Regulating content on the Internet: A new technological perspective

The Internet is a Major Music Source

The Internet has become a major source of music downloads, from fee-based sources such as iTunes, Amazon, WalMart (and the Web sites of recording artists), free sources such as CBC, MTV (and the Web sites of some recording artists), and peer-to-peer file sharing networks.

Peer-to-Peer File Transfers are Consuming Significant Bandwidth

Peer-to-peer (P2P) file transfers have become the largest single type of data on the Internet, both within Canada and around the world. As a result of its file-sharing architecture, which allows files easily to be swapped between multiple users' computers instead of having the files stored centrally on a server, peer-to-peer data now accounts for over 50% of all Internet traffic.

Canadians are Accessing Video Online

Canadians are increasingly accessing video on the Internet, including user-produced video downloaded from sites such as YouTube, professionally-produced Web quality video streamed from broadcast network sites such as the CBC and CTV, and broadcast quality video provided directly to gaming consoles. Nine Internet video sites, alone, now generate more traffic in the United States, than the entire US Internet backbone carried in 2000.¹⁵ We should also note that close to 50% of this Internet video is usercontributed video hosted on social media sites such as YouTube and MySpace. The table below compares total US Internet backbone traffic in 2000 with Internet video traffic from those nine sites in 2007.

IPTV is an Emerging Service in Canada

In Canada, Internet Protocol Television (IPTV) is relatively new.¹⁶ To date uptake has been limited, in comparison with countries in South Asia or the EU. Major Canadian telcos such as Bell and Telus are beginning to deploy subscription-based IPTV services. Sasktel's Max service is Canada's most mature IPTV offering. It has been in production since 2002 with over 50,000 subscribers at the end of Fiscal Year 2006.¹⁷ The table below shows the growth in Sasktel's Max service since its introduction.

Source: Sasktel 2006 Annual Report 

MTS/Allstream and Bell Aliant are also offering IPTV services in Manitoba and the Maritimes, respectively.

Internet has become a Distribution Medium for Radio Broadcasts

A significant number of Canadians are also listening to radio broadcasts streamed over the Internet. A sample of data from comScore Canada from May 2007 indicates that approximately 30% of Canadian Internet users visited a Web-based radio site in that month. The most popular sites among Canadian users appear to be Canadian radio stations. Based on research conducted by comScore Inc. in the United States that indicates that most Internet listening takes place at work¹⁸ , it is likely that many users are taking advantage of their office Internet connections to listen to local radio broadcasts while working. The table below indicates the top 30 sites visited by Canadians in that month.

Top 30 Internet Radio Sites visited by Canadians in May 2007

Top 30 Internet Radio Sites visited by Canadians in May 2007		Total Unique Visitors (000)	% Reach	Total Minutes (MM)	Total Pages Viewed (MM)
Total Internet : Total Audience		23,092	100.0	59,655	95,044
Radio		6,982	30.2	291	631
1	Corus Radio	1,714	7.4	27	72
2	Standard Radio Inc.	1,063	4.6	17	33
3	Rogers Media Radio	828	3.6	29	66
4	CHUM Radio Interactive	556	2.4	5	10
5	radioenergie.com	501	2.2	6	11
6	Clear Channel Online	372	1.6	3	5
7	LAUNCHcast	345	1.5	14	10
8	vocm.com	268	1.2	11	10
9	z1035.com	236	1.0	2	6
10	rockdetente.com	232	1.0	2	2
11	AOL Radio	183	0.8	4	4
12	live365.com	175	0.8	2	3
13	BBC UK Radio	171	0.7	2	2
14	rythmefm.com	162	0.7	14	33
15	npr.org	146	0.6	0	0
16	Social.fm	134	0.6	3	3
17	choiradiox.com	116	0.5	0	1
18	rick.com	103	0.4	0	0
19	flow935.com	91	0.4	00	11
20	hot899.com	86	0.4	00	11
21	Disney Music	84	0.4	0	0
22	CBS Radio	79	0.3	0	1
23	jrfm.com	78	0.3	0	1
24	online-radio-stations.com	66	0.3	0	0
25	ARD Sites	63	0.3	0	1
26	di.fm	56	0.2	7	1
27	listenernetwork.com	54	0.2	6	11
28	Star Media Group, Inc.	53	0.2	6	11
29	rfi.fr	52	0.2	1	1
30	luckysevenradio.com	51	0.2	0	0

Source : comScore Canada

VoIP Usage is growing Rapidly

Voice over IP (VoIP) has become a very popular Internet service. A wide range of VoIP service providers have come into being over the last 10 years. They range from free computer-to-computer call services such as Skype, to commercial VoIP providers such as Vonage focused on the home and small business market, all the way to companies such as Monophone that provide products and services targeted at the corporate user. While VoIP uptake among consumers has been significant, its impact on Internet traffic has been relatively small due to the modest bandwidth requirements of a voice call. The table below shows the global growth of VoIP since 2005, with projections to 2009.

Global VoIP growth

	2005	2006	2007	2008	2009
Total Subscribers	24,043,303	47,346,874	81,618,331	111,209,271	133,633,938
Growth %	67	97	72	36	20
Net New Subscribers	9,682,349	23,303,571	34,271,457	29,590,940	22,424,668

Source : Infonetics Research, February 2006

Electronic-Commerce is worth $Billions

Another significant change since 1999 has been the growth in the importance of the Internet for business in Canada and around the world. Electronic-commerce (on-line sales and financial transactions) represented a very small percent of business-to-business trade, and was close to non-existent on the retail front in 1999. Since then, Internet sales have experienced double digit dollar growth in every year. By the end of 2006, which is the last year for which we have survey data, electronic commerce had grown to almost $50 Billion, and accounted for between 14 and 18 per cent of total business to business sales, although only slightly over 1% of total retail sales in Canada.¹⁹ The Internet has also become a critical factor in other aspects of day-to-day business activity. For everything from online research and banking to collaboration, communication, file exchange and filing of government forms, Canadian businesses in large urban centres and in remote and rural communities have come to rely on the Internet. The table below shows the growth in Internet sales between 2002 and 2006.

Value of Internet sales

	2002	2003	2004	2005	2006
	Internet sales with or without online payment $ millions
Private sector	10,815.30	18,164.40	26,438.00	32,836.90	46,492.00
Public Sector	263.6	756.5	1,881.50	2,933.40	3,424.30
Total	11,078.90	18,920.90	28,319.50	35,770.30	49,916.30

Source: Statistics Canada

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¹⁵ Cisco Systems Inc., Global IP Traffic Forecast and Methodology 2006-2011

¹⁶ IPTV is a closed subscription service. It is worth noting that most telephone companies plan to eventually migrate all their services, including telephone service to IP networks.

¹⁷ Sasktel 2006 Annual Report,
http://www.sasktel.com/about-us/company-information/financialreports/attachments/06-annual-report.pdf.

¹⁸ Bridge Ratings Industry Update — Internet Radio, February 21, 2007
http://www.bridgeratings.com/press_02.21.07.Internet%20RadioUpd-.htm

¹⁹ Statistics Canada, The Daily, "Electronic Commerce and Technology, April 20, 2007
http://www.statcan.ca/Daily/English/070420/d070420b.htm. Note that, while the Statistics Canada report breaks out business to business sales by sector, it does not break out retail sales by sector. While 1% of total retail sales may seem quite small, some areas of retail are far more suited for on-line transactions than others (e.g., travel, electronics, music and software purchases). For these areas, on-line sales are a significant and growing portion of total business.