Wednesday, January 19, 2011

Sweden: miles ahead of Canada on the internet

I was flipping through the latest issue of Wired the other day and I came across an article on Spotify, a music-streaming service based in Stockholm. I'd heard a little about the service before but, because it's not available in North America, I hadn't paid much attention to it.

The article was illuminating and Spotify indeed sounds like a cool service. It's not here thanks to record labels and their reluctance to give listeners anything for free even though it sounds pretty much like an internet version of commercial radio, except that it allows people to actually buy what they hear.

Ah well, such is not the point of this particular rant. What struck me is that Spotify was started in Sweden, which got me thinking: what is it with those Swedes and their incredibly popular internet services? By my count, at least three internationally successful, game-changing services have been started there: Spotify, Skype and, yes, The Pirate Bay.

The effects of the three are easy to summarize. Spotify is changing the way music is consumed in Europe. Skype has completely revolutionized phone calls (especially long distance), while The Pirate Bay - a torrent tracking website that courts and other authorities seem incapable of shutting down - has forced the entertainment industry to change how it does business because it enables free swapping of music, movies and other stuff.

Then I got to thinking about the many internationally successful, game-changing internet services that have been started in Canada. Hmm. Wait a second. Actually... there aren't any.

Why is this? We're constantly told how smart Canadians are, how we're very big users of computers and how we're very clued in to the internet. So where are our world beaters? Why have no earth-shaking internet services arisen here?

It's a good question and could probably serve as the basis of a Master's thesis as I'm sure there are many answers. But, as usual, I think it's prudent to start with the obvious: internet access and the philosophy government and regulators take toward it.

All of the Scandinavian countries (Sweden, Finland, Norway and Denmark) fare very well in international benchmarks, scoring in the top 10 of the OECD by most measures. Canada, not so much. In terms of average advertised speed, for example, Sweden is 13th out of 30 compared to Canada at 25th. In terms of prices for medium speed connections, Sweden is third while Canada is 20th.

The numbers are from a study by the Berkman Center at Harvard, which is probably the best such report I've seen on such stuff. Here in Canada, of course, some of our big telecom companies screamed bloody murder over the report when it came out, claiming it was full of errors. Of course they did. While no international comparison is going to be completely correct, when enough independent studies (read: not industry funded) point in the same direction, when a good number of experts say the same thing, and when all of that combines to confirm what you already felt to be true, well then there might just be something there.

As that study states, "the level of competition in Swedish broadband markets is strong," a fact that has been achieved by correctly applied unbundled local loop rules, an open door for foreign competitors and government involvement in building infrastructure - issues I remarked on the other day ( generated an incredible amount of traffic, by the way - thank you for reading and commenting!).

As for Canada, we've had none of those things. The report tries hard to shatter the illusions some people may still have: "Canada continues to see itself as a high performer in broadband, as it was early in the decade, but current benchmarks suggest that this is no longer a realistic picture of its comparative performance on several relevant measures."

You would think Canada actually has several advantages over Sweden when it comes to starting new internet businesses. We're just as connected but we're closer to the heart of the internet - the U.S. - which means that our companies surely have better access to venture capital, and perhaps better talent. Our population is four times bigger, which means we should have a higher statistical likelihood of producing more killer internet companies. We also have more universities producing more computer scientists and business graduates. English is also our mother tongue, the main language of the internet.

One possible reason I've heard for why we still haven't produced even a single great internet firm is our over-reliance on natural resources. Canada is teeming with oil, gas, lumber and other "dumb" commodities, so we haven't really had a need to "get smart." That's a good theory, especially when you look at the staggering disparity between how much Canada and Sweden spend on research and development. (Sweden isn't home to the Nobel prize for nothing.)

Another possibility is that Canadian startups are more visible to Americans and are therefore either snapped up by them quickly (Google seems to like buying Canadian companies), or they go out of business when a U.S.-based competitor starts up. Swedish companies, meanwhile, benefit from flying under the radar until they're too big to be denied.

Like I said, there are probably many reasons. If you ask me, though, at the root of it all is a different mentality when it comes to the internet. The common denominator shared by those three Swedish internet services is that they used the true power of the internet - the ability to innovate without permission - to upset the status quo and affect change. This has also happened a lot in the United States, where companies such as Google, eBay, Amazon, Netflix, Craigslist and so on have emerged.

It hasn't happened in Canada because that "innovation without permission" mentality hasn't been allowed to develop. To bring it back to our internet access, it seems like every step of the way we have to ask our internet providers for the right to innovate. The current issue of usage-based billing is a case in point. Limiting how much people can use the internet - rather than encouraging them to use it more, like Sweden does - is a very strong way of continuing and enshrining this permission-based system.

Like I said last week, while I'm not completely opposed to charging heavy internet users more than light users, there should be alternatives available where if an internet provider wants to give its customers unlimited usage, than it should have that option. By forcing all ISPs to play the permission system game, we're not just limiting our internet usage, we're limiting our options.

The real effect of the system we've allowed to developed isn't just cranky internet users, it's a lack of services such as Spotify, Skype and Pirate Bay. That's a far more serious effect than people griping about their bills.


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