Demand side subsidies

I took a fresh look at the Statistics Canada Internet Use Survey results and it seems to support my oft expressed view that we need to consider a way to support internet use based on affordability.

Statistics Canada is reporting that the urban / rural divide describes a difference of 83% use of the Internet in communities of 10,000 or larger, versus 73% use in smaller communities. The national average is 80%.

On the other hand, 94% of people from households in the top quartile of annual income (those over $85,000) use the internet versus just 56% of those from household in the lowest quartile (less than $30,000). The income-based digital divide includes users from rural and urban communities and represents even more consumers that need to be brought on-line.

Since the opening remarks of The 2008 Canadian Telecom Summit, I have been suggesting a needs-based direct user subsidy as a better approach to expand broadband adoption.

We propose that the government establish a sustainable program that helps lower income Canadians to pay what it costs to provide service, regardless of means. Our tax system is already structured to be able to offer such subsidies and there are even mechanisms to differentiate based on geography.

This kind of approach would use the AWS auction windfall to stimulate economic investment in broadband infrastructure by regional and niche service providers. It represents a way for the government to re-invest money generated from the telecommunications industry, back into the industry to help bridge the digital divide and render broadband affordability a non-issue.

I have long felt that it is patronizing (although clearly politically expedient) to target subsidies based solely on geography. Just because the cost is higher in some regions doesn’t mean that all residents need or deserve public subsidy for their communications services.

Should  the government anoint a defacto “official supplier” in high cost serving areas, with taxpayer grants to the winning service provider that effectively prevent competition from ever bringing benefits to these areas?

We need to find a way to bring internet into the homes of the Canadians who need help the most, regardless of their geographic location.

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