Maintaining balance

Last week’s Cabinet shuffle brought a new Minister of Innovation, Science and Industry into the telecommunications policy arena, The Honourable François-Philippe Champagne. As indicated in his biography, he brings a wealth of experience at large international companies in Europe, particularly in the fields of energy, engineering, and innovation. These are great credentials for the Minister of Innovation, Science and Industry.

For telecom policy, Minister Champagne’s predecessor, Navdeep Bains, had focused on the tension between quality, coverage and price, seeking to balance the requirements for investment to support providing world-leading communications services, while ensuring affordability for all Canadians, including those in rural and remote areas. Last August, former Minister Bains succinctly summarized the policy as “Canada’s future depends on connectivity”.

Canada’s future depends on connectivity. Our government recognizes that access to affordable, high-quality high-speed Internet is a necessity for all Canadians, no matter where they live.

The COVID-19 pandemic has only reinforced the importance of connectivity. The investments our government is making in high-quality networks, particularly in rural and remote communities, are key to ensuring equitable digital access for all Canadians. Equitable access also means that it is available at fair prices that Canadians can afford.

The message from Minister Bains last summer expressed the perspective of Cabinet: “On the basis of its review, the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas.”

The critical importance of maintaining a balance of competing policy objectives figured prominently. Quality, coverage, and price.

In a blog post in late August (“Acting in the public interest”), I wrote about the tension between these policy objectives. I noted that Minister Bains was careful in defining “Price” as “offering service at an affordable level.” As such, it is clear that an affordable price is not necessarily the same as having the lowest price. “Acting in the public interest involves balancing priorities to achieve an optimal outcome. It isn’t all about price.”

There can be a high cost associated with low prices. Israel serves as an example of what happens to quality when there is a singular focus on reducing prices, as Canadians have been warned: “Prices did fall, but so did the quality of the networks. The massive reductions to revenues caused major reductions in capital expenditures, network roll-out and expansion, market capitalizations of the participants and even the number of employees.”

The past year has highlighted the importance of investment in world-leading technologies and extending the geographic reach of Canada’s mobile and wireline broadband networks. A policy framework that encourages network investment is the best way to accelerate expansion of quality infrastructure into unserved territory. The vast majority of investment in networks – rural and urban, wireless and wireline – comes from the private sector, not government. While governments support and supplement network investment by carriers, large and small, governments do not (and generally should not) supplant private sector investment.

To the extent affordability is a concern, perhaps targeted support programs can be developed to supplement Connecting Families, without increasing the level of regulatory intervention in the market, consistent with the objectives of Canada’s telecom policy.

Will the CRTC’s review of mobile services and its determination on the application to review wholesale internet rates create a shift in the balance between quality, coverage and price? These proceedings are foundational, with the potential to cause significant shifts and disruptions in the marketplace and the investment climate.

The mandate letter for Minister Champagne appears to provide for continuity in Canada’s digital policy priorities. The letter incorporates Minister Bains’ mandate letter by reference (“In addition to the priorities set out in my mandate letters of 2019…”), and is entitled “Supplementary Mandate Letter.”

It is interesting that the matter of rural broadband appears in both letters. In the December 2019 letter, broadband is referenced as:

Work with the Minister of Infrastructure and Communities, the Minister for Women and Gender Equality and Rural Economic Development and the Minister of Canadian Heritage to deliver high-speed internet to 100 per cent of Canadian homes and businesses by 2030.

Thirteen months later, in a COVID environment, the new letter says:

Recognizing that all Canadians need the tools to fully participate in and benefit from the digital economy, support the Minister for Women and Gender Equality and Rural Economic Development on the continued implementation of the Universal Broadband Fund to ensure that all Canadians, no matter where they live, have access to high-speed internet. Your work should include considerations around the effective use and deployment of innovative technologies, such as low-earth-orbit (LEO) satellites, to connect all Canadians.

I found the removal of the 2030 deadline in the supplemental letter as interesting, and perhaps noteworthy. Similarly, the specificity of LEO technologies and “considerations around the effective use and deployment of innovative technologies” merit further consideration. Is it a signal to favour policies to drive investment in facilities?

How should we interpret silence in the supplemental letter regarding other areas of the Minister’s mandate? Is it a signal that the government is satisfied with progress made to date in areas such as reductions in mobile pricing?

How will the government encourage deployment of digital infrastructure, in urban and rural markets, while preserving the balance (and tension) between quality, coverage and price?

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