing (multiple users)

–– Ultra HD video streaming (4k)

–– Real-time data collection

Over 50 Mbps (CRTC Target)

–– Real-time medical image consultation –– Remote super computing

Source: Northern Development Initiative Trust 2016 proprietary data; Engadget.com.

Benchmarking connectivity in British Columbia

Broadband in BC In December 2016, the CRTC issued a decision which stated that

Why broadband matters to British Columbians The internet is embedded in all aspects of our daily lives – we use it to check the weather, read the news, email colleagues, buy goods and services online, connect with friends, monitor our sleeping babies, book a flight or a doctor’s appointment, download a book, stream a movie – we hardly even think about it. But have you considered how valuable the internet is, specifically at higher speeds enabled by broadband, when it connects rural areas to important or urgent services that many urbanites take for granted? Broadband can allow a patient to meet with his doctor located three towns over without getting in his car, a Masters student to participate in her classroom discussion taking place on the other side of the country, and a CEO to conference with her on-site staff in Northern BC from her home base on Vancouver Island. In many cases, the social assistance provided by government like health and education is increasingly delivered through digital platforms, too. High-speed internet has woven itself into the fabric of our day-to-day lives; it enables a broad spectrum of possibilities including BC’s healthcare, education, culture, public safety, and economic activity.

Did you know?

” Broadband Internet access services are vital to Canada’s economic, social, democratic, and cultural fabric. Canadians will increasingly need to have access to broadband Internet services to participate in the digital economy.” CRTC Submission to the Government of Canada’s Innovation Agenda

18% of Canadians (or approximately 855,000 people) don’t have access to internet speeds of 50 Mbps, which are considered by the CRTC to be a “vital telecommunications service”. 16 Source: CBC

In a recent announcement, the CRTC issued a decision that the internet is now a new universal service objective setting a target that 90% of Canadians should have access to 50 Mbps download speeds and 10 Mbps upload speeds by 2021, and have deemed broadband as a “vital and basic telecommunication service all Canadians are entitled to receive.”17 In 2015, 88% of BC had access to 50 Mbps download speeds, and of that, most of this coverage was in BC’s urban centres.

16. Data was provided by CRTC and ISED and analyzed by Network BC 17. CBC, Internet CRTC declares broadband internet access a basic service, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Generally, it costs more to connect rural areas than urban areas due to lower population densities and other factors such as challenging topographies.

Challenges faced in improving connectivity in BC BC faces significant challenges to improving internet connectivity, primarily due to: –– Its rugged and dynamic terrain (e.g. deserts, mountain ranges, valleys, rivers, and a long, jagged coastline) which make wireline infrastructure expensive to build and wireless infrastructure less effective –– Dispersed populations in remote and isolated areas of BC; British Columbia’s population density is approximately 5 people per square kilometre, nearly one-third that of Ontario18, which makes it difficult to share the expense of infrastructure over a meaningful number of residents in these areas The combination of these factors make it difficult for Internet Service Providers (ISPs) to create a sound business case to connect rural/remote areas; nonetheless, the “last mile” connectivity, even though sometimes unprofitable, can be highly impactful. Connectivity in rural BC enables urban-based services that previously weren’t available, such as: local education to grade 12, emergency rescue teams, and basic healthcare.19 In this setting, there is a call for collaboration and co-investment between government entities and the private sector.

Distribution of high speed internet access across BC

Access to varying advertised download speeds in BC (2015) Population Density number of people per square km

0.0 – 0.5 0.5 – 2.5 2.5 – 20 20 – 200 200 – 5,400

1.5

97% of BC

92% of BC

89% of BC

88% of BC

Mbps+

Households that have access to 50 Mbps Households that do not have access to 50 Mbps Source: Network BC Analysis (Heat Map), CRTC Communications Monitoring Document 2016 (Access to Varying Speed Levels in BC).

18. Statistics Canada, Population and dwelling counts, for Canada, provinces and territories, 2011 and 2006 censuses, 2011 19. CRTC, Telecom Regulatory Policy CRTC 2016-496, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Progress so far Canada and BC have made significant investments to improve broadband connectivity and to bridge the “digital divide” between urban and rural areas over the last decade, including these key initiatives:20

1 First Nations connectivity: federal and provincial governments have invested funding with the All Nations Trust Company to connect all 203 First Nations with an internet connection through the Pathways to Technology project.

3 In late 2016, the Canadian Radio-television and Telecommunications Commission (CRTC) made a statement that they will collect a percent of telecom revenues and direct up to $750 million towards the development of connectivity in rural and remote areas. The regulator has set a mandate to cover 90% of Canada with speeds of 50 Mbps download and 10 Mbps upload, with the option of an unlimited data cap.

Connect to Innovate: a federally funded $500 million project aims to bring high-speed internet to rural and remote communities in Canada. The program will support new “backbone” infrastructure to connect institutions like schools and hospitals with a portion of funding for upgrades and “last-mile” infrastructure to households and businesses.21

7 Connecting BC Program: A multi-year, provincially funded program to expand high-speed internet connectivity province-wide administered by Northern Development Initiative Trust.

Connecting BC Agreement: a non-monetary provincial agreement signed in 2011 with TELUS to expand internet services and highway cellular coverage. TELUS will maintain internet connections and reduce pricing in 119 communities while connecting more than 1,700 km of highways with cellular service.

5 BC Broadband Satellite Initiative: Contributes towards the “one-time satellite installation fee in locales that currently, and for the foreseeable future, have no other high-speed internet solutions.” This is aimed to increase connectivity on the “last mile”.

Network BC launched in 2003 and given the mandate to close the "digital divide" in 366 communities across BC.

A new program launched by the BC government in 2017 to install free public Wi-Fi in select highway rest areas to support highway business (such as commercial trucking), keep travelers connected, and improve highway safety.22

20. Network BC, 2017 website 21. Government of Canada, Connect to Innovate From Innovation, Science and Economic Development Canada, 2017 22. Free, public Wi-Fi coming soon to a rest area near you, BC Government, August 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Critical roles of broadband in British Columbia Economy

Public safety

–– Online connectivity enables core business functions such as talent attraction and outreach, marketing, research, and eCommerce –– As BC’s technology industry blooms, the province (and country) becomes more reliant on strong internet connectivity, which -in turnhelps BC remain competitive and relevant internationally –– Instant data sharing improves the agility and effectiveness of businesses, and has a direct and measurable impact on BC’s and Canada’s GDP

–– Broadband internet allows for instant communication and necessary resources for emergency responders (such as GPS mapping, image sharing, alerting, and natural-disaster monitoring)

Healthcare –– Portable Electronic Medical Records (EMR) allow for doctors across the province to communicate and share patient-specific records, improving speed, accuracy, and enabling easy communication between different healthcare teams serving the same patient –– Social services, such as recovery programs and material, can be available to all residents; removing the need for travel and expensive program enrollment –– Telemedicine (or “telehealth”) brings personalized, face-to-face care to rural and remote locations, saving the expense and effort of travel and improving patients’ access to family physicians and specialists

Education –– Where educational resources are scarce, internet can bridge the gap and enable young students to make use of urban and international learning material. Examples include: –– Distance education and remote campuses –– Flexible learning schedules (particularly for adults, whose schedules or locations may otherwise prohibit them from re-engaging with the school system) –– Decreased education costs

Social wellbeing/culture –– Internet has woven itself into the way we communicate and share with each other. This preserves languages, engages social wellbeing, and promotes sense of community

Benchmarking connectivity in British Columbia

Broadband in the economy Did you know? A 10 percentage point increase in fixed broadband availability would increase GDP growth by 0.9 – 1.21% in developed economies.23

The economy and high-speed internet The modern economy is enabled by high-speed communication, data sharing, and remote transactions. The Canadian and provincial economies rely heavily on high-speed broadband connection in everyday business activities: Marketing: Broadband internet allows companies of any size to establish an online presence and market to a global audience Telecommuting: Video-conferencing and email capabilities allow for remote-employment, increasing staff flexibility and saving on travel costs Supply chain: Internet connectivity pushes the boundaries of supply-offerings away from the immediately local, increasing competitiveness and product diversity Market research: Through a strong internet connection, firms are able to access online resources and tools to best position themselves

” Digital literacy is now a necessity to participate in the workforce, but workers must consistently update their digital skills or risk falling behind in a relatively short time. As more and more government services move to online platforms, Canadians will require the digital skills to access these services.” CRTC, CRTC Submission to the Government of Canada’s Innovation Agenda, December 2016

eCommerce: Internet platforms can host online transactions and banking – making money management easier and more accessible for users Talent attraction: Web-based competitions or job boards hosts thousands of open positions, bringing employment opportunities all together under one banner.

23. World Bank, Exploring the Relationship Between Broadband and Economic Growth, Michael Minges, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

When the connection isn’t there, businesses in rural and remote areas are unable to unlock internet-based benefits, and are forced to operate in a slower, more confined marketplace. This limits the growth of those businesses and their socioeconomic impact.

Did you know? Small businesses heavily using web technologies see both a 10% increase in productivity and double the growth of their counterparts.24 BC’s tech sector has seen incredible growth in the past 3 years. Now, the industry employs over 100,000 British Columbians earning 75% more than the average wage in BC.25 Employment rose 16% faster in the technology industry than the province-wide employment growth. This industry relies heavily on broadband connectivity for talent acquisition, training (computer coding in schools, for instance), and international competition. Without strong internet quality, industry growth will likely be inhibited and employment opportunities may be met by out-of-province talent.

24. McKinsey Global Institute, Internet Matters: The Net’s sweeping impact on growth, jobs, and prosperity, Matthieu Pelissie du Rausas, 2011 25. Government of BC, BC tech sector now employing more than 100,000 people, Website © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Case study: Broadband in BC Tourism The Ditidaht nation, which owns property along Vancouver Island’s popular West Coast Trail, has used the land to construct a full-service campsite. Now with internet access, the managers of the site hope to strengthen their online presence and have now constructed a web-based reservation and booking system, allowing tourists from all over the world to remotely assess and reserve a spot. Destination BC, in tandem with the Ministry of Tourism, is investing heavily to enable small and medium firms in the tourist industry to access global markets and effectively link into BC’s billion-dollar tourism industry.26 Positive visitor experience is key to increasing the number and duration of visits in a tourism-driven economy. This can range from searching for amenities, finding adequate parking, minimizing wait times, and enabling free perks such as memorable photos of visitor activities sent to their cell phones. Many examples of “positive visitor experience” have been created, enhanced or shared via internet-enabled technology. Dianna Ducs from Nelson Kootenay Lake Tourism describes the impact of the internet on the region’s tourism: “Five years ago people stayed in the Nelson and Kootenay Lake region one or two days. Data shows it’s now five or six days because people are aware of more things to do through the website, an easily accessible tool, via the internet. The internet provides us the ability to reach potential visitors, therefore acting as an economic driver.”

Case study: Software Programming in BC For brothers Cameron and Deryk Wenaus, moving to Nelson was a conscious lifestyle choice. So was staying when Retreat Guru, the software company they founded, began to grow. Retreat Guru offers an online booking service catering to the unique needs of the retreat industry. Retreat Guru has more than 200 clients worldwide on almost all continents and employs 12 people, all of whom live in the Nelson area. Only five per cent of clients are in Canada. Deryk says, “Our clients are heart-centred and visual. They would not buy our product without seeing how it works. We spend most of our time in video conferences demonstrating our product to potential buyers around the world.” He goes on to say: ”At the office, our internet connection is more valuable than water. Without the internet, the company simply cannot exist… The office can operate without water, but we can’t operate without internet. Our product sits on an Amazon server in the Cloud. Internet is how we store, sell and ship our goods”. Without Nelson’s strong broadband connectivity, Retreat Guru wouldn’t be able to sell their products nor would the team be able to work from rural BC.

26. Norsat International, Case Study: Broadband Internet Connectivity for BC’s First Nations, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Broadband in healthcare Introduction As technology improves, so does our management and execution of public healthcare. Broadband, in particular, has become essential to everyday medicine in: –– Record keeping/file sharing –– Patients’ access to records (including remote access) –– Telemedicine (i.e. “Telehealth”) Telemedicine is the use of health practitioner-assisted video conferencing to remotely connect healthcare specialists with patients across the province. It has brought personalized, urban medical services to rural and remote locations. Over the last five years, the greatest strides in telemedicine in Canada have been those made in BC.

200

Telehealth facilities providing access to approximately 470 videoconferencing endpoints27

50,558 telemedicine visits in BC in 201428 with an expected provincial growth rate of 25% per annum29; in rural BC, this growth has been 42%30

Did you know? The only requirement for a full suite of telehealth services is a strong broadband connection with speeds of 10+ Mbps and a supporting, knowledgeable staff.

27. Vancouver Sun, The doctor is online, anytime – it’s the freewheeling world of eHealth, Erin Ellis, 2016 28. Government of BC, Benefits of eHealth, Components of eHealth, Telehealth, 2016 29. Carrier Sekani Family Services (CSFS) – eHealth, 2016 30. Interior Health Authority, Testimonial, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Case Study: Telemedicine in Action in BC In January 2014, a Cranbrook resident had a kidney transplant. For the surgery, she, like all other rural transplant patients, was obliged to travel to Vancouver. The routine follow-up appointments, while closer than Vancouver, still entailed a significant journey. The closest post-transplant clinic to the patient in Cranbrook, is more than 200 kilometres away in Trail (three hours of driving each way). Fortunately, thanks to telemedicine, she was able to remotely connect with the healthcare team from her home (saving her a day off work and six hours of driving). During her follow-up appointment, the patient’s blood pressure, weight, and pulse was relayed via a telehealth videoconference system to a healthcare team in Trail. On the receiving end, her information was appropriately shared with the transplant clinic nurse, the transplant nephrologist, a social worker, and a dietitian, as needed.

Benchmarking connectivity in British Columbia

76% of BC’s indigenous communities (or 155 communities) do not have the broadband connectivity needed to access these services. Pathways to Technology, Summary of Findings on Broadband Internet as a Sustained Infrastructure for Social Services in the First Nations Communities, as provided July 2017

Case Study: Telehealth in First Nations Communities In 2009/10, Network BC provided the All Nations Trust Company with $40.8 million and a broad yet flexible mandate to ensure that all First Nations in BC have the opportunity to acquire high-speed internet. The project was branded “Pathways to Technology” (or just “Pathways”). The Carrier-Sekani Family Services (CSFS) is a healthcare group formed in 1990 and was working to digitally connect rural and remote areas with healthcare services but was struggling to obtain consistent funding to do so. This obstacle was solved and a partnership-project between Pathways and CSFS was underway by 2011. The Carrier-Sekani now delivers health and social services to 11 First Nations communities in the traditional Carrier and Sekani territories, covering approximately 14,000 people. This project alone saves thousands of hours of travel, CO2 emissions, and personal stress. Although there is still a lot of work to be done in this space, the communities covered by this project have benefited enormously. The First Nations Health Authority (FNHA) also works closely with CSFS and Pathways to Technology. The FNHA team will travel into these communities, assess their broadband potential and possible internet funding options to improve their sub-standard connectivity, and relay this information to the internet service providers with the goal of bringing telehealth to the area. Other initiatives, such as the BC Satellite program or provincial internet grants and cofunding projects aim to bring last-mile coverage across rural BC; these programs work in conjunction with health authorities to provide the necessary hardware and training to enable telehealth services. Tl’azt’en Nation is one of the First Nations Communites that has been connected to broadband through the Pathways to Technology program. Pathways reports that physicians in the community have incorporated telehealth continuity-of-care workflows into their practice and report that up to 20% of patient encounters are now in the virtual care setting. They are also able to monitor and maintain the wellness, consultations and planning with the community members year-round and with much more effective frequency of visits.31

Telehealth is becoming a reality for some connected rural communities. As higher speeds become more affordable to rural communities throughout the province, BC has an opportunity to apply the multiplier effect to these successful applications where telehealth becomes the norm not the exception.

31. Carrier-Sekani Family Services Case Study, A Case Study in eHealth and Sustainable Broadband Internet Connectivity, as provided July 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Broadband in public safety Introduction Broadband internet allows for nearly instantaneous data sharing and communication. In terms of public safety, this means that emergency or first responders no longer have to call their team members individually, carry paper maps, or physically pick up and review surveillance recordings. Broadband internet brings these pieces all together into one, easy and fast location; this means that first responders can be faster and more targeted in their services for those in need. Specific roles that broadband plays in public safety are discussed below.

Case Study: Search and Rescue Andy Muma, a regional director for BC’s Search and Rescue Association in the district of Bulkley-Nechako, noted that the improvement of broadband internet near Houston, BC, has likely been the difference between “life and death” with some of their rescues. Before the improvement of the city’s satellite internet, he would have to individually call his team (up to 45 calls) before the search could initiate. Secondly, the team would have to drive to the nearest town for either a wi-fi or a mobile wireless signal to download the necessary maps. With the advent of improved internet in the area, he notes that there has been a reduction in preparation by up to four hours per search, allowing his team to hit the road in a matter of minutes.32 In his words, “It’s been a game-changer, really, the team can mobilize in a fraction of the time and get the search going.”

Case Study: Remote Policing The First Nations Policing Program (FNPP), through the Community Tripartite Agreement, aims to leverage technology and online tools for community surveillance and detection. This will allow for communities with scarce policing resources and utilize the scale and assets of more developed, urban areas. This initiative aims to promote efficiency and effectiveness in intervention and response.33

32. August 2017 interview with Andy Muma, Regional Director for BC’s Search and Rescue Association 33. Pathways to Technology, Summary of Findings on Broadband Internet as a Sustained Infrastructure for Social Services in the First Nations Communities, as provided July 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Case Study: Highway Connectivity and Safety The Government of BC, in its 2016 Rural Economic Development Strategy, committed $9 million from 2016 through to 2018 to install free public wi-fi in 25 highway rest areas to support businesses such as commercial trucking, to keep travellers connected, and to improve highway safety. The general public now will be more able to connect with families, friends, and emergency response vehicles in the case of any issues experienced on BC’s highways.34

Case Study: Environmental Monitoring and Earthquake Alerts Ocean Networks Canada (OCN) is an initiative being taken out of the University of Victoria (in partnership with Canada Foundation for Innovation, Department of Fisheries and Oceans, and the Province of BC) that operates world-leading ocean observatories for the advancement of science and Canada’s public safety. The initiative collects and shares, in real time, 280 gigabytes of data every day. This data contains ocean acidity, oxygen and carbon dioxide levels, temperature, and the like; it is collected through 7 mobile instrument platforms and over 850 km of seafloor backbone internet cables (“backbone internet cables” are principal internet routes carrying high data-traffic; these typically cross large distances, including underwater connections). OCN’s information is publically available and is used to further environmental policy and Canadian earthquake and tsunami alerts. These alerts are then sent to the relevant communities to prepare for a precautionary evacuation, for instance. The program Director, Benoît Pirenne, noted that the program’s satellite connectivity for earthquake and tsunami monitoring on the west coast of Vancouver Island has room for improvement as upload speeds are slow, inconsistent, and expensive. Improved connectivity here will place critical information in the hands of the public much faster and with less volatility.35

34. BC Rural Economic Strategy, The Government of British Columbia, 2016 35. August 2017 interview with Benioit Pirenne, Director of User Engagement, University of Victoria, Ocean Networks Canada © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Broadband in education Introduction Education has seen great changes in the past 50 years; as societal norms and technological capabilities change, so do the ways we educate ourselves. Secondary schools are now much more accommodating to a variety learning styles and disabilities; furthermore, they offer not only classical academia, but also a range of practical subjects such as plumbing and metal work. Much more recently, broadband has re-shaped the education system. High-speed internet improves communication and brings a world of student material into every classroom. Specifically, the internet has unlocked in the following benefits:

Professional development Connecting with colleagues and accessing resources was difficult before the internet. For rural areas that do not often have training and travel resources, access to digital content helps teachers keep abreast of, and trained in, new developments sooner – at more affordable prices than before. It also gives teachers a sense of community and helps them to feel less isolated.

Decreased textbook and research cost; decreased research efforts As more learning resources are posted online, teachers and students are able to access textbooks at a fraction of the cost – bringing affordable education within reach and decreasing the education system’s impact on the environment. Online resources also increase the speed and access to research. For instance, a large portion of UBC’s library has been scanned and made available to all students, wherever their location.

Improved breadth and accessibility of distance education Online homework submissions, live chats, and emails have increased the quality of remote instruction, allowing students in rural and remote areas to tap into course curricula formerly available only in urban settings. For instance, this can include online tutoring, linking students to top-rated tutors across the country. © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

As of 2015, the CRTC reported that 5% of BC’s population does not have access to the 5 Mbps minimum download speeds required for distance education.

Flexible learning schedules Internet-based courses allow students (particularly adult learners) to study on a schedule shaped around their other commitments, such as work and family.

Personalized instruction Online courses can be tailored to match the learning style and pace of the student. This flexibility enables individualized instruction. For instance, students with dyslexia are able to write and submit provincial examinations (with additional time, if needed) online. In this case, the student is able to read the material more slowly and be appropriately assessed on their grasp of the content.

Promoting 21st century skill development 36 Technology advancements will continue to drive demand for computerspecific skills, such as software coding, especially as BC’s tech sector blooms. Skills such as computer coding are becoming not just relevant, but essential for many employment opportunities; unfortunately, a lot of the resources necessary to develop these skills are internet-based, bringing a disadvantage to the rural and remote locations with only marginal internet connectivity.

Case Study: Impact of Broadband in Rural BC Lorri Fehr, Director Learning Services in Kootenay Lake School District (#8) in BC’s southern interior describes how online professional development has benefitted teachers in her region: “Teachers living in Southern Interior towns like Kaslo, Salmo and Yank find it expensive to travel to major centres for professional development and it’s not safe in winter when roads are treacherous. Video-conferencing enables them to keep skills current, stay safe and it is a better use of their time.” Teachers are able to share successful or updated curricula with their colleagues across the province. In BC’s southern interior, five classrooms in the remote communities of Ashcroft, Cache Creek, Lytton and Lillooet are connected via high-speed video conference, enabling students to collaborate on projects. In 2017, students from several schools researched the Mars Rover program and used online tools to design their own working versions. At the end of the school year, the students travelled up to 100 km to meet in person to compete together and share their experiences. The schools range in size from 68 to 280 students. Digital access to higher education is also exemplified by Cynthia Maxwell’s experience as a Master of Social Work student at the University of Waterloo. She says: “Without connectivity here [in Campbell River, BC], I wouldn’t be able to do my Master’s program out of the University of Waterloo...my whole class is dispersed across the country. This allows us to study around our work schedules and really pursue the employment opportunities we want.”

36. US Chamber of Commerce, The Impact of Broadband on Education, 2010 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Broadband in culture Introduction A society’s culture is the set of values, conventions, or social practices associated with a particular field, activity, or societal characteristic. Because broadband internet has woven itself into almost every aspect of twenty-first century life, it too plays a role in our societal values, conventions, and social practices. Some important involvements of broadband noted in British Columbian culture are discussed below: Social wellbeing: Broadband internet brings government and social services to those in need with a click of a button. For instance, social workers rely on housing boards to help their clientele find affordable housing. In one instance, an indigenous community used the internet to research options for healthier eating. Ultimately, they found a suitable option for a fruit and vegetable delivery service that provides nutritious food options in locations where these items are difficult to purchase, and they registered for routine deliveries.37 Language preservation: BC has 34 unique First Nations languages (60% of all Canadian First Nation languages). Unfortunately, now only 4% of the indigenous population is fluent in these languages. There have been recent investments in technological tools to help maintain and preserve this cultural heritage. The First People’s Cultural Council is a First Nations-run Crown Corporation monitoring and implementing strategies to revitalize indigenous languages. Their strategy includes recording phrases, sharing learning resources, and creating online translations. The organization estimates that these digital strategies require at least 15 Mbps of bandwidth.38 Employment: Access to the internet allows employers to advertise job openings on community job boards, bringing employment opportunities into one, central location. Alternatively, some BC communities have created a “resource bank”, which will allow business members access to the contact information of individuals or businesses highlighting their skills, training, and certificates.38 Social interconnectivity: Certainly, the most common use of internet, and arguably one of the most valuable, has been the convenience, pleasure, and social connectivity derived from online platforms such as Facebook, Google, and email. In addition, the use of online dating websites have nearly tripled for young adults between 2013 and 2015.38 Day-to-day practicalities such as a Skype conversation can bring distant family and friends right into your living room. These services, often taken for granted in urban areas, are integral to fast and effective communication and can make the world much more accessible.

37. Pathways to Technology, Summary of Findings on Broadband Internet as a Sustained Infrastructure for Social Services in the First Nations Communities, as provided July 2017 38. Pew Research Center, 5 Facts about online dating, Aaron Smith, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

How BC compares with similar Canadian and US jurisdictions Introduction The BC broadband landscape is dynamic. The province hosts over 80 ISPs, serving a population of roughly 4.6 million over a land mass larger than Texas. BC’s landscape, coastline, and low population density present a number of challenges in bringing internet connectivity to all of BC.

Jurisdiction

Québec

–– Diverse terrain –– Population density –– % of population that is rural –– Sizable indigenous communities

Ontario

–– Economic composition –– Geographic size –– % of population that is rural

Alberta

–– Landmass –– Proximity to BC –– Population density

Washington

–– Broadband ecosystem –– Diverse terrain –– Proximity to BC

Oregon

–– Demographic composition –– Broadband ecosystem –– Proximity to BC

This document compares BC’s broadband connectivity against its counterparts in Canadian provinces, US states and international jurisdictions based on comparable geographic, economic and social dimensions (see table on the right). As mentioned earlier in this document, broadband connectivity is measured on its access, affordability and speed. This document will help identify where BC can focus some of its future efforts and investments to create a stronger broadband connectivity landscape. Summary: Relative to its peers, BC performs well on access to higher download speeds (50 Mbps +) as well as actual measured download and upload speeds but lags behind other jurisdictions on affordability especially when it comes to rural areas.

Similarities with BC

BC’s population density relative to comparator jurisdictions (population/square Km) Washington Oregon Ontario Alberta Québec BC 0

Benchmarking connectivity in British Columbia

Access Access to high-speed broadband service lays the foundation of a vibrant digital economy in an increasingly connected world. Access to higher broadband speeds is a key indicator of a stronger connectivity landscape as more people, businesses and institutions can purchase internet services. Please note all speeds outlined in this section refer to advertised speeds and not the actual download speeds received by the end-consumer. Additionally, only provincial data from 2015 was available during the creation of this document. Hence, there may have been material changes to access figures from 2015 that are not captured in this document.

How do BC’s access metrics compare? vs. Ontario, Alberta and Québec

vs. Washington and Oregon

Access metrics Access to basic broadband (1.5+ Mbps) (2015) Access to standard broadband (5+ and 10+ Mbps) (2015) Access to “high-speed” broadband (25+ and 50+ Mbps) (2015) % of plans with data caps vs. without data caps (2017) Subscription rates (2015) Percent of population served by more than 2 ISPs (2016) Better than most

Comparable

n/a

Worse than most

n/a Data not available

Benchmarking connectivity in British Columbia

Highlights –– BC performs well for access to “high-speed” broadband. In a report issued by the CRTC in 2016, BC led the pack in access to CRTC’s target download speeds with over 88% of the population having access to 50 Mbps or higher download speeds. However BC lags behind the Canadian average for speeds lower than the 10 Mbps threshold. In BC and Canada as a whole, areas with a lack of access to higher download speeds are disproportionately rural.

Access to various download speed threshold in 2015 (BC vs. Canadian average) 100% 90% 80% % of Population

BC performs well on higher download speeds (50+ Mbps) relative to the Canadian average but lags behind the Canadian average on lower speeds (10 Mbps or less).

70% 60% 50% 40% 30% 20% 10% 0% 1.5+ Mbps

5+ Mbps BC

10+ Mbps

25+ Mbps

50+ Mbps

Canada

–– High uptake when broadband is available. For access to basic broadband plans (1.5 Mbps or higher), BC has the highest rate of subscribers (percentage of population who purchased broadband plans) demonstrating BC’s appetite for purchasing broadband services when available. –– Canada consistently lags behind the US. BC and the rest of the selected Canadian provinces consistently rank behind the US states in terms of access to higher broadband speeds. –– BC may achieve 100% coverage of “basic” broadband by end of 2017. The most recent CRTC data, which was relied on for much of this study, was documented for 2015. Network BC expects that BC will achieve 100% coverage for 1.5 Mbps download speeds by the end of 2017 with the help of satellite technology.

Benchmarking connectivity in British Columbia

Access to basic broadband (1.5 Mbps and over)39 BC ranks in the bottom half of Canadian provinces and last against US states for access to basic broadband Basic broadband access is defined as having access to broadband download speeds of 1.5 Mbps and over by the CRTC. At 1.5 Mbps, users can browse the web, check email and access low-definition streaming services. While 97%40 of BC has access to at least 1.5 Mbps, BC still lags behind Ontario and Alberta, who showcase almost 100% coverage40, while the US states outperform all Canadian provinces. The 3% of the population without internet access is concentrated in rural and remote areas which are, in many cases, challenging areas to connect because of their geographic location, topography and low population densities. BC lags behind in access to basic broadband availability compared with select Canadian and US jurisdictions.

% of households with access to 1.5+ Mbps broadband in 2015 (Canada and US) Canadian Average

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% BC

Québec

Ontario

Alberta

Oregon

Washington

Source: CRTC’s Communication Document 2016 as of February 2016 was used for Canadian availability figures. For US figures, FCC fixed broadband deployment data form 477 as of December 2015 was combined with FCC’s staff block estimates by census tract from 2015 to determine the % of households with access to 1.5+ Mbps download speeds.

While BC lags behind its peer group in access to speeds of 1.5 Mbps, it has made good progress between 2011 and 2015, providing basic broadband connectivity to roughly 52,900 new households.41

39. Access speeds refer to advertised download speeds as defined by the CRTC. Areas that have access to a certain speed thresholds may not actually receive said speed due to real world network infrastructure limitations. 40. CRTC Communications Monitoring Document, 2016 41. Statistics Canada, Household size, by province and territory (2011 Census) (British Columbia) © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

BC has seen a high rate of improved access to basic broadband since 2011.

% of households with access to 1.5+ Mbps broadband (2011-2015) 100% 99% 98% 97% 96% 95% 94% 2011 BC

2012 Alberta

2013 Ontario

2014

2015

Québec

Source: CRTC Communications Monitoring Report 2012 as of September 2012, Communications Monitoring Report 2013 as of January 2014, Communications Monitoring Report 2014 as of October 2014, Communications Monitoring Report 2015 as of November 2015 and Communications Monitoring Report 2016 as of February 2017.

Access to standard broadband speeds (5 Mbps/10 Mbps)42 Relative to its peers, BC lags with internet accessibility with 95%43 availability for 5 Mbps download speeds

mbps

A download speed of 1.5 Mbps is now considered the minimum to perform the most basic internet tasks. Download speeds of 5–10 Mbps are required to perform internet activities such as using video streaming, basic telemedicine and basic remote education. For BC, access to both 5 Mbps and 10 Mbps download speeds (at 95% and 92% respectively) lag comparator jurisdictions. Furthermore, BC slightly under performs against the Canadian average for 5 Mbps (which sits at 96%) and falls in line with the Canadian average for 10 Mbps (at 92%).

42. Access speeds refer to advertised download speeds as defined by the CRTC. Areas that have access to a certain speed thresholds may not actually receive said speed due to real world network infrastructure limitations. 43. CRTC Communications Monitoring Document, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Access to higher broadband speeds (25 Mbps/50 Mbps)44 At the higher download speeds, BC leads Ontario, Alberta and Québec in providing access to 50 Mbps download speeds Internet access becomes more costly at the last mile of connectivity, particularly where those costs cannot be shared by a large number of households. As shown below, BC historically exhibited superior accessibility to internet speeds of 25 Mbps and over. Relative to its peers in the past two years, however, BC has been outpaced and now ranks third out of all Canadian jurisdictions. This relative change in performance is likely a indication of the increasing cost to add incremental internet access because lower population density and rugged terrain prevent easy/cost-effective broadband expansion in BC. After being the Canadian leader for 3 years, in 2015 BC’s rank fell to third relative to comparator jurisdictions, highlighting the rapid rate of connectivity improvements across Canada.

% of households with access to 25+ Mbps broadband (2011-2015) 100% 95% 90% 85% 80% 75%

2011 BC

2012 Alberta

2013 Ontario

2014

2015

Québec

Source: CRTC Communications Monitoring Document 2012 as of September 2012, Communications Monitoring Document 2013 as of January 2014, Communications Monitoring Document 2014 as of October 2014, Communications Monitoring Document 2015 as of November 2015 and Communications Monitoring Document 2016 as of February 2017.

44. Access speeds refer to advertised download speeds as defined by the CRTC. Areas that have access to a certain speed thresholds may not actually receive said speed due to real world network infrastructure limitations. © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

To date the highest download speed published by the CRTC is 50 Mbps and is, arguably, considered the most relevant access metric for navigating, and thriving, in the “digital world”. In 2015, where comparable CRTC provincial data is available, BC performs the strongest against its Canadian peers on this metric. At 95% availability, BC ranks last against comparator Canadian and US jurisdictions for access to 5 Mbps download speeds. However, at 88% availability, BC leads select Canadian jurisdictions with respect to access to the CRTC’s target download speeds of 50 Mbps.

% of population with access to 5+ and 50+ Mbps broadband in 2015 (Canada and US)

Canadian average at 5 Mbps Canadian average at 50 Mbps

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Alberta

Quebec

Ontario 5 Mbps

Oregon

Washington

50 Mbps

Source: CRTC’s Communication Document 2016 was used for Canadian availability figures. For US figures, FCC fixed broadband deployment data form 477 from December 2015 was combined with FCC’s staff block estimates by census tract from 2015 to determine the % of households with availability to 5+ and 50+ Mbps download speeds.

Going deeper: Satellite technology helping to bridge the urban and rural digital divide The urban and rural digital divide is prevalent among most of the developed world. One strategy being deployed to reduce the discrepancies between access and affordability is the use of satellite technology and specifically low-orbit satellite technology. Satellite technology can provide broadband access to a large geographic area with dispersed populations regardless of terrain. However, traditional satellite technology has issues regarding latency, which is how long it takes for data to travel from a computer to the backhaul infrastructure. As a result of high latency, internet access becomes “choppy” with a significant delays especially with video streaming. To mitigate this issue, low-orbit satellites are being considered as an alternative to traditional satellite technology since these satellites are closer to the surface of the earth, in turn, reducing data transfer time.45

45. Proprietary Gartner report, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Access to higher data caps When broadband is available, BC sees a significant discrepancy between broadband data caps in urban and rural areas. A “data cap” refers to the data allowance provided to the user on a monthly basis by a service provider. Data caps are often designed to incur price penalties and slowed speeds for over-consumption; they therefore impact not only accessibility, but also affordability and speed. For instance, an internet plan with a very small data cap will cost significantly more and will be slower than the same internet plan with a high data cap, once the low data threshold has been crossed. Data caps tend to have a lower average allowance in rural areas which contributes to affordability issues which is explored in the following section. It’s worthwhile, then, to include data caps in the analysis of BC’s performance, relative to its comparable jurisdictions.

Practical guide to monthly data caps

10 GB

100 GB

200 GB

300 GB

Video-conference

40 hours

400 hours

800 hours

1,200 hours

Video-streaming

10 hours

100 hours

200 hours

300 hours

E-mails

1,000 emails 10,000 emails 20,000 emails 30,000 emails

Source: SaskTel, Xplornet, retrieved and analyzed July 2017.

Benchmarking connectivity in British Columbia

ISPs are increasingly offering unlimited plans (i.e. plans without data caps) to accommodate the proliferation of the number of internet devices in a typical household. In a sampling analysis performed by KPMG, more than 1,000 different plans were surveyed across all jurisdictions represented in this study. The percent of BC plans without data caps was 38%, which is slight above the group’s average. Alberta, however, showcased the highest proportion of unlimited internet plans at 55%.46 At 38%, BC’s proportion of plans with data caps sits at just above the average for comparator jurisdictions.

% of broadband plans without data caps in 2017 50% 45% 40% 35%

Average 36%

30% 25% 20% 15% 10% 5% 0% Quebec

Washington

Ontario

Oregon

Alberta

Note: Data on broadband plans collected from a sample of ISPs across the selected jurisdictions from July 11th 2017 to August 4th 2017. Figures do not include provincial, state or federal taxes. Conversion to USD to CAD based on $1.25 USD:CAD exchange rate on July 31, 2017 (Bank of Canada). Dollar figures adjusted for inflation using Consumer Price Index from StatCan and US Bureau of Labour Statistics Source: StatCan, US Census Bureau, 2015

46. Data on broadband plans collected from a sample of ISPs across the selected jurisdictions over the period of July 11th 2017 to August 4th 2017. © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Average size of data caps Within our sample, BC shows one of the lowest average data caps (174GB). Alberta and Ontario lead the cohort of jurisdictions at 200GB and 250GB, respectively. BC’s difference in data cap size (excluding unlimited plans) between urban and rural areas is 122GB. This is not a dramatic difference compared to the other jurisdictions. However, when comparing average data caps in rural areas, BC ranks the second lowest; in urban areas, BC is above average. BC has lower than average data caps in rural areas which limits the quality of internet services that subscribers can access without paying penalties.

Average size of limited data caps by jurisdiction in 2017 (Canada and US) Washington Alberta Ontario Québec BC Oregon 0

100

200

300

400

500

Average size of data caps (GB) Urban

Rural

Note: Data on broadband plans collected from sample ISPs across the selected jurisdictions from July 11, 2017 to August 4, 2017.

600

Benchmarking connectivity in British Columbia

Access to number of ISPs Despite a high number of ISPs in BC, 30% of BC residents are served by only 1 or 2 ISPs The number of ISPs participating in a market provides a good indication of the health of the broadband market. A high number of ISPs correlates with a strong market demand for broadband and more importantly, a compelling business case for ISPs to compete. BC’s broadband ecosystem has approximately 80 ISPs47 which is almost double the amount in Alberta; however, this does not necessarily translate to better service and cheaper rates. This is in part driven by geographic constraints that prevent ISPs from competing in neighbouring communities as well as the trend towards a high rate of acquisitions of smaller ISPs by larger telecom providers. The market in BC exemplifies this problem as 30%47 of the population only has access to two or fewer ISPs. BC’s topographic diversity coupled with low population density are two possible drivers for this uneven distribution of ISPs, especially for rural and remote areas. As result, rural parts of BC see less competition and further market fragmentation translating to, relatively speaking, less affordable pricing regimes. Among its peers, BC has the largest % of population with access to three or fewer ISPs, suggesting a relatively fragmented broadband market.

Access to number of ISPs in 2016

BC Number of services providers

Québec

1 ISPs 2 ISPs 3 ISPs 4 ISPs

Ontario

More than 5 ISPs

Alberta

100

Percentage of population Note: Data collected from Connect to Innovate eligibility map. Data analyzed by Network BC (Ministry of Citizens’ Services).

47. Data collected from Connect to Innovate eligibility map. Data analyzed by Network BC (Ministry of Citizens’ Services) © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Subscription rates However, when basic broadband is available, BC leads Ontario, Alberta, Québec, Washington and Oregon in subscriptions Subscription rate is defined as the percentage of the population that purchases internet when it is made available. A higher subscription rate is linked to broadband’s affordability, reliability, and accessibility. While access doesn’t necessarily translate into residents purchasing internet services, BC leads in subscription rates for download speeds at 1.5 Mbps or more. This highlights BC’s appetite to purchase broadband when available despite BC’s generally more expensive broadband plans (refer to the following section for more information on affordability). BC maintains its leadership position in subscription rates even in relation to US counterparts despite US states having 100% broadband access for basic internet access. BC has the highest subscription rates despite having the lowest availability of basic broadband relative to comparator jurisdictions, highlighting BC’s appetite for internet services.

Subscription and availability rate comparison at 1.5 Mbps in 2015 (Canada and US) Average Canadian Subscription Rate: 82% Washington

87%

Ontario

85%

Alberta

84%

Oregon

83%

Québec

80% 0%

10%

20%

30%

40%

50%

Population in each jurisdiction covered by fixed broadband

60%

70%

80%

90%

100%

97%

99%

100%

97% 100%

Subscription rates to fixed broadband

Note: US state subscription rates are based on 200 Kbps download speeds. Source: CRTC Communications Monitoring Document 2016 as of February 2017 for Canadian figures and FCC Internet Access Services: Status Document as of December 2015 for US figures.

Benchmarking connectivity in British Columbia

Affordability Wider spread broadband access is important for bridging the digital divide between urban and rural areas especially for enabling remote and indigenous communities to participate, and thrive, in the “digital economy”. Access aside, if local residents are not able to purchase broadband services due to high prices then they are inhibited from transitioning into the digital economy or at least accessing core, valuable online health and educational services. The affordability metrics outlined in this section view affordability from an end-consumer point of view, which includes lowest priced broadband plans in urban and rural areas in absolute terms and as a portion of income. The price of broadband plans, and consequently the affordability of these plans, is primarily a function of, but not limited to, population density, geography, local competition, and proximity to backhaul infrastructure. Most jurisdictions rely on a “market-driven” model for broadband infrastructure development as ISPs are the primary agents for improving access, speed and affordability. As a result of this model, urban areas generally see lower broadband prices since ISPs can serve more households with less wireline infrastructure. This ease of distribution increases the competitiveness of the urban broadband market, driving prices down further. However, as you move away from densely populated areas, the cost for providing broadband services becomes increasingly expensive. The total cost for broadband delivery is a function of both the backhaul wireline and the local connections from the home to the backhaul. The major ISPs, in some cases referred to as “Incumbent Local Exchange Carriers” (ILECs) who are the main providers of

Population density (pop. per sq. km)

Population density and % of rural population 100

50%

45%

40%

35%

30%

25%

20%

15%

10%

0% BC

Québec

Alberta

Ontario

Oregon

Washington

% of rural population Note: US data is based on 2010 Census data. Source: Canadian figures based on 2011 StatCan data. US figures based on 2010 Census data from the United States Census Bureau.

% of rural population

BC’s difficulty in improving broadband affordability is highlighted by the fact that BC is comparable to other provinces in % of rural population, however, ranks the lowest in population density.

Benchmarking connectivity in British Columbia

broadband for a region, or local smaller ISPs, build this “last mile” connectivity between individual households and the broader broadband infrastructure. When the infrastructure is built, high capital and operating costs are transferred onto the end-consumers (over time) to recoup costs by the ISP. The sheer magnitude of costs to be borne by a small number of households makes the business case for investment difficult and risky. In which case, government intervention, via various funding mechanisms, is required to facilitate market involvement to improve connectivity in these areas. As the affordability section shows, the urban and rural divide is in part due to this scenario.

Highlights –– Urban and rural divide is prominent across all of Canada. Rural areas pay on average roughly 14% more than their urban counterparts for similar broadband plans with similar data caps.48 –– BC displays largest price discrepancy between rural areas and urban areas. For the lowest priced broadband plans at 5 Mbps or over download speeds, BC has the largest discrepancy between rural and urban areas with rural areas paying an average of $33 more per month.49 For broadband plans with data caps less than 200GB, rural areas in BC pay on average over 30% more than their urban counterparts.48 –– BC’s rural areas pay significantly more than other rural jurisdictions. When comparing rural broadband plans across similar speeds, on average BC’s rural areas pay 37% more based on the lowest priced broadband plans at 5 Mbps.49

How do BC’s affordability metrics compare? vs. Ontario, Alberta and Québec

vs. Washington and Oregon

Affordability metrics Lowest monthly price for a 5 Mbps plan in urban communities (2015)

n/a

Lowest monthly price for a 5 Mbps plan in rural communities (2015)

n/a

Difference in lowest monthly price for 5 Mbps plan between urban and rural communities (2015)

n/a

Difference in highest monthly prices for 5 Mbps plan between urban and rural communities (2015)

n/a

Average monthly prices in rural communities with data caps of 1-199GB and 200+ GB (2017) Price difference between urban and rural areas for data caps of 1-199GB and 200+ GB (2017) Better than most

Comparable

Worse than most

n/a Data not available

48. Data on broadband plans collected from a sample of ISPs across the selected jurisdictions from July 11, 2017 to August 4, 2017. 49. CRTC, Communications Monitoring Document, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Annual costs for internet access Increases in BC’s average income are partially offset by a sharp growth in internet access spending Strong economic conditions in BC have translated to the fastest growth in median income compared with any other province, growing at 2.1% Compound Annual Growth Rate (CAGR) over the last three years.50 However, spending on internet access rose the fastest in BC at an increase of roughly 15% from 2014 to 2015, while BC’s counterparts saw their internet costs rise by an average amount of roughly 8%. The overall increase in internet access spending signals in BC a growing demand for internet access despite the affordability issues outlined below. However, BC residents are spending a higher proportion of their income relative to other provinces. BC’s median income rose the fastest in the last three years at CAGR of 2.1%.

Monthly median household income trend (2013-2015, CAD in 2015 Dollars) $9,000 2014 Oil crisis $8,500 $8,000 $7,500 $7,000 $6,500 $6,000 2013

2014 BC

Alberta

2015

Ontario

Québec

Source: StatCan data as of July 2017.

BC residents are spending an increasing amount of money to access internet services.

Yearly internet access spending per household as a proportion of income (2011 – 2015) 0.75% 0.70% 0.65% 0.60% 0.55% 0.50% 0.45% 0.40% 2010

2011 BC

2012 Alberta

2013 Ontario

2014

2015

Québec

Source: StatCan data as of July 2017.

50. StatCan, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Price of broadband plans based on similar advertised speeds BC’s urban areas saw a drop in the cost of the lowest priced broadband plans while rural areas saw a significant rise While internet spend is rising in BC overall, the lowest priced 5 Mbps broadband plans in urban areas saw a drop of 18% (CAGR) from the previous two years. This is expected since urban ISPs can service more customers and utilize infrastructure and organizational synergies to drive down costs.51 When comparing the lowest cost 5+ Mbps plans, BC is tied for having the lowest priced internet service.

Lowest monthly price for a 5 Mbps plan in urban communities (2013-2015, adjusted to 2015 CAD Dollars) $35 $30.93

$30.48

$30

18% Drop

$25

$25.00

$20 $15 $10 $5 $0 2013 BC

2014 Ontario

Québec

2015 Alberta

Source: Communications Monitoring Document 2014 as of October 2014, Communications Monitoring Document 2015 as of November 2015 and Communications Monitoring Document 2016 as of February 2017. Dollar figures adjusted for inflation using Consumer Price Index from StatCan.

51. Statcan, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

In contrast, BC’s rural and remote areas saw an increase of over 16% (CAGR) for the same plans over the previous two years.52 This trend is inconsistent with Ontario and Alberta which saw a decrease of 2%52 for the same type of broadband plan. On an absolute basis, BC’s rural areas pay more for these broadband plans relative to the rest of their counterparts in Canadian provinces. When comparing the same plans as a proportion of provincial median income, BC’s rural areas spend approximately double their median income relative to BC’s urban areas and their rural counterparts in the select Canadian provinces. Overall, the combination of the aforementioned trends highlight affordability issues in BC’s rural areas.

Lowest monthly price for a 5 Mbps plan in rural communities (2013-2015, adjusted to 2015 CAD Dollars) $70 16% Increase

$60 $49.79

$50 $40

$58.00

$38.15

$30 $20 $10 $0 2013 BC

2014 Ontario

Québec

2015 Alberta

The price discrepancy is further compounded considering rural areas have lower median incomes when compared with their urban counterparts. The rise in rural prices may be attributed to several factors, including: (1) market fragmentation resulting in less competition between ISPs; and (2) market consolidation as small ISPs are being acquired. In his letter to the Minister of Industry, Science and Economic Development, Jean Pierre-Blais, the Chairman and Chief Executive Officer of the CRTC highlighted the issue of internet affordability. He noted that many low-income Canadians told the CRTC they can afford to pay for broadband service only if they sacrifice other necessities, such as food, clothing, and healthcare. They regularly spend a higher percentage of their income on broadband service than the average Canadian household. In fact, the CRTC’s 2016 Communications Monitoring Report shows that the price of broadband service is increasing faster than the rate of inflation.53

52. CRTC, Communications Monitoring Document, 2016 53. CRTC Submission to the Government of Canada’s Innovation Agenda, December 21, 2016. © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

The urban and rural divide is apparent across all provinces when looking at the lowest priced broadband plans at 5 Mbps download speeds. However, the divide is especially prominent in BC with an average difference of $33 per month while other provinces exhibit an average difference of $13 per month.54 Comparing these plans is a strong indicator for affordability since these plans are generally subscribed to by lower-income households. The significant price difference can be partially attributed to BC’s mountainous landscape and dispersed population, necessitating significant ISP investment and government support. BC’s rural areas are paying $33 more per month than their urban counterparts for the same type of plan.

Price comparison between rural and urban areas for the lowest monthly price for a 5 Mbps plan in 2015 $70 $60

$33 difference

$50

$33 difference $5 difference

$40 $30 $20 $10 $0

Ontario Rural

Alberta

Urban

Note: Québec showcased no significant difference between its rural and urban communities. Source: Communications Monitoring Document 2016 as of February 2017.

BC has the smallest difference between the most expensive broadband plans between rural and urban communities highlighting the limited availability to affordable broadband plans in BC’s rural communities.

Price comparison between rural and urban areas for the highest monthly price for a 5 Mbps plan in 2015 $100 $90

$35 difference

$7 difference

$80 $70

$27 difference

$60 $50 $40 $30 $20 $10 $0 BC

Ontario Rural

Québec

Alberta

Urban

Source: Communications Monitoring Report 2016 as of February 2017. 54. CRTC, Communications Monitoring Document, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Prices of broadband plans based on similar data caps For broadband plans that offer a data cap of less than 200GB, rural areas in BC have one of the highest average monthly prices versus Ontario, Alberta, Québec, Washington and Oregon With an average monthly price of $88 per month for plans with a data cap of less than 200GB, BC has the least affordable price when compared to other Canadian provinces. BC is also more expensive than the comparator US states. The expensive plans for this data cap range further showcase the inherent difficulties in providing high-speed broadband to rural areas in BC. Even when broadband is available in these communities, BC residents may not have the financial resources to become connected. From the perspective of the ISPs, this presents an additional deterrent to their business case for expanding connectivity to rural areas. Not only is broadband infrastructure expensive to set up given the unforgiving terrain of BC, ISPs are also forced to charge higher prices to compensate and, in doing so, risk attaining lower subscription rates. The need for affordable broadband plans with higher data caps is becoming ever more pressing as highlighted by the fact that internet users, in Canada, have increased their bandwidth consumption by an average of 50.4% over the last five years.55 As bandwidth consumption is expected to grow as household internet devices proliferate, this necessitates the need for broadband plans to keep pace

Average Monthly Price (2017 CAD Dollars)

Average prices in rural communities per 1-199GB data cap in 2017 (adjusted to 2017 CAD Dollars) $100

$120,000

$90 $100,000

$80 $70

$80,000

$60 $50

$60,000

$40 $40,000

$30 $20

$20,000

$10 $0

Alberta

Washington

Ontario

Oregon

Quebec

Median household income Note: Data on broadband plans collected from a sample of ISPs across the selected jurisdictions from July 11th 2017 to August 4th 2017. Figures do not include provincial, state or federal taxes. Conversion to USD to CAD based on $1.25 USD:CAD exchange rate on July 31, 2017 (Bank of Canada). Dollar figures adjusted for inflation using Consumer Price Index from StatCan and US Bureau of Labour Statistics Source: StatCan, US Census Bureau, 2015

Going deeper Plans with a 5 Mbps download speed showcase a substantial difference in price between BC’s rural and urban areas. Data caps portray the same story – BC exhibits the second largest difference in pricing between the two areas for both the 1-199GB and 200+ data plans.

55. CRTC, Telecom Regulatory Policy CRTC 2016-496, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Median household income (2017 CAD Dollars)

BC has the highest average monthly price for a 1 – 199GB data cap plan for rural communities relative to comparator jurisdictions.

Benchmarking connectivity in British Columbia

in terms of increasing data caps while keeping plans affordable. However, the difficulties of providing affordable broadband internet to rural communities in BC is further highlighted when compared with urban areas. For lower data cap plans (i.e. less than 200GB), rural areas pay on average 31% more than their urban counterparts in BC. The same story holds true for the 200+ data cap – not only are prices in BC’s rural areas higher than most other jurisdictions, the difference in price for urban and rural areas are also significant (37%). The substantial differences in prices between BC’s urban and rural areas, as well as BC’s rural areas relative to the other jurisdictions, is indicative of BC’s lack of affordability for broadband.

Price comparison between urban and rural communities for plans with 1-199GB data caps in 2017 (adjusted to 2017 CAD Dollars) $100 Average monthly price (CAD)

BC has one of the largest monthly average price difference between urban and rural areas for a 1-199GB data cap plan.

$21 price disparity

$80

$60

$40

$20

$0 Alberta

Québec

Ontario Rural

Washington

Oregon

Urban

Price comparison between urban and rural communities for plans with 200+ GB data caps in 2017 (adjusted to 2017 CAD Dollars) $24 price disparity

$100 Average monthly price (CAD)

Even at a higher data cap of 200+ GB, BC still has one of the largest differences in price between urban and rural areas.

$80

$60

$40

$20

$0 Oregon

Alberta

Ontario Rural

Québec

Washington

Urban

Source: Data on broadband plans collected from a sample of ISPs across the selected jurisdictions from July 11th 2017 to August 4th 2017. Figures do not include provincial, state or federal taxes. Conversion to USD to CAD based on $1.25 USD:CAD exchange rate on July 31, 2017 (Bank of Canada). © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Speed While wide-spread access to higher advertised internet speeds and prices of broadband plans are important, these metrics do not provide insight into the “actual” speeds received by end-consumers. The actual speeds received by households round out the assessment of the internet quality provided by ISPs. The advertised speeds of broadband plans tend to be the highest speed offered by the ISP for a specific plan. Often, the actual download speed is much lower than the advertised speed due to a number of different factors. This includes but is not limited to network congestion, distance from the ISP and the time of day. Comparing actual internet speeds helps paint a more vivid picture of how BC’s speeds compare with other jurisdictions in a real-world setting and determine the type of internet content and services that users can actually access. Please note speed is one component of assessing the quality of internet access. The analysis is limited to actual speeds, since internet quality metrics such as latency, jitter and others are not provided on the granular level required to conduct a robust analysis by province and state.

Highlights: –– BC leads all Canadian provinces in download speeds. BC has a median download speed of 14 Mbps56 placing BC third against all other jurisdictions, and ahead of all selected Canadian provinces.57 BC’s strong performance showcases the quality of the existing broadband infrastructure. –– Urban-rural difference in speed not as dramatic in BC. BC saw a difference of 6.2 Mbps between urban and rural download speeds. This places BC ahead of Alberta and Ontario, which saw a discrepancy of 7.6 Mbps58 and 7.7 Mbps,58 respectively.

How do BC’s speed metrics compare? vs. Ontario, Alberta and Québec

vs. Washington and Oregon

Speed metrics Download speeds (2015)

Upload speeds (2015) Difference urban and rural between download speeds (2015) Better than most

Comparable

Worse than most

n/a

n/a Data not available

56. Canadian Internet Registration Association, 2016 57. M-Lab, 2016 58. Telegraph, February 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Actual download and upload speeds BC’s leads all Canadian provinces in downloads speeds while it lags behind in upload speeds Download speed is the rate at which data is transferred from the internet to a user’s computer, while the upload speed is the rate at which data is transferred from the user’s computer to the internet. Higher download speeds are important for residential customers since residential users primarily pull information from the internet (e.g. HD streaming). Higher upload speeds are important for businesses, specifically technology companies, which use the internet as a primary channel for customer acquisition, internal communication, information management and data storage that uses complex cloud technology. As the trend of working from home continues, businesses are increasingly relying on telecommuting and off-site meetings, which require significant upload speeds to operate effectively. Using speed test data collected from M-Lab, BC has the third highest download speed at 14 Mbps,59 surpassing Alberta and Ontario. By comparison, BC has room for improvement when it comes to upload speeds. BC has a median upload speed of 3 Mbps, placing it in the bottom half of the compared jurisdictions. Consistent with findings from the analysis of access metrics, comparison of median speeds showcases the continued disparity between Canadian and US jurisdictions. But the divide is not as significant as that for access, due to BC’s strong download speed performance.

Median broadband download and upload speeds in 2015 (Canada and US) 16

6 4 2 0

14 Speed (Mbps)

BC leads all Canadian comparator jurisdictions for median download speeds while, less importantly, lags behind most comparable provinces and states for upload speeds.

2 Alberta

Ontario

Québec Upload speed

Oregon

Washington

Download speed

Note: M-lab data is based on median download and upload speeds. Source: M-Lab as of December 2016.

59. M-Lab as of August 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Difference between download speeds in urban and rural areas BC’s download speeds in rural areas are comparable to other provinces, while the urban-rural “divide” is not as prominent in BC as it is in other provinces While US data is not available, a Canadian comparison of actual download speeds between urban and rural areas reinforces the notion of the urban-rural “divide”. Using data collected from CIRA, the urban-rural divide is especially prominent in Ontario and Alberta with a difference of 7.6 Mbps60 and 7.7 Mbps,60 respectively. For BC, however, the difference between urban and rural is not as dramatic: it stands at 6.1 Mbps. There is room for improvement for download speeds in BC’s rural areas but the province is mainly in line with its provincial counterparts’ download speeds.

Average urban and rural download speeds in 2015 25

20 Speed (Mbps)

BC’s rural areas rank in the bottom half of the pack for average download speeds. However, the disparity of download speeds between BC’s urban and rural areas is not as prominent as that of its peers.

7.6 6.1

2.3

7.7 10

Alberta

BC Urban download speed

Québec

Ontario

Rural download speed

Source: Canadian Internet Registration Association as of December 2016.

60. Canadian Internet Registration Association, 2016 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Broadband, internationally Broadband has been a hot topic in developed countries as internet fully integrates itself into our day-to-day lives and technological advances increase the demand for more bandwidth. In order to produce a well-rounded image of connectivity outside of North America, it is valuable to review the state of broadband and the key initiatives taken to date in other countries that have initiated ambitious connectivity programs. Because of Australia’s similarity to BC and Canada in terms of diverse climate, rugged geography, and sparse population density, Australia can serve as a case study; the United Kingdom, while much smaller and more densely populated relative to Canada, has initiated several large-scale connectivity investments that are worth review.

Australia Internet in Australia Australia, one of the leading developed nations in the world, lags significantly in broadband connectivity. In 2015, Australia trailed behind other developed nations such as US, Canada, and United Kingdom in broadband download speeds and subscription rates at 4+ Mbps. Australia also showed the lowest increase in the Asia Pacific region in year-over-year change for broadband download speeds; speeds have improved minimally. Peak speeds were also noted to fluctuate, with Australia being the only country within Asia Pacific to see a quarterly decline of 6.3% in the fourth quarter of 2015. Australia’s subpar broadband performance is despite the ongoing rollout of National Broadband Network (“NBN”), a massive government funded and spearheaded broadband project aimed to increase the quality of and access to broadband.61

National comparison on average download speeds in 2016 16 13.1

14 Speed (Mbps)

Australia is significantly behind developed nations like Canada, UK, US in average download speeds.

13.9

14.2

12 10 8

8.2

6 4 2 0

Australia

Canada

Source: Akamai’s state of the internet, Q4 2016. 61. Akamai, Q3 2016 State of the Internet © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

National comparison of subscription rates for 4+ Mbps in 2016 % of households subscribed to broadband internet

Australia ranked last in subscription rates relative to US, UK, and Canada.

100% 90%

88%

89%

Canada

83%

80%

73%

70% 60% 50% 40% 30% 20% 10% 0% Australia

Source: Akamai’s state of the internet, Q4 2016.

The National Broadband Network Overview In 2007, Australia initiated its largest infrastructure investment ever made and allotted $43 billion (Australian dollars) to the NBN. At the time, existing copper wiring was approaching the end of its life cycle and the demand for internet connectivity was on the rise. The NBN is a wholesale, open-access data network project. It intends to provide at least 25 Mbps download speeds to all household premises, and at least 50 Mbps to 90% of fixed line premises as soon as possible.62 The project completion date is 2020. This connectivity will help bridge the gap between urban and rural economic prosperity and opportunity. A 2015 document by Deloitte valued the nation’s digital economy at $58 billion and estimated that it could be worth 50% more by 2020. “The speed of that growth is at risk if we don’t have the broadband to support it,” said John O’Mahony, an economist at Deloitte Access Economics.63 Successes of NBN The Centre for Energy-Efficient Telecommunications (CEET), in partnership with the University of Melbourne, completed a study reviewing the impact the NBN will have on Australia’s GDP. The study found that the investment will have a net positive impact on the country’s GDP by 1.8% and increase real household consumption by about 1.4%.64

62. Government of Australia, NBN Co Ltd – Statement of Expectations 2016 63. New York Times, How Australia Bungled Its $36 Billion High-Speed Internet Rollout, 2017 64. Centre for energy-efficient telecommunications. University of Melbourne, The Economic Benefit of the national Broadband Network, 2015 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

Challenges of NBN To date, the net results of the NBN have been disappointing. Average internet speeds still lag behind those of most developed countries (such as Canada, US, Japan, and South Korea), and even some developing countries (such as Thailand and Indonesia); peak-time speeds go as low as 1/500 of the service promised and rural Australia has received sparse and inconsistent coverage. The initial objective of the NBN was to bring 1,000 Mbps of download speed to 100% of households. That number has been reduced to 100 Mbps, and now to 25 Mbps. The project has unfortunately been subject to partisan politics. A likely cause for the program’s challenges has been in the nature of its scope and timeline. The government was not realistic in the resources, partnerships, and timeframe required for a project of this size. Already, the budget has increased $6 billion (12% increase) to $49 billion and the timeline was pushed back 3 years (the original completion date was 2017). It’s difficult for NBN to have the support and resources it needs from the government as partisan priorities shift on a three-year election cycle. Lastly, internet affordability is difficult to maintain given the current wholesale pricing structure between the NBN and Australia’s Internet Service Providers (“ISP”). NBN uses a two-part pricing strategy, charging the ISP a monthly fixed fee and a usage fee dependent on the data downloaded. The ISPs, however, are charging only a fixed fee (often held by contract) to their customers and are unable to pass increasing usage fees to their customers. With growing data consumption, ISPs are forced to purchase less capacity from NBN to maintain their costs. In other words, the high speed broadband, even when available, is not always accessible.

Benchmarking connectivity in British Columbia

Lessons learned for Canada and BC By the US Federal Highway Administration’s standard, NBN is a “mega project” (a project valued over $1 billion USD). The risks of mega-projects are well documented. In one influential study, Bent Flyvbjer, an expert in project management at Oxford’s business school, estimated that 9 out of 10 projects go over budget; time overruns, too, are a perennial problem.65 Lastly, the premise that projects need to work on two levels – in the short term for recovering financial outlays and the longer term for creating social impact – often becomes a barrier to taking action. NBN’s size is admirable, but it may also be its central point of weakness. The provincial and federal government in Canada can leverage the work underway in Australia as a case for targeted and tightly defined projects at home. The following analysis of government initiative in the United Kingdom, a world leader in internet quality, showcases success driven by smaller investments with narrower scopes.

United Kingdom Internet in the UK The United Kingdom is a small, densely populated nation (consisting of four countries: England, Scotland, Wales, and Northern Ireland). The Economist ranks the UK’s internet connectivity as the fourth best in the world. Reasonable cause for their superior connectivity rests on the nation’s relatively simple geography and high population density (which is approximately 67 times greater than that of British Columbia). Some comparative statistics: –– Average download speed: 13.9 Mbps (Canada: 13.1 Mbps) –– Internet access at 25 Mbps: 90% (Canada: 88%) Key government initiatives The United Kingdom has proposed several aimed investments that target their underserved population in order to tap into the economic and social welfare benefits of unanimous broadband coverage.

–– Stimulate private investment in full-fibre connections by 2021 through regulatory oversight –– Starting 2017, the government will invest £200 million to fund locally-led projects across the UK to leverage local and commercial investment to deliver more fibre connections (the fastest broadband technology). –– As of March 2017, Department for Digital, Culture, Media & Sport has invested £551M towards this initiative The UK government has also committed to introduce a Universal Service Offering (USO) that will enable any household in the nation to request high-speed internet connection of 10 Mbps. This commitment may either be through regulation, or through a voluntary investment from an ISP. In July 2017, British Telecommunications (BT) offered to provide this service across the country; no decision has been made yet, and the Government will carefully weigh the merits of the two approaches.

Programs include the Broadband Delivery UK (BDUK), a part of the Department for Culture, Media and Sport. This initiative is delivering superfast broadband and local full-fibre networks to the nation. The government is supporting investment to: –– Provide superfast coverage (24+ Mbps) to 95% of the UK by December 2017 –– Provide basic broadband (2+ Mbps) to all household premises

65. McKinsey & Co, Megaprojects: The good, the bad, and the better, 2015 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

A regulatory USO would provide a safety net, meaning that fast and reliable broadband could be available to everyone, regardless of where in the country they lived whereas the proposal from BT will proactively build the necessary network infrastructure to connect the majority of households and businesses rather than wait for this to be done on request. BT’s Chief Executive, Gavin Patterson, says, “This investment will reinforce the UK’s status as the leading digital economy in the G20. We already expect 95% of homes and businesses to have access to superfast broadband speeds of 24 Mbps or faster by the end of 2017.”66 Lessons learned for Canada and BC Although it is difficult to accurately compare Canada’s connectivity with that of the UK, it is still worthwhile reviewing how their government priorities are being executed, and attribute successes where they’re due. The UK government spurs investment through public-private partnerships and keeping regulation “at an arm’s length”. In contrast to Australia, this allows the private market to operate competitively and efficiently.

66. UK Government, Universal Broadband To Reach Every Part of the UK, 2017 © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Benchmarking connectivity in British Columbia

kpmg.ca

This document has been prepared by KPMG LLP (“KPMG”) for Northern Development Initiative Trust (“the Client”) pursuant to the terms of our engagement agreement with the Client dated July 11, 2017 (the “Engagement Agreement”). KPMG neither warrants nor represents that the information contained in this document is accurate, complete, sufficient or appropriate for use by any person or entity other than the Client or for any purpose other than that set out in the Engagement Agreement. This document may not be relied upon by any person or entity other than the Client, and KPMG hereby expressly disclaims any and all responsibility or liability to any person or entity other than the Client in connection with their use of this document. © 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 17426 The KPMG name and logo are registered trademarks or trademarks of KPMG International.