New task force will decide government’s role in bringing broadband to rural Canada

Industry Canada has given a new national task force an ambitious mandate and little time to examine how broadband Internet access can be provided to all rural and remote communities by 2004, and whether the federal government should be footing part of the bill. One of Brian Tobin’s first jobs as Industry minister will be to appoint representatives from the private and public sectors, including local communities, to sit on the new National Broadband Task Force. To be chaired by University of Waterloo president David Johnston, the group will have until March 31 to report to government on how the 2004 deadline can best be met. Johnston is also well known for his past work as president of the two Information Highway Advisory Councils. The falling price of fibre optics and the emergence of dark fibre competitors, combined with the CRTC’s creation of a resale market for DSL and high-speed cable, have created powerful incentives for companies to roll out broadband Internet in urban areas. Those same incentives, however, don’t exist in more rural and remote communities where the infrastructure costs are higher, and the profit margins lower. Between 15 and 20 per cent of the population are expected to fall outside the reach of either DSL or cable. Government spending, tax relief or other incentives are considered by many to be the only way to bring high-speed connections to far flung regions of the country. "There probably will be need for the feds to spend something on it, because this is one of those infamous policy gaps where there’s no market case to provide that service," says Andrew Reddick, director of research for the Public Interest Advocacy Centre. "The question is how do you pay for it? They could do it through procurement, through the public institutions, they could do it as an infrastructure partnership with the communities, they could do it through Canarie, there’s a lot of different ways you could leverage that development." Johnston says it’s doubtful the task force will get into the finer details of how much it may cost the federal government to help bring broadband Internet to all communities. "Once the task force is assembled, I think one of the first jobs would be to try to get a snapshot of where we are in broadband high speed rollout, and where we think we’re going so far as you can plot technology," Johnston told Network Letter. "As we begin our work, we will probably be identifying gaps and government roles. Will we attempt to put a cost estimate on that? I’m not sure." A front page story in the Globe and Mail’s Report on Business on Oct. 17 said the federal government will spend $1 billion on the broadband initiative – information the press secretary denies came from her boss, former Industry minister John Manley, who made the announcement Oct. 16. "We don’t know where that number came from," Jennifer Sloan told Network Letter. "It was not a number minister Manley used." She adds that as far as she’s aware, there has been no public spending commitment yet made for this initiative. However, such a commitment is expected once the government reviews the recommendations from the task force in the spring. The government’s view is that where market forces fail to provide reasonable levels of accessibility, then it must step in. It’s a view shared by the federal government’s new information technology officer, Michelle d’Auray. "There is a role for government in reaching under-served areas because it often does not make good business sense to service remote areas," she told the Senate Subcommittee on Communications on Sept. 18. "We started to work through those issues with Industry Canada, with Canarie and with a number of other private-sector partners. Do we have a simple solution? No, we do not. But we recognize that is the next step." Canada falling behind Despite Canada’s claim to be "the most connected nation in the world", there is growing concern this lead is quickly being lost to other countries. John Adams, the Toronto city councillor who heads the city’s telecommunications committee, says Canada isn’t keeping pace with other countries when it comes to the rapid deployment of advanced networks. "So this is the time to put our shoulder to the wheel and figure out a workable strategy for rapid deployment of high capacity network," he says. "Now for people to be truly connected, to have all the aspects of economic development and social development people need to be able to have high capacity connections to anytime anywhere." Even with this broadband community commitment, Reddick says Canada isn’t going far enough. "What it does is keep us up to the pack but it’s not exactly progressive." David Colville, head of the CRTC’s tele-communications branch, says much has been done from a regulatory standpoint to improve access to and competition in high speed services. But he agrees that less populated areas are a problem. "The commission will continue to be modifying the rules to try to encourage high speed access throughout the country, but having said that, in the very rural and remote areas, it’s going to need some financial assistance to get there," he says. Are subsidies an option? Using subsidies to provide communications services to rural and remote areas isn’t a new concept. Long distance rates are artificially inflated to help bring down the cost of local telephone service for all Canadians, particularly those living outside urban centres. Using a similar subsidy scheme to bring high-speed Internet to far flung regions is an option, albeit not an overly palatable one for many in the industry.Colville agrees government funding is likely, but believes there are other regulatory mechanisms that can be used, aside from contribution. "For example, we’re re-looking at the whole area of (cost) banding to more narrowly focus where the subsidies are going to be required. More recently we had the hearing dealing with Northwestel, and we’ll be putting that decision out mid to late November. And we’ll be dealing with some of these issues as they relate to the north as well." The commission is also expected to release its decision on high cost serving areas sometime in November – Telecom PN 99-21. That decision, however, deals specifically with subsidies to local telephony. "Largely the subsidy has been there to fund basic telephone service, to keep it affordable in the remote areas, not to fund Internet access in those same areas," says Colville. "I wouldn’t see our contribution decision really addressing the high speed issue." Reddick maintains there is a role for subsidies, noting that even the U.S. relies on them to ensure rural areas are not left off the high-speed communications grid. "There’s (a subsidy fund) through the new telecom act which provides $2 billion a year for community access sites, schools and libraries. In addition to that, they’re also requiring contributions at the community level from cable companies to make sure there’s sufficient public access and capacity and that sort of thing," says Reddick. "If you have a high cost subsidy for telephone service, there’s nothing unreasonable or silly about the idea of also having a high cost subsidy to offset some of those costs where there isn’t competition in the market." Canada’s CLECs are suspicious of any telecom subsidy scheme, fearing the main beneficiaries will be their largest competitors. "Some of us would be concerned that this money would be targeted just for the old monopolists," says Jean Brazeau, Call-Net Communication Inc’s VP of regulatory affairs. "These are the guys that are serving the areas that it seems that the government is trying to promote high speed Internet access to. Hopefully this is not just a hidden subsidy to the old monopolists and somehow they’ll find a formula that would allow companies like ours to also participate in something like this." Brazeau is also concerned that the task force will recommend that the definition of a basic telephone service would be expanded to include high-speed Internet. "The definition of a service might change to include high speed and therefore the amount of subsidy that these communities would require would increase." The senior director of advanced networks at Canarie Inc, Bill St. Arnaud, says he doubts subsidies are needed. He contends there is a business case for the private sector to serve rural and remote areas, but that such initiatives will require direction from the federal government."There are a number of private sector companies who we’re dealing with who are willing to build these networks... For example, if you deliver fibre to a school and you put in a couple of extra strands, which only increases the cost by 10 per cent, and then make those strands available to any competitive service provider. A wireless company could come along, set up an antenna there, and there’s some new wireless technologies that if they’re down to 250 homes in a kilometre radius, they can deliver at least 50 megabits per home. "For farms, cottages and people that live out in really remote areas," adds St. Arnaud, "a satellite link is the only effective solution. And there are some new satellite services out there that will deliver direct broadband, and I’m sure that will be part of the equation."

New task force will decide government’s role in bringing broadband to rural Canada

News | October 23, 2000

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