Incentives more than subsidies needed to accelerate broadband deployment

Fixed wireless and satellite companies will likely take the lead in bringing broadband access to rural and remote areas of Canada, as part of a new federal initiative to have every community connected to a high-speed link by 2004. On the day before his departure from the Industry Canada portfolio, Industry minister John Manley’s swan song was the creation of a National Broadband Task Force, which will advise the government on how it can best meet the 2004 deadline. One of Brian Tobin’s first jobs as Industry minister will be to appoint representatives to sit on the new national Broadband d Task Force. The group’s new chair, David Johnston, says representatives will be drawn from the private and public sectors, including local communities. He couldn’t say how many members it would include, although many people RoW spoke with suggest that anything larger than 12 or 15 would be unmanageable. Johnston is no stranger to the federal government’s information highway agenda. In the 1990s, he headed up the government’s two Information Highway Advisory Councils, the recommendations of which led to the Liberal government’s "Connecting Canadians" initiative. He is currently president of the University of Waterloo. Headed up by David Johnston, president of the University of Waterloo, the task force is to report back to the new Industry minister, Brian Tobin, by March 31 – assuming the Liberals regain power following the Nov. 27 general election. High-speed access technologies are rolling out quickly in urban areas of the country. The policy challenge for the federal government is in ensuring that the 15 to 20 per cent of Canadians outside the reach of DSL and cable are not left behind in the nation’s rush to get connected. Using fixed wireless and satellite to fill the gaps is an obvious alternative. Serving rural and remote communities is already part of the business plans of companies like Inukshuk Internet Ltd, Stream Intelligent Networks Corp and Telesat Canada. Inukshuk and Stream hold spectrum in the secondary and rural regions, and Telesat’s satellites are able to reach everywhere in Canada. It’s unlikely, however, that the private sector will rally to meet the government’s 2004 deadline, not without direct financial assistance or other incentives that make serving high-cost areas more profitable. However, introducing a new contribution scheme to subsidize service in rural and remote regions isn’t an idea that should be given serious considerations, according to some industry executives. Competitive telecom companies have long complained that the urban-to-rural subsidy in long distance has been a detriment to competition. "I think it would be unlikely the CRTC and the government would blunder twice," says John Phillips, executive VP carrier relations and general counsel at Clearnet Communications Inc and past chair of the Canadian Wireless Telecommunications Association. "(The government has) the capability of playing a role by using something other than money and not by using contribution as an absolutely wrongly focused taxing device." The "Connectedness" agenda is a social policy objective, and "therefore, if there is to be any funding at all, it should come out of general revenue," he told Report on Wireless. "It is to me and it always has been lunatic in a competitive arena that one taxes the very people you are depending on to subsidize to provide service." There are other avenues the government could take to speed up the arrival of broadband service in northern and remote regions. Phillips says the government could reduce the cost of spectrum licences in remote areas by assessing them more realistically on a per point-of-presence basis. The government could also accommodate shared use of public-owned facilities. He explains that it’s expensive to provide service to some of these northern areas because of the distance between the communities and the switches needed to provide backhaul. "But if there was a great big government pipe that came down there to service some government installation and I was allowed to have a piece of it, that would be grand," says Phillips. Dean Proctor, project leader for Inukshuk and director of regulatory affairs at Microcell Telecommunications Inc, doubts the industry is headed for a new contribution regime for broadband access to rural Canada. While he agrees some type of government subsidy program may be needed to fund the roll out of service, he says it wouldn’t have to be a contribution-type mechanism. "This is completely different from the CRTC, and again, the CRTC contribution regime is something that comes from industry where in this case, clearly the government is willing to step in to make this happen," explains Proctor. Stream’s president and CEO Steve Spooner says there are several things the government can do to improve the economics of serving high-cost areas and to make it more attractive to deploy to these under-served communities. "I would expect that the task force will look at things like cost-sharing programs, financing options, tax credits, and easing access to rights of way," he says. Phillips says he’s hopeful that a competitive market will produce players who are willing to push the limits of coverage and provide service to the outlying regions without government assistance. There are already three smaller broadband service providers doing just that.With Industry Canada releasing spectrum in the 3.4 GHz to 3.7 GHz range earlier this year – spectrum that was once reserved for the military – it is already addressing the demand of broadband access in rural Canada. To date, three companies have purchased spectrum in this frequency range covering Saskatchewan, Alberta and BC (RoW, Oct 16/00 and Oct 2/00). Initiative needs to address types of services available While Proctor lauds the government initiative for going beyond the "Connectedness" agenda and bringing high-speed access to all communities, he says the key to the success of the program will be access to services. "What the community broadband program can attempt to do is not only make sure that broadband gets to the community, point X in the community, but also make sure that members of the community can benefit from that," he says. "So the transport connects point X in the community to the outside world, but how do the greatest number of people benefit from the big fat pipe" is something that the task force will need to address. Paul Bush, VP corporate development at Telesat Canada, shares the same concern that more than access is needed to make the initiative successful. "I see that if (rural and remote) communities are going to stay relevant and they’re going to be able to sustain any type of economic growth, they’ve got to have access to high-speed communications," he told RoW. "They’ve got to have access to the Internet. They’ve got to have a way of training their people and I think in many ways the only way you can do it in Canada is by several wireless ways and satellite as well." Some things out of government control need to happen Stream’s Spooner says the broadband access initiative is commendable, but it’s also aggressive. He says a couple of things will need to happen to make 2004 a realistic target for broadband access. "One, it will be a function of the amount and nature of government commitment to this initiative, (and) secondly, I think it will be a function of technology and how it matures," he says. The commercialization of point-to-multipoint technology will be a jumping off point for an accelerated deployment of broadband access to the community and eventually to the home. Once the price points for the technology come down, Spooner says it will become economically feasible to extend broadband not only to small businesses in rural communities, but also to the home. The creation of compelling economics is one factor that this government initiative could potentially address, he adds. With a March 31/01 deadline to report back to the minister of Industry, it doesn’t leave the task force much time to determine where Canada is in terms of broadband roll out in various types of communities. Meeting the deadline will partly hinge on how the task force defines a basic level of broadband service. "I think it really comes down to defining what you want to provide. That’s the hard part," says Bush. Developing and deploying the program and the technology may prove to be the easy part of the whole equation, he adds. The task force also doesn’t have much time to conduct extensive public consultation or indepth studies on the status of the industry. "I think we’ll try to identify the areas of most acute concern and try to extrapolate from those, and also try to develop some sense of the speed at which broadband is being rolled out," the task force’s chair, David Johnston says. He adds that the task force will attempt to determine what general role the government should play in extending broadband, rather than how much it should spend. "As we begin our work, we will probably be identifying gaps and probably government roles. Will we attempt to put a cost estimate on that? I’m not sure," he says.

Incentives more than subsidies needed to accelerate broadband deployment

News | October 30, 2000

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Incentives more than subsidies needed to accelerate broadband deployment

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