Download limits may have harmful effects on a country's businesses, the OECD says. (Associated Press)

Canada's early position as a global broadband internet leader continues to erode, with the country sliding in the latest subscription rankings from the Organization for Economic Co-operation and Development.

Canada had 8.6 million broadband subscribers as of December 2007, or about 26.6 per 100 inhabitants, enough to rank 10th among the 30 developed countries that make up the Organization for Economic Co-operation and Development. In the OECD's previous survey six months ago, Canada ranked ninth, while in 2002 it placed second behind South Korea.

In the current rankings, Denmark continued to lead OECD countries with 35.1 subscribers per 100 inhabitants, followed by the Netherlands at 34.8 and Iceland at 32.2.

The twice-yearly ranking measures how many people find enough value in high-speed internet to pay for a connection at home.

Canada 'woefully uncompetitive': analyst

Internet experts said the report painted a poor picture of the state of competition in Canada, where many people tend to have only one or two internet providers — usually a phone company versus a cable firm — to choose from. While ISPs fought vigorously for customers in the early part of this decade by offering enticing deals, which reflected Canada's early lead, they have become less competitive over the past few years.

"This reflects poorly on Canada's advancement in the information economy," said University of Ottawa internet law professor Michael Geist. "Canada remains woefully uncompetitive … We're getting a poor deal."

Overall, the OECD added 235 million subscribers from December 2006, an increase of 18 per cent, with the strongest growth rate coming in Luxembourg (seven per cent), Germany (6.6 per cent) and Ireland (5.8 per cent). Canada's growth rate of three per cent was middle of the pack.

The OECD said that with the pace of subscriptions increasing, speeds have gone up and prices have decreased. The average speed of advertised connections increased from two megabits per second to nine megabits since 2004, while between 2005 and 2006 the average price of a DSL connection went down 19 per cent and cable decreased 16 per cent.

The average broadband connection in Canada, about 7 mbps, ranks below that average. Canada also fared poorly in cost versus the speed provided, ranking 27th out of 30 at $28.14 U.S. for average broadband monthly price per advertised megabit per second.

Taylor Reynolds, communication analyst and economist for the Paris-based OECD, said Canada is still doing well and leading G7 countries in broadband uptake.

"That's impressive for a big country," he told CBCNews.ca.

Download limits a concern

Issues that are of concern to Canada, he said, are the download limitations imposed on subscribers — caps that have thus far not been introduced by ISPs in the United States. According to the report, download caps could hold a country's businesses back by limiting their online development.

"This may become an economic disadvantage in countries with relatively low bit caps, particularly as more high-bandwidth applications appear," the report said.

Typical limits on Canadian internet connections are 60 GB per month, with higher-end plans offering around 100 GB. In the U.S., ISPs currently give customers unlimited downloading, with Comcast, the nation's largest provider, considering a cap of 250 GB — more than quadruple the typical Canadian limit.

Canada has also not benefited from regulations that allow smaller third-party ISPs to access the networks of large phone companies such as Bell Canada, a practice that has flourished in Europe, Reynolds said. A rule known as "local-loop unbundling" allows smaller ISPs to rent out portions of a large phone company's network, then attach their own equipment to provide customers with internet access.

"The current press over traffic shaping [network neutrality] is precisely because competitive operators haven't installed their own equipment in exchanges and rely on wholesale offers from Bell Canada," Reynolds said. "What has stopped them from investing in their own equipment?"

Smaller ISPs say they have invested in their own equipment, but Bell — the country's largest phone company — has sidestepped the unbundling rule by shifting its internet connections out of central buildings and into streetside cabinets, which are exempt from regulation. The Canadian Association of Internet Providers says Bell has shifted the majority of its connections in urban areas to these cabinets, a charge Bell disputes.

Mirko Bibic, chief of regulatory affairs for Bell, recently told CBCNews.ca that the company had only pushed out its network in a few areas.

The OECD report also noted that several countries are taking the lead in the next generation of broadband deployment — superfast fibre networks. About 40 per cent of Japan's broadband connections are fibre, with South Korea coming second at 34 per cent. Most of the OECD — 18 countries, including Canada — have not yet begun rolling out fibre.

The government must also shoulder the blame for Canada's poor OECD showing, however, because it has not made broadband rollout — particularly to rural areas not served by the bigger ISPs — a priority, Geist said.

"Other countries have seen this as a priority and have chosen to ensure that where the market does not provide access or is unlikely to provide access there is a public role," he said.

Officials at Bell and Rogers Communications Inc., Canada's two largest ISPs, declined to comment.