Acting in the public interest
What does it mean to act in the public interest for telecommunications?
Does it mean working to get Canadians universal access to the fastest internet speeds? The lowest prices? The greatest coverage? All of the above?
There are few people who would say they oppose lower prices, faster speeds or improving coverage. In his remarks opening The 2017 Canadian Telecom Summit, Minister Bains said:
our government understands that Canadians want three things from their telecom services.
- Quality. Is the service fast enough to do what I want it to do?
- Coverage. Is the service available where I want it to be?
- and lastly, Price. Is this service affordable?
These three areas are clearly where providers need to compete and that’s why our Government is doing our part to promote competition and investment. The goal is very clear. We want to improve quality, coverage and price for all Canadians.
There is a tension that ties these together. Quality and coverage each require capital investment, which in the Canadian context is measured in billions of dollars each year. Canada has achieved world leading quality scores for our mobile and fixed line networks. The overwhelming majority of Canadians have access to the latest generation of wireless technology, delivering the fastest speeds in the world.
The Minister carefully defined “Price” as offering service at an affordable level. An affordable price is not necessarily the same as the lowest price. PwC recently looked at Canada’s mobile affordability and described its analytic process in concluding “Canadian mobile services top G7 affordability ranking”:
To provide a holistic view of wireless affordability in Canada, this report examined a number of aspects related to the overall affordability of consumer wireless in Canada, including:
- The changing pattern of household expenditures, as wireless data use is enabling a different delivery of products and services – including the substitution of select historic spend categories by wireless.
- The assessment of wireless affordability in Canada, as measured by recognized affordability metrics.
- The affordability of wireless services for Canadians in proportion to their income relative to other jurisdictions.
As I concluded at the time, “We need to focus on strategies to drive “demand”: increasing adoption rates among groups that could subscribe, but have not. That is a problem across all geographies, and perhaps more pronounced in urban markets. That should start with developing a greater understanding of those individuals and households on the wrong side of the digital divide.” Last week, I wrote more about “Using evidence to solve the digital divide.”
The third leg, coverage, is a real challenge. Many countries define regions as “rural” in terms of population densities that Canada considers to be “suburban”. Not only are there remarkably low population densities in some areas, but some of these are in extremely harsh geographies or so far north to be difficult for equatorial geostationary orbit satellites to “see”. Other underserved areas are close to high quality networks but located just beyond the economic reach of existing service providers. These households are perhaps the most frustrated, and understandably so.
In some cases, it means direct subsidy to offset the uneconomic costs associated with building to an area. Government subsidy programs only amount to a fraction of the level of investment required to extend coverage to unserved and underserved areas. The balance comes from the private sector.
The challenge is how do we create the right environment to incent investment. In some cases, there can be policy incentives, ranging from simplifying approval processes, making available government owned (or government controlled) passive infrastructure, or changing regulatory disincentives. It is important to understand that the current regulatory and financial conditions do not support the business case for extending service to other regions. To incent investment, there has to be an increase in top line revenue or a reduction in costs. Some of these levers are within the control of regulators and policy makers.
Acting in the public interest involves balancing priorities to achieve an optimal outcome. It isn’t all about price. As a nation, we can use targeted subsidies, or programs like Connecting Families to aid with affordability.
It takes a certain level of intellectual maturity to understand that reaching an optimal balance of Quality, Coverage, and Price is a challenge in the Canadian environment. There are trade-offs and prioritization required, especially in these difficult economic times with extraordinary and shift demands for connectivity.
Ultimately, the responsibility for determining the policy priorities rests with the government. Given the response to the pandemic, it is understandable that the federal Cabinet decided Canada’s future depends on connectivity.
How does this shift the equilibrium between Quality, Coverage, and Price?