The last time Canada's telecom regulator launched a review of "basic telecommunications services," one of its decisions focused on the necessity of the phone book. Now, five years later, hopes are high that its next review opens a new chapter.
In 2011, the Canadian Radio-television and Telecommunications Commission (CRTC) didn't include high-speed Internet in its definition of "basic telecom services." That could change this time around as the regulator considers more ambitious goals in an age where people are spending more of their lives online streaming video and music, using social media and other apps, and experimenting with "Internet of things" connected devices in their homes. Canadians' right to fast, reliable Internet, its role in the economy and the social isolation of not being online are all up for discussion.
"It's obvious people are realizing the transformative importance of this to social democracy, economic competitiveness and citizenship. So, it's very important," CRTC chairman Jean-Pierre Blais said in a recent interview in Toronto.
The CRTC has already collected hundreds of written submissions over multiple rounds of questioning and 90 individuals, academics, advocacy and lobby groups, municipalities and telecom companies are scheduled to appear at the three-week hearing, which starts Monday at the commission's Gatineau headquarters.
Dozens of issues will come into play but three major questions will focus on how to extend broadband access throughout Canada's sprawling geography and remote northern communities: Should high-speed Internet access be considered a "basic telecom service"? If it is, how should we define broadband speeds and service? And finally, how do we pay for it?
This is likely to be the last major proceeding in the current five-year term of Mr. Blais, who has cultivated a reputation for a focus on consumers through high-profile decisions on wireless services and cable television unbundling. The outcome could also shape Canada's global reputation for its commitment to innovation and the digital economy as well as affordable services and the treatment of those living in remote communities.
Mr. Blais is weighing lofty international precedents, and in the Toronto interview pointed to discussions at the United Nations and steps "some Nordic countries" have taken to recognize broadband access as a human right (Finland made universal access to minimum Internet speeds a legal right in 2009).
The question of whether broadband access will be included in the basic telecom service definition is still a live issue before the commission, he said. "But once you've decided that threshold question, there are other questions that flow in terms of high-cost areas and do we go down the road of a subsidy or not?"
"We're trying to build the system without going the Australia route," Mr. Blais later added, characterizing that country's often-criticized efforts to roll out a national, wholesale network as "basically an expropriation or nationalization of their broadband network – very costly."
Most financial analysts don't expect the hearing to have a material impact on the profitability of the country's biggest telecom providers, although the companies will be watching the outcome closely as they rely increasingly on Internet offerings for revenue growth as legacy services such as cable television and land-line telephone steadily decline.
Desjardins Securities Inc.'s Maher Yaghi noted in an April 1 report that a recent Ekos Research survey prepared for the CRTC showed consumer demand for a minimum level of services as well as standardized pricing for a base-level Internet offering.
"While it is widely expected that the CRTC will use this process to create some form of fund to push for improved Internet access in rural Canada, we believe there are signs which suggest a willingness to consider pricing levels as well," Mr. Yaghi wrote, arguing that there is a possibility the commission could implement a "skinny broadband" of sorts, similar to what it mandated last year with skinny basic cable packages. He said such regulation could slow the inflation of broadband prices, a worrying sign for companies making huge capital investments in services like "gigabit" Internet (with download speeds around 1,000 megabits per second) in urban areas.
And while many of Canada's large Internet providers are likely wary about the prospect of increased regulation, dozens of intervenors are urging the CRTC to take dramatic steps in support of the "world-class communications system" it envisages in consultation documents.
Catherine Middleton, Canada Research Chair in communications technologies at Ryerson University, says the hearing is an opportunity for the CRTC to go beyond the narrow question of basic telecom services and "investigate much more ambitious approaches to advancing the telecommunications services that will underpin Canada's digital economy," arguing in her submission that the commission should consider how business, governments and regulators could take a co-ordinated and sustained approach to tackling the problem together.
Broadband access as a basic telecom service?
The CRTC established the "basic service objective" in 1999, aiming to make certain base-level services available to all Canadians. Current basic services include land-line telephone, a low-speed connection to the Internet and a printed copy of the local phone book, upon request.
Companies providing those in "high-cost" service areas receive a subsidy to help offset their costs. Telecom operators with annual revenue of more than $10-million pay a percentage of various revenues – primarily from voice calling services and not including retail Internet revenues – into a contribution fund and last year the fund totalled about $110-million.
In 2011, the CRTC didn't include high-speed Internet as a basic service or include it in the contribution fund, but set an aspirational target of universal access to speeds of five megabits per second (Mbps) for downloads and one Mbps for uploads. That's slower than what many urban dwellers currently enjoy but the regulator says it's "sufficient for streaming higher-quality audio and video content."
Mr. Blais says that target has been successful "in some places" and, indeed, the most recent CRTC figures show that 96 per cent of Canadian households had access to such speeds by the end of 2014. Innovation, Science and Economic Development Canada (previously Industry Canada) said last year that it expects more than 98 per cent of households will fall into that category by July 1, 2017. But that could still leave somewhere in the range of 300,000 households without access.
There is general consensus across the industry that "five down/one up" broadband service should now be considered a basic telecom service, but many large players say there is no need for the CRTC to create a new fund to extend Internet coverage and warn that any further demand on revenues will drive up prices for other consumers.
Telus Corp., for instance, argues in one filing that "market forces combined with targeted federal, provincial and municipal government programs" have led to "excellent" broadband availability in Canada that "will soon deliver broadband speeds of five Mbps or greater to all or almost all Canadians. ... There is no need for the commission to intervene."
Ottawa launched a $305-million program in 2014 to fund projects by companies to expand Internet access in rural and remote communities, and the recent federal budget pledged an additional $500-million over five years, starting in 2016–17.
"I anticipate you'll hear a lot of arguments in the hearing that the CRTC shouldn't be directing carriers to add to the existing contribution fund; rather, it should be [helping] the government understand where it should direct its money," said Colin Lachance, an Ottawa-based telecom lawyer.
Many providers also argue that advances in satellite-based Internet technology and capacity will soon lead to improved coverage and speeds and essentially solve the problem. They point to rural Internet carrier Xplornet Communications Inc.'s plans to make broadband coverage with download speeds of 25 Mbps available across the country by July, 2017 and to OneWeb, a company building a global network using a constellation of low-Earth orbiting satellites expected to come online in 2019.
Some say that if the CRTC does conclude that an industry-funded broadband subsidy is necessary, it should redirect the current contribution fund to high-speed Internet expansion, recognizing that services such as voice calling are available as an application over the Internet.
The Affordable Access Coalition (AAC) – a group of public interest, seniors and anti-poverty advocates – says that's not enough and proposes extending the contribution fund to include Internet revenues and target base-level download speeds of at least 10 Mbps.
"People [in rural areas] are driving into town, going to WiFi hot spots, to get the access they need. They're making a lot of sacrifices. And that's to get five [Mbps], let alone getting 10 or 20 or whatever most Canadians have access to," said Geoff White, a lawyer for the AAC. "It's such a myth to say that five is enough or that market forces are taking care of Canadians. That, to me, is the ultimate canard in this hearing. People are hurting, people are paying a lot, and competition is suffering."
An affordability subsidy?
The AAC also argues for additional support from industry revenues to address the challenges faced by low-income households, similar to initiatives in France and Spain and the U.S. Lifeline program, which was recently extended to include a monthly supplement for broadband services.
It has proposed a "baseline" affordability program that would offer low-income households a monthly subsidy of $10.50 to use on any telecom service and says the program would be available to about 1.4 million households and could be capped at $70-million a year. (An "ambitious" program would offer $20.50 a month to up to 2.9 million households and would be capped at $410-million.) Community group ACORN (also a member of the AAC) wants the CRTC to go even further and order telecom providers to offer monthly Internet service for $10 a month to low-income households.
The group filed 400 handwritten testimonials with the CRTC to illustrate the hardship people without home Internet face. Something as simple as preparing home-cooked meals at dinner time becomes a challenge when families need to go to a library to work on homework or apply for jobs, says ACORN member and housing worker Alejandra Ruiz."It adds another stress to the already difficult life of low-income people."
Although high-speed Internet is widely available, the CRTC said only 82 per cent of Canadian households subscribed to broadband service in 2014. The commission recently published an Ekos Research survey in which 11 per cent of respondents said they didn't have home Internet. Exact and up-to-date information is not readily available, but it is clear many households remain offline.
Characterized broadly, the industry's response is that some people simply aren't interested in using the Internet – due to factors such as old age or low levels of education – and the challenges faced by low-income households, while unfortunate, are issues for society as a whole to confront.
Shaw Communications Inc., for example, acknowledges in its filings: "It is problematic that some Canadians do not have access to the Internet because they cannot afford it." But the company goes on to say: "This is not a telecommunications issue, it is a poverty issue," and suggests it is outside the CRTC's jurisdiction, a problem best addressed by "those levels and bodies of government with the expertise and mandates to do so."
Rogers Communications Inc. chief regulatory officer David Watt says there are a range of pricing options on the market and Rogers offers a $25-a-month Internet package that it believes is an affordable option. "You're going from a very standard car to a luxury car and a range of speeds from five Mbps all the way up to a gigabit per second."
Rogers also introduced a pilot project in 2013 offering residents of Toronto Community Housing broadband service for $10 a month and the company said Thursday it plans to expand that project to residents of social housing throughout the areas where it has cable service – Ontario, New Brunswick and Newfoundland.
Rogers stands out in the country as the only major telecom offering such a low-cost service for low-income Canadians. "Make no bones about it, this is an offer that loses money – this is a heavily subsidized offer on the part of Rogers," Mr. Watt says, noting that it is part of the company's corporate responsibility program. "This is not something that any company could reasonably offer on a universal basis."
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Filling in the gaps
TekSavvy Solutions Inc.’s main business is to buy wholesale access to broadband services from cable and telephone companies like Rogers and Bell and sell retail Internet to its own customers. But when broadband services weren’t available in the Chatham, Ont. company’s backyard, it decided to build them itself. Using unlicensed wireless spectrum – the invisible airwaves used to deliver cellular signals – TekSavvy operates a small patch of “fixed wireless” Internet services primarily in Southwestern Ontario, between Windsor and London. Wherever possible, the company puts its radio equipment “on top of tall things – so a grain silo, a hockey arena roof, a library tower,” building its own towers only when necessary, says chief regulatory officer Bram Abramson. Last summer it received some funding under the federal government’s $305-million “Connecting Canadians” program to extend rural broadband (TekSavvy and Execulink Telecom were awarded a total of $3.15-million to expand access in the area). With about 1,500 households on its fixed wireless network, it’s a small part of TekSavvy’s business (it serves more than 250,000 total customers), Mr. Abramson says, but “the goal is to get people service.”
New satellite capacity
Xplornet Communications Inc. says it will be able to offer download speeds of 25 Mbps to customers across the country by mid-2017 thanks largely to investments in new satellite capacity. The New Brunswick-based rural broadband provider uses satellite as well as fixed wireless technology (using communications towers and wireless spectrum) to reach more than 300,000 customers in hard-to-serve areas. Over the next year, Xplornet is launching two new high-throughput satellites, which CEO Allison Lenehan says will allow it to provide more capacity and higher speeds than the current 5 Mbps to 10 Mbps offered on satellite. “It’s wonderful for video streaming and web browsing, but it doesn’t address latency, so any time-sensitive gaming – it still would not be the appropriate solution for folks,” he says, adding that video consumption is generally a bigger priority for the company’s customers.
Backbone connections to Northern Canada
Northern broadband provider SSi Micro Ltd. is investing $75-million in an update of its infrastructure in Nunavut, with $35-million of that coming from the federal government’s Connecting Canadians program. When the funding was announced last year, the company said it planned to improve high-speed Internet service for almost 9,000 homes in all 25 communities in the territory through facility upgrades as well as a new long-term contract to purchase new satellite capacity from Telesat Canada. But there’s still work to do, the company says. In filings with the CRTC for its review of basic telecommunications services, SSi urges the regulator to establish new subsidies to help fund “backbone transport” infrastructure, which connects to the broader Internet. “Building high-capacity local access networks in the North without adequate backbone to feed that capacity is akin to building water bottling plants in the desert without a pipeline to bring the water through the desert and to the plant.”