Month: January 2022

Today’s post takes a look at extending broadband to unserved areas, stimulated by a recent newspaper article and a New York state news release.

In Saturday’s Toronto Star, I read what I considered to be a superficially researched article about SpaceX Starlink broadband service: “‘Crazy good’: Rural Canadians are raving over Elon Musk’s Starlink satellite-based internet service. Should Canada’s big telcos be worried?”

The bottom line, as stated by SpaceX founder Elon Musk in the final paragraph, is “I want to be clear, it’s not like Starlink is some huge threat to telcos. I think it will be actually helpful and take a significant load off the traditional telcos”.

Unfortunately, you have to read through a full page and a half of muddled messages before reaching the answer to the question posed in the article’s headline.

Should Canada’s big telcos be worried? No, they shouldn’t. The end. Of course, that would have been too short an article to merit the front page of the Saturday business section.

Unfortunately, we were left without any explanation of Musk’s comment about how services like Starlink “will be actually helpful and take a significant load off the traditional telcos.”

The article featured a graphic indicating Canada’s average monthly price for broadband in 2020 ($77) was higher than other surveyed countries other than Australia ($78). The Star didn’t mention that the Australian government has squandered tens of billions of tax dollars on its National Broadband Network and yet, Australians still pay higher prices. The article, that reads somewhat like a Starlink advertorial piece, carries testimonials from customers seemingly happy to pay $700 up front and $130 per month for Starlink service – nearly double Canada’s average broadband price. At those prices, Starlink is clearly not a solution within the affordable reach for many Canadians.

Still, Starlink, and other low earth orbit (LEO) satellite broadband systems (unmentioned in the article), are important additions to the array of technologies available to bridge the rural and remote digital divide. LEO has the ability to provide service to locations that are beyond the economic reach of terrestrial wireless (both fixed and mobile), and can provide a more viable solution than wireline technologies in many low density locations.

It demonstrates why governments need to be technology agnostic when looking to accelerate broadband adoption in unserved areas. For example, I think it is a mistake for Ontario’s most recent broadband program to specify technologies for each service area, which may limit the ability for proponents to offer more cost-effective, and perhaps more rapidly deployed service options.

Rather than causing worry among major carriers, Starlink is much more likely to pose a threat to smaller rural wireless internet service providers, especially those providing lower bit-rate services, such as 5Mbps and lower. Further, each lost customer harms the financial viability for these small ISPs to upgrade their facilities. Business cases for providing service in rural and remote areas can be very fragile, and the loss of major clients can be devastating, as I wrote last year in “Anchor institutions”.

Last week, I noticed an interesting press release from New York Governor Kathy Hochul announcing a new billion dollar ‘ConnectAll’ initiative intending to bring affordable broadband to millions of NY residents.

The initiative calls for “over $1 billion in public and private investments to connect New Yorkers in rural and urban areas statewide to broadband”, but that part of the announcement appears to be more sizzle than steak, given a reliance on private sector funding “plus hundreds of millions of forthcoming dollars from the federal Infrastructure Investment and Jobs Act”.

Still, there are a few aspects to the announcement that are worth consideration by other jurisdictions, including all levels of government in Canada:

• $30-a-month Affordability Subsidy: To further the expansion of affordable broadband, the Department of Public Service will administer efforts to ensure every eligible New Yorker can take advantage of the IIJA’s $14 billion Affordability Program to support a permanent $30-a-month broadband subsidy for low-income households. The Department will also conduct a statewide marketing program geared toward increasing enrollment in this program — which currently lags below 30 percent of eligible households in New York.

…

• Removing Fees, Outdated Regulatory Hurdles and Leveraging State Assets. This includes a set of reforms not limited to:
  • A Build-Free Initiative for Rural Broadband Deployment – Eliminate state use and occupancy fees that hinder rural broadband deployment directing the Department of Transportation to exempt ConnectALL projects, reducing costs for program participants.
  • Streamline Make-Ready Processes: Direct the Department of Public Service (DPS) to streamline the current make-ready process.
  • Standardize Right-of-Way Access for Cellular and Fiber Deployments and Establish Clear Timelines: Establish clear permitting timelines for cellular and fiber deployments on state land and rights-of-way with simple and standardized forms and processes.
  • Leverage Existing State Fiber Assets: Conduct a pilot to leverage existing State fiber assets to support middle-mile broadband.

In August, I asked “Is there a better approach to affordable telecom service?” Right now, affordable internet programs in Canada are fully funded by the private sector. Would a different model be even more effective?

In addition, we need to examine government fees, and regulatory hurdles are inhibiting deployment of digital infrastructure in rural and remote areas. New York’s ConnectALL initiative has some promising proposals that should be considered by all public agencies and departments in municipal, provincial and federal governments.

Are there public sector assets that be leveraged for faster and more cost effective construction of communications facilities?

Should we rethink the CRTC’s broadband fund, perhaps examining a model that subsidizes service in high cost areas? Rather than subsidizing the upfront capital expenditures for extending networks to unserved areas (like every other government broadband program), should the CRTC fund assist with the ongoing higher operating expense?

The price of service from Starlink (and other satellite providers) are beyond the reach of many households, but such services may be the most economic way to service many Canadian households. Over the past couple years, we have frequently seen broadband funding announcements exceeding $10,000 in subsidies per household (as can be determined by reviewing ISED’s summary funding chart).

Can we be more creative in finding ways to build broadband better?

On December 17, the Government of Canada opened its consultation on the 3800 MHz spectrum band. The day before, Ceri Howes, Head of Regulatory for Opensignal published an article that I think merits highlighting, in light of the government’s stated object for the consultation “to ensure Canadians have access to high-quality wireless services.”

In the header for “Canada’s 5G future – the story so far”, Opensignal indicates the article “discusses some key considerations for Canada’s 5G future and highlights how policymakers and regulators can better make use of independent, globally-standardized data that reflects the actual experience of the consumers they serve.”

The article shows that Canada’s wireless carriers have consistently invested in new technologies, increasing spectrum efficiency and capacity, leading to Canada currently having some of the fastest 4G networks in the world, “despite Canada’s relatively low population density and the high capex and opex costs involved in deploying networks in rural and remote parts of a large country.”

However, the article observes that Canada is “unfortunately slipping behind” when it comes to 5G, and Opensignal suggests that spectrum policy is a factor.

The political and regulatory dynamics in Canada are complex, and spectrum management approaches also must consider factors such as a long, shared land border with the US. However, it is clear that various decisions around the timing, availability and pricing of critical 5G spectrum may be leading to constrained deployment.

Opensignal supported PWC Canada’s March 2021 report that looked at Canada’s connectivity needs in a post-COVID environment and looked at the implications for the roll-out of 5G. As I wrote at the time, the report identified six policy drivers to incentivize 5G deployment and broadband-enabled use cases, including spectrum timing and costs; network investment incentives; rural subsidies; and, funding for research and development.

Opensignal warns that Ottawa has a “pressing opportunity to prioritize the auction of additional mid-band and lower band spectrum”.

In Minister Champagne’s mandate letter, spectrum policy is only mentioned once: “Accelerate broadband delivery by implementing a ‘use it or lose it’ approach to require those that have purchased rights to build broadband to meet broadband access milestones or risk losing their spectrum rights.” I think much greater focus on spectrum policy is needed.

Opensignal says, “The speed with which new spectrum is allocated to carriers is also important if Canada is to see the full economic benefits of 5G and also if it is going to continue to rank highly on mobile network experience worldwide.”

As 2022 opens, 5G use cases in “agriculture, mining and manufacturing will play a central role in the transformation of Canada’s industrial policy and digital economy”.

Spectrum policy needs to take a higher profile on Canada’s political and economic agenda.

For the 3800 MHz consultation, comments are due February 15, with replies due March 7.

Just before the holidays, the Prime Minister set out new mandate letters for members of his Cabinet, including one for Innovation, Science and Industry Minister Champagne.

While many may focus on what is in the letter, I think it is also worth examining what is no longer part of the Minister’s mandated focus. What has changed?

In the current mandate dated December 16, 2021, the subject of telecom services is reduced to a single bullet:

• Accelerate broadband delivery by implementing a “use it or lose it” approach to require those that have purchased rights to build broadband to meet broadband access milestones or risk losing their spectrum rights.

Let’s take a look at the telecom items from the letter for Minister Bains from just two years earlier (December 13, 2019):

• Use all available instruments, including the advancement of the 2019 Telecom Policy Directive, to reduce the average cost of cellular phone bills in Canada by 25 per cent. You will work with telecom companies and expand mobile virtual network operators (MVNO) in the market. If within two years this price target is not achieved, you can expand MVNO qualifying rules and the Canadian Radio-television and Telecommunications Commission mandate on affordable pricing.
• Award spectrum access based on commitments towards consumer choice, affordability and broad access. You will also reserve space for new entrants.
• With the support of the Minister of Middle Class Prosperity and Associate Minister of Finance and the Minister of Seniors, create a new Canadian Consumer Advocate to ensure a single point of contact for people who need help with federally regulated banking, telecom or transportation-related complaints. Ensure that complaints are reviewed and, if founded, that appropriate remedies and penalties can be imposed.
• 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.
• Co-lead work with the Minister of Canadian Heritage to modernize the Broadcasting Act and the Telecommunications Act, examining how best to support Canadian content in English and French and ensure quality affordable internet, mobile and media access.
• Work with the Minister of Canadian Heritage to introduce legislation by the end of 2020 that will take appropriate measures to ensure that all content providers, including internet giants, offer meaningful levels of Canadian content in their catalogues, contribute to the creation of Canadian content in both Official Languages, promote this content and make it easily accessible on their platforms. The legislation should also consider additional cultural and linguistic communities.

The new mandate includes additional bullets for cyber security and artificial intelligence that will merit further examination, but there is clearly a changing focus of the mandate letters, at least as relates to telecommunications related issues. To be sure, there are other digital economy points in the mandate, such as:

• Establish a digital policy task force to integrate efforts across government and position Canada as a leader in the digital economy and in shaping global governance of emerging technologies.
• Introduce legislation to advance the Digital Charter, strengthen privacy protections for consumers and provide a clear set of rules that ensure fair competition in the online marketplace.

Two years ago, Minister Bains’ letter included this consumer protection section:

With the support of the Minister of Middle Class Prosperity and Associate Minister of Finance and the Minister of Seniors, create a new Canadian Consumer Advocate to ensure a single point of contact for people who need help with federally regulated banking, telecom or transportation-related complaints. Ensure that complaints are reviewed and, if founded, that appropriate remedies and penalties can be imposed.

That appears to have evolved to this:

To enhance consumer protection and ensure a level playing field for all businesses, undertake a broad review of the current legislative and structural elements that may restrict or hinder competition. This includes directly reviewing the mandate of the Commissioner of Competition, and in so doing, ensuring that Canadians are protected from anti-consumer practices in critical sectors, including in the oil and gas, telecommunications and financial services sectors.

There seems to be less micro-management in the new mandate letter, setting out the results being sought (“ensuring that Canadians are protected from anti-consumer practices in critical sectors”), but enabling greater flexibility in how to achieve the objective.

As Minister responsible for Statistics Canada, Minister Champagne is clearly aware of the agency’s tracking of cellular prices in the monthly Consumer Price Index. That data shows that mobile prices have fallen by more than 27% since Minister Bains’ mandate.

There are other important issues to be addressed to “position Canada as a leader in the digital economy and in shaping global governance of emerging technologies.”

Before the holidays, Minister Champagne told Columnist John Ivison, “When I look ahead, my major job is to prepare Canada for the 21st century.”

Given the circumstances, the government’s focus has justifiably widened to look at a bigger picture. The Minister’s mandate letter reflects that broadened perspective.

The mandate letter implicitly allows for a less interventionist approach in the marketplace, but it remains to be seen if the Minister’s office can resist the temptation. As William Watson wrote in response to the Ivison column:

“Visit me when you’re in Ottawa,” a true-blue industry minister would tell all those CEOs who keep calling, “But don’t feel obliged to come. There’s nothing for you here except skating on the canal. In Canada, we let markets decide which businesses succeed and which don’t.”