Mark Goldberg

Bridging the income divide

According to its three-year plan, later this year the CRTC will launch a proceeding to examine what should be considered basic telecommunications service.

The CRTC will initiate a comprehensive review to determine what services (e.g. voice and broadband) are required by all Canadians to fully participate in the digital economy and whether there should be changes to the subsidy regime and national contribution mechanism.

In general, the subsidy systems we have in Canada have been based on geography without regard to financial needs. We subsidize rural telecom service, trying to deal with higher cost of providing service to such regions. That has been the basis of the “contribution” subsidy regime for traditional local telephone service. Industry Canada has given out hundreds of millions of dollars to reduce the cost of providing internet service in rural and remote regions.

These subsidies go to everyone in the region, not just those who have a financial need.

Such an approach is politically attractive. Oversized ceremonial subsidy cheques create a number of photo ops for politicians: at the time of the announcement; when construction starts; and, when service launches. All of the households in a given region get a handout, whether they need or not, so all of the households are grateful to the politician who delivered savings.

On the other hand, low income Canadians, who tend to be concentrated in urban areas across the country, have no programs to help them pay for service. Prices that seem affordable to most Canadians, may be out of reach for those who are living from week-to-week, let alone month-to-month. All of us may complain about the price of service – who wouldn’t like lower bills for everything – but more than 80% of us have computers at home connected to the internet. As I have written many times, there are too many low income households that don’t have a computer, let alone a broadband connection.

Canada needs to make changes to its approach if we want to bridge the gap between those who can and those who cannot afford to participate in a digital economy.

In the United States, there is “Lifeline“, a program that provides targeted discounts on monthly telephone service, funded by the universal service fund (USF). The USF is somewhat analogous to Canada’s National Contribution Fund in that it is funded by a levy on telecommunications service provider revenues.

Two and a half years ago, the US cable industry launched “Connect2Compete” to increase adoption of connected computers in low-income households with children. When asked about such a program in February 2013, Christian Paradis (the Industry Minister at that time) said “the CRTC has jurisdiction over this.”

A program that targets low income Canadians won’t directly deliver votes to the government; the recipients of the program benefits are too widely distributed across the country. Still, it is the right thing to do.

A Thomas Friedman interview with former Israeli President Shimon Peres at the World Economic Forum in Davos is worth watching to gain insights from the 91 year old Nobel Laureate. Peres talks about the need to invest in long term societal change, believing strongly in investing in education, especially science: “You cannot escape poverty without science.” Later in the interview, he says that in the future, countries won’t be counting how many square miles they have, but rather, how many scientists they have per square mile.

It seems to me that you cannot deliver science education without access to modern communications services. For Canada to be a leader in a global digital economy, we need to expand the inclusiveness of opportunity to those Canadians who are economically disadvantaged.

Delivering subsidies based on financial need will stimulate the demand side of the adoption equation. Increased demand will in turn, stimulate supply, without advantaging one supplier over another.

Targeting low-income Canadians may not deliver votes as directly as a series of photo ops in rural communities, but it is the right thing to do. That’s what I would vote for.

1 comment to Bridging the income divide

  • Mark: Great article on the role of government and telecommunications/broadband pricing strategies! Brings me back to the initial competition hearings in 1992 where us CBTA members (Canadian Business Telecommunications Alliance) said that the role of government was not to hinder competition or pricing for Canadian businesses. But….if the CRTC and Industry Canada felt that low cost telecommunications services are important to Canada’s economic future, that perhaps they could adopt something similar like the ‘Baby bonus’ system, but based on income and/or geography.

    Net is 23 years later, and we are still trying to figure out the role of government as it relates to telecom pricing. I believe as a technology dependent small business consultant owner who has distributed staff and clients, that it is critical for all Canadians (disregarding income or location) to have access to broadband services and computers to use.

    Wake up government! Figure out a way to work with the industry to make it work.

    Here is a closing idea… perhaps the newer technology players could come up with ideas and peg their approaches and solutions to be paid for from spectrum auction income?

    Keep up the good work Mark!