Senate committee urged to support a national plan and funding for broadband internet

Adopting a national plan and national funding for broadband internet, maintaining telecom subsidies for high-cost serving areas and declaring broadband an essential telecom service are among the initiatives needed to bring high speed access to all Canadians, SaskTel told a Senate committee last week. Appearing Sept. 30 before the Standing Senate Committee on Transport and Communications as part of its study of the Canadian wireless sector and high speed internet, SaskTel argued the only way to ensure universal broadband is to have it declared an essential telecom service that is subsidized by the CRTC’s local service subsidy regime and by a new Industry Canada-managed fund. Under the local services fund, telcos are required by the CRTC to contribute about 1% of their revenues to subsidize the provision of residential phone service to high-cost rural and remote areas. The commission has launched a review to consider whether the regime is still needed. “Our firm belief is that should not go away,” SaskTel president/CEO Robert Watson told the Senate committee. “ If they go away, rural rates will go from an average rate of $30 a month now to $40 or $50 a month, which would not assist rural communities at all.” The company estimates that about 42% of its lines serve rural and remote customers. Senator Rod Zimmer (Lib) asked what the implications would be for rural Canadians if the fund was cancelled. “It will become another expense for rural Canadians that urban Canada doesn’t pay,” said Watson. The SaskTel chief also took aim at federal broadband programs, specifically Industry Canada’s new $225-million rural broadband stimulus program, saying substantially more money and a coordinated national approach are needed to achieve universal access. “I have a jaundiced view of the new federal program,” said Watson. “It has been too long getting out. It is nowhere near what is required. My personal opinion is that this is not enough on a national basis.” When asked by Zimmer why, in his opinion, federal broadband programs had not worked well, Watson said “They come in bits and pieces, and seem to be more of a reaction. We don’t have a national plan for this country.” He added: “To date we believe the federal programs – though with good intentions – are not sustainable for two reasons. They try to split up the funds too much. They should dedicate the funds to a provider to build the network. Also, they do not give sustainable funds to maintain and continue to develop the network, in our view,” said Watson, who suggested that Ottawa consider replicating Saskatchewan’s approach to broadband. SaskTel “guarantees” that 100% of the province’s population will have access to at least 1.5 Mbps internet speeds within three years. About 90% of unserved or underserved area will be reached by a wireless broadband network that will be open to other companies. To reach the remaining 12,000 to 15,000 households and businesses, the Crown-owned telco has partnered with a private company, Barrett Xplore Corp., to provide satellite-delivered high speed access to rural and remote regions. In return, SaskTel will subsidize Barrett for 10 years and guarantee it a minimum number of customers. “SaskTel takes the obligation of delivering the quality of service, with the private companies delivering it for us on our behalf…,” Watson explained. “Therefore, we were able to focus the funds on building a single network. The government did not split the funds up between two companies and have two networks.” Even Industry Canada concedes that $225 million likely isn’t enough to extend broadband access to all Canadians. Appearing before the Senate committee Sept. 29, Helen McDonald, the department’s ADM, spectrum, information technologies and telecommunications, noted that the 2006 Telecom Policy Review Panel estimated it would cost up to $700 million; others in industry have suggested the amount would be closer to $1 billion; the federal Liberals have suggested as high as $2 billion. McDonald says she’ll have a better idea as to how many more communities will receive broadband when companies submit their funding applications to the rural broadband program in December. Industry Canada has identified 64 areas that contain unserved or underserved households and the goal of the program is to reach as many of these areas as possible. “Part of the digital economy behoves our government, along with other governments, to look at what remains, if something remains… we cannot tell you how far our program will be able to reach at this point until we see the applications,” she said. Wireless industry tables wish list Appearing the same day as McDonald, the Canadian Wireless Telecommunications Association used its time to reiterate its recommendations for accelerated depreciation, longer licence terms and a new cost recovery formula for spectrum fees – “modest” incentives the CWTA says are needed to stimulate investment in next generation broadband networks in Canada. “There are spectrum policy measures, fiscal policy tools and ways to regulate carriers more efficiently that, when combined, will free up additional millions annually for direct investments in next generation networks,” said CWTA president/CEO Bernard Lord. One longstanding issue for the CWTA is to have licence terms longer than a decade, and a higher expectation that licences will be renewed after those 10 years. The UK, for example, awards licences for 20 years for 3G networks. “Over $6 billion was invested last year,” he explained. “When we ask the private sector to make these investments, they need a high expectation that their licences will be renewed, provided they meet and respect the conditions of the licences, and that they will have a licence for a longer period of time. In that way, you will entice them to make the investments to continue to upgrade the networks.” Lord also argued that it was time for Industry Canada to establish a different cost recovery formula for assessing spectrum licence fees, given that the wireless industry and carriers have 1-2% of the spectrum in Canada, yet pay nearly half the spectrum fees. “We recommend that spectrum licence fees be based on the cost to government for administrating spectrum and nothing more,” said Lord. “Anything else is a tax on innovation.” The CWTA’s wish list includes cancelling the requirement that spectrum licence holders spend 2% of revenue on domestic research and development and file reports to demonstrate compliance. “The R&D requirement was set out a number of years ago,” Industry Canada’s McDonald said in response to Senator Terry Mercer’s (Lib) reiteration of Lord’s concern. “At the time, there was a concern that businesses were under?investing relative to government investments in R & D, so when the spectrum was licensed at that period, this condition was added.” As well, Lord proposed that the next federal budget “provide a temporary accelerated capital cost allowance for network equipment assets to draw forward several years’ worth of investments to a strategic window of accelerated network growth.” The Senate committee reconvenes on this issue Oct. 7 in th evening with testimony from the Public Interest Advocacy Centre and SuperNet.

Senate committee urged to support a national plan and funding for broadband internet

News | October 5, 2009

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