Gigabit Internet in 3% of Canadian homes by end of 2016: Deloitte

The availability and adoption of gigabit Internet in Canada is expected to grow this year, with almost three per cent of Canadians subscribing to the service by the end of 2016, according to Deloitte Touche Tohmatsu Ltd.’s annual predictions of technology trends. Deloitte said in a press release it forecasts the number of 1GB-per-second connections will “surge” with availability to more than four million households by the end of 2016, and at least 100,000 homes, or about three per cent of Canadians, subscribing to those speeds. Duncan Stewart, Deloitte’s director of research for technology, media and telecommunications in Canada, said in a phone interview that while it “remains unclear how many people will actually opt for it … we do have numbers in the predictions suggesting it will probably be in the hundreds of thousands for Canada.” He said reasons people might sign up for such fast speeds include the reality that the Internet speeds customers actually get are slower than what's advertised, especially during peak periods. “If you want to do things like online gaming, you want the absolute fastest connection,” he noted. In households with multiple users, each person may be watching something separately on their own device, using social media, working on school projects and uploading video. In such a scenario, a family may not need a gigabit connection, but they might need something in the hundreds-of-megabits per second range, he said. “It’s not that there is a single device that drives a gigabit worth of usage. It’s that we are using so many devices simultaneously that we start getting there,” he said. Others may want such fast service because they’re running a small business out of their home, Stewart added. Having three per cent of Canadians subscribe to gigabit Internet is “not bad for the first year,” given how new such services are, he noted. It wasn’t until last year that major Canadian service providers began announcing they would offer gigabit Internet to customers —first with an announcement from BCE Inc. in June and a launch in August, followed by an announcement in July from Quebecor Inc.'s Videotron that it was testing gigabit speeds, and a similar announcement by Rogers Communications Inc. in October, which launched the service in December. “We’re talking about more than a 100 per cent growth year over year,” Stewart said in the interview, though he noted that “at that rate, it will take a while before it’s in half of Canadian homes. We are taking the first step of the marathon, not the first step of the hop, skip and a jump.” Industry figures would suggest Deloitte's prediction that gigabit Internet will be available to four million households by the end of 2016 is an underestimate. Bell has said its gigabit Internet is already available to two million residences, while Rogers has said its comparable service will pass four million homes by the end of this year. Stewart said in a followup email that the estimate of four million was made prior to Rogers' announcement, and that Deloitte now expects availability will likely be "well over" six million, assuming the companies hit their deployment goals. Some analysts have said gigabit Internet is essentially a marketing tool at this point, while some companies maintain there is no demand for the service. “There’s nothing wrong with marketing,” Stewart said. “We all drive cars that go well above the speed limit. … In many of the same ways, having that overcapacity, speed or horsepower allows us to do things faster.” The Deloitte report said that, globally, the number of gigabit Internet connections will increase 10-fold by the end of this year to reach 10 million. Of those connections, 70 per cent will be residential, it said. “Looking further ahead, we forecast about 600 million subscribers may be on networks that offer a Gigabit tariff as of 2020, representing the majority of connected homes in the world,” the report predicted. “While Gbit/s subscriptions should surge this year (albeit from close to nothing to niche) the sharpest inflection point for the service may be in terms of perception. This would follow a flurry of announcements about the launch of Gbit/s around the world,” it added. The report also made a number of predictions about the erosion of the TV market. Stewart said the trends in Canada would be very similar to what’s happening in the U.S. The number of TV subscribers in the U.S. is expected to fall about 1 per cent in 2016, and 1.5 per cent in 2017 and 2 per cent in 2018, the report said. “Unquestionably, the number of people paying will fall, but it’s falling in a very measured and gradual fashion. Our phrase erosion, not implosion,” Stewart said. TV penetration rates will also see similar trends in both countries, he said, which could see the rate of subscriptions fall from around 80 per cent to potentially as low as 70 per cent by 2020. “That’s very much similar to the sort of levels that we would have seen in the late 1990s. So the idea that we are going into some sort of collapse of traditional TV —pay TV wasn’t in collapse in the 1990s. They had 70 per cent. There’s no reason why it would be in collapse at 70 per cent in 2020.” He added that monthly TV bills will probably continue to rise, though more slowly than in the past. “We will have unbundling, but many Canadians will stick with their existing packages. And even those that do unbundle may in fact find they’re not saving as much money as they thought they were,” he said. Stewart added that the people who are cord-cutting tend to subscribe to the cheapest packages anyway, “so as they drop off, it actually pushes monthly up.” None of those developments will make for big changes in the TV market —except for the decline in TV watching by millennials aged 18 to 24. “There is a significant decrease in viewing by that youngest cohort,” he said, adding that the trend in Canada appears to be similar to that in the U.S. “The younger Canadians are moving away from TV faster in percentage terms than the population as a whole.” The report predicted that, in the U.S., 18 to 24-year-olds would watch about 12 per cent less traditional TV in the first quarter of the 2016 broadcast year than at the same time a year earlier. That makes for a 20-minute reduction to 150 minutes a day. Deloitte also made a number of predictions regarding mobile devices, including that only 0.3 per cent of Canadians who own mobile devices will use an ad-blocker in 2016. “Everybody’s obsessed about mobile ad blocking, or at least they were about a month ago. If you look at the app stores, the ad-blockers, they’re just not in the top 10, they’re not in the top 20 anymore,” Stewart said. He said, in contrast, people are “really serious about ad-blockers” when using desktops, given that 20 to 25 per cent of people have such software on their computers. “Mobile ad-blockers only block browsing, and of course, we spend 90 per cent of our time on our smartphones in-app. So there’s really not a lot of point in installing a mobile ad-blocker, because they don’t work on most of the stuff we do,” he said. Another noteworthy development in mobile, Stewart said, is the growth of touch-based mobile shopping. “It’s the idea that with a single or maybe two taps of a button, you are able to do a purchase,” he said. Deloitte is predicting that the number of Canadians who use touch-based mobile shopping will increase 150 per cent to more than a million. The report also said that in developed markets, 26 per cent of smartphone users won’t make any traditional phone calls in a given week on their devices. The report noted that “mobile voice volumes as measured in minutes have increased by 20 per cent between 2012 and 2015, likely because of the increased affordability of voice minutes, the rising take-up of unlimited voice packages, an increase in voice minute allowances and an ongoing substitution of fixed to mobile calling.” It added: “What may be happening is a polarization in the usage of voice on mobile: some users are increasing their voice call volumes; at the other end of the scale a growing proportion are not using voice at all.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Gigabit Internet in 3% of Canadian homes by end of 2016: Deloitte

Broadcast | January 12, 2016

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Gigabit Internet in 3% of Canadian homes by end of 2016: Deloitte

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