Affordability of telecom services is a major theme in the CRTC’s review of telecommunications in the far north. The far north is one of the only areas where broadband service is price regulated, and prices in many areas are substantially higher in the north than consumers typically pay in urban areas. Of course, prices for virtually everything are substantially higher in the north.
For more than 15 years, I have been writing about the relationship between income and the adoption computers and broadband, observing as early as 2008 that the rate of adoption of broadband are as much an issue of getting computers into households as it is an issue of affordability of telecom services.
Economists typically define affordability as the ability of individuals or households to purchase or access goods, services, or resources without undue financial burden or hardship. Various measures of affordability relate costs to a personal (or household) income, expenses, and financial situation.
There are various ways to measure affordability, depending on the context. Some common methods include:
- Income-based affordability: This approach measures affordability by comparing individual (or household) income to the cost of a particular good or service. For example, a common measure is the “housing cost-to-income ratio,” calculating the proportion of household income spent on housing costs such as rent or mortgage payments.
- Expense-based affordability: This approach measures affordability by considering overall expenses for an individual (or household) in relation to income. It takes into account not only the cost of a particular good or service, but also other expenses such as transportation, utilities, food, and healthcare.
- Relative affordability: This approach compares the affordability of a good or service across different groups or locations. For example, economists may compare the affordability of housing in different cities or countries by looking at factors such as median incomes, housing prices, and cost of living indices.
- Subjective affordability: This approach takes into account perceptions of affordability. It may involve surveying individuals or conducting qualitative research to understand their subjective experiences and perceptions of affordability, including their ability to meet their basic needs, maintain a certain standard of living, or achieve their financial goals.
Affordability is a complex and multifaceted concept that varies depending on the context and the goods or services being considered. Economists may use one or a combination of these approaches to assess affordability in different situations. Policy makers must rely on such measures to inform policy decisions related to income redistribution, social welfare programs, or market regulations, especially as the CRTC considers acting as an agent to provide social welfare subsidies for telecom services in the north.
In a 2015 report [pdf, 2.1MB], the Public Interest Advocacy Centre (PIAC) said “We suggest that communications services are “affordable” where, as a guideline, they make up about 4% to 6% of a household’s income.” In 2017, PIAC found that low income households considered home internet to be equally important as health care.
At the hearing on telecom services in the Far North, NWTel announced that it will be joining Connecting Families, an industry-led program to bring affordable broadband services to the most disadvantaged households. Connecting Families provides 50 Mbps (down) / 10 Mbps (up) speed service for just $20 a month to families receiving the maximum Canada Child Benefit or low-income seniors receiving the maximum Guaranteed Income Supplement. There is also a 10/1 service available for just $10 per month.
Too many people confuse affordability with the overall desire to lower prices across the board. We all want lower prices for everything. The best approach for affordability of telecom services is to target help to those who need it most, with programs like Connecting Families.
A recent study by UK regulator Ofcom found that half of those eligible were unaware of “social tariffs” that could reduce household broadband rates by about £200 per year for millions of households.
Savings opportunities for eligible Canadian families are even greater than in the UK. But, the industry, including service providers, policy makers and the regulator, may need to develop partnerships with trusted community groups and social service agencies to understand (and overcome) the reasons why some households are not adopting broadband, even at deeply discounted pricing, with services priced well below costs.
It isn’t enough to make affordable broadband service available to targeted communities. Collectively, we need to make sure people actually get online.