CRTC’s national broadband target nods to government to make next move, insiders say

Industry insiders say the CRTC’s new national targets for broadband Internet speeds are a first step towards a government-led national broadband plan. The CRTC decision, released last week, said that “market forces and targeted government funding, an approach which encourages private and public partnerships,” should drive broadband expansion, even in rural areas. The commission set a target for all Canadians to have access to Internet speeds of 5 Mbps or faster for downloads and 1 Mbps for uploads by 2015. Although the decision said a CRTC funding mechanism to subsidize broadband deployment is not appropriate, it added that the commission hopes “the findings in this decision might assist the government in addressing issues related to broadband Internet access in rural and remote areas.” Michael Hennessy, Telus Corp.’s vice-president of regulatory and government affairs, said he supports the setting of “aspirational targets” because no single technology can answer the country’s broadband needs. “In those circumstances, you can’t put an obligation to serve on any one particular player without, one, distorting the market and, two, not necessarily targeting the right technology for the right circumstance,” he said. Hennessy said with next-generation satellites able to provide access to Internet at speeds of at least 5 Mbps anywhere in Canada, accessibility isn’t the primary issue. “The issues that I think many people have identified, and rightly so, are due to reasons of income and digital literacy in particular. Even with 100 per cent coverage, there are still going to be challenges for 100 per cent adoption,” he said. Incumbent Internet service providers (ISPs) say they support the decision’s emphasis on market forces to meet the commission’s target for universal access to basic broadband Internet at set speeds. The CRTC noted that relying on market forces gives ISPs the flexibility to “choose technologies and prioritize rollout in a manner that best responds to consumer demand.” The commission added that it will monitor and analyze ISPs’ progress. But what’s needed now that the regulator has taken the first step is a stronger government policy direction, Hennessy said. “What the CRTC has done is nicely set the table for the government of Canada when it comes to defining more fully what Canada’s national broadband plan should look like,” he said. Michael Geist, Canada research chair in Internet and e-commerce law at the University of Ottawa, wrote in a blog post Friday that universal broadband access—“perhaps the most important digital policy issue Canada faces”— should be a policy concern, not a regulatory one. “With a new Conservative majority government, the era of excuses (the Liberals did nothing, minority governments make this issue too difficult) are over,” Geist wrote. The Conservatives have four years to foster competition, expand fibre connectivity, set targets for broadband speeds and pricing in Canada, and “reverse a decade of decline and once again become a global leader.” Public Interest Advocacy Centre counsel John Lawford said in an interview that, although the decision falls short of other countries that identify universal broadband as a question of fairness and have adopted national strategies, it could nudge the Canadian government into action. “he government will have to finish their digital economy strategy consultation and really, to look credible out of that, will have to come to some sort of coordinated program to get broadband to people—unless they believe so completely in the free market as the commission ,” Lawford said. More than 80 per cent of Canadian households now have connections at the CRTC’s targeted speeds of 5 Mbps downloads and 1 Mbps uploads, the commission said in its decision. It added that 95 per cent of households have download speeds of at least 1.5 Mbps. But Lawford questioned that data, saying that “no one was being fair about the numbers at all” at last fall’s hearings. Lawford said Statistics Canada data from 2009 shows that almost 32 per cent of rural Canadians had no Internet access at all (the data didn’t differentiate between dial-up and broadband). The decision won’t “drive into places that are small towns far away from everything else” because there’s no business case to do so, but it may allow cottagers with disposable incomes to get higher speeds, Lawford said. Dennis Béland, Quebecor Inc.’s senior director of regulatory affairs for telecom, said in an interview that Industry Canada could play a role in keeping prices low by implementing affordability and speed requirements when companies submit competitive tenders to target a region. But Lawford said he remains skeptical that incumbents are “going to be ripping out copper and putting fibre to the boonies.” He said he doesn’t believe the cablecos will expand to rural areas either. “They might incrementally increase their DSL footprint a little bit around areas where they already are, but in five years there’s no way they’ll be out to all the areas they say they want to cover.” Lawford said one of the problems with the commission’s pledge to monitor the ISPs and gauge progress is that the information won’t be available to the public. “No one else will be able to second-guess their judgment on whether it’s working or not or going at a good pace,” he said. The commission should issue a report on its website a year from now, he said, that clearly presents any progress made toward achieving its targets. David Elder, who practices communications, competition and privacy law with Stikeman Elliott, wrote in a blog post last week that the CRTC’s targets are not legally mandated. “Given the short time frame, the lack of a legal requirement to meet the speed objective and the fact that no new funding is being made available in connection with the decision, it remains to be seen whether the new target will have any meaningful impact on the rollout of broadband in Canada,” Elder wrote. The decision also changes the basic service objective for telephone companies operating in unregulated or exempt areas. “The Commission considers that, in forborne exchanges, competition continues to be strong and pervasive across most areas, thereby allowing market forces to work and making it unnecessary to insist upon the basic service objective to protect the interests of consumers,” the decision said. It added that a lack of wireline competition in regulated and rural areas and the view that most residents view wireless substitution as supplementary rather than a replacement for wireline phone service, led the commission to decide that regulations be maintained. Previously, both incumbent and competitive local phone companies could receive subsidies to serve high-cost areas, but now the smaller competitors (predominantly cable companies) will no longer be eligible effective June 1, the CRTC decision said. “Subsidies account for a small percentage of the total operating revenues of CLECs , and cable companies that are CLECs have not indicated that subsidies are an important consideration in their decisions to enter particular markets,” the commission said. “Rather, the Commission considers that a cable company’s decision to offer local voice telephony service is driven by a desire to maximize service offerings using its existing cable plant.” Hennessy said he was pleased that only companies willing to meet the CRTC’s obligation to serve will receive subsidies. “We thought that’s critically important because it ensures there’s actually sufficient revenues flowing to the company with the obligation to serve to actually be able to provide the service,” he said. Béland said the measure could lead to a lack of discipline from incumbents claiming the subsidies. “Now that these local telephony subsidies are the exclusive preserve of the telcos, any shame that they might have had in the past, in terms of keeping their subsidy demands reasonable, will be gone,” he said. “And it’s going to take a lot of scrutiny and a lot of effort on the part of the commission to keep those subsidy demands reasonable.” Lawford said the CRTC’s decision to allow companies operating in rural areas to raise rates to a maximum of $30 per month over the next three years should get consumers riled up. “Why people aren’t jumping up and down and pitch-forking them and their MPs? I don’t know, because people that live out there are going to be pretty mad when it goes up $3 per month a year for three years,” he said. mburgess@thewirereport.ca

CRTC’s national broadband target nods to government to make next move, insiders say

News | May 10, 2011

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