Is CRTC’s broadband fund fundamentally flawed?

When the CRTC issued its landmark 2016 broadband decision, “Modern telecommunications services – The path forward for Canada’s digital economy” [TRP 2016-496], I observed at the time that there was “a high likelihood that the basic service objective will not be much more than a score card bound to disappoint.”

At the time, the CRTC set an ambitious broadband objective relative to its peers in other countries: that within 10-15 years, all Canadians should have access to subscribe to an unlimited broadband service with speeds of 50 Mbps down and 10 Mbps up, as well as access to the latest generally deployed mobile technology in our homes, our businesses and major transportation roads. Since the ten to fifteen year target was issued at the end of 2016, the government objective has set 2030 as the target for universal access. To help achieve that objective, the CRTC decided that it would also get into the funding game, with its Broadband Fund joining a myriad of other government agencies at all levels who pick winners and losers in handing out ceremonial cheques to provide a one-time funding stimulus.

Many people didn’t give much thought to what the CRTC termed a consequence of that decision, “As a result, the Commission will begin to phase out the subsidy that supports local telephone service”. In other words, the Commission swapped out a program for ongoing support for all high cost serving areas, in favour of awarding one-time payments to specific winning projects.

As I wrote last week, the current environment may be creating an ‘expense gap’ for rural telecommunications service providers. Capital stimulus programs, whether by the CRTC or any other government agency, provide a one-time incentive payment to offset the higher costs of building networks in rural and remote areas. The forecasted business cases used in funding applications have a finite time horizon.

There remains a much higher ongoing cost to operate and maintain rural and remote networks. What happens at the end of that application funding period?

Will service providers be able to sustain service at affordable prices at the end of the funded business plan?

There is always a great photo-op and media coverage when a big capital funding cheque is awarded. A short while later, there might be a second press release when service is actually launched and a ceremonial ribbon gets cut.

The problem is that the need for ongoing support tends to be ignored (present company excepted, of course). But these support payments can be critical to maintaining affordable service in certain areas, as well as enabling ongoing upgrades. As I observed last week, a report from the FCC (“Improving the Nation’s Digital Infrastructure” [pdf]) recognized the need for $2B in annual support to accompany $40B in one time subsidies in the US context.

Did the CRTC err in phasing out its ongoing subsidy of local services in rural and remote markets? Was there a way to add broadband to the contribution eligible services to provide ongoing funding of service providers operating in high cost serving areas?

When other agencies and departments at federal provincial and regional levels of government are already in the business of awarding grants, did we need the CRTC to create yet another broadband capital funding program?

The CRTC acknowledges it “may conduct future consultation processes to review the eligibility and assessment criteria for the fund as needed.”

Perhaps such a review should consider whether the CRTC should exit the game of choosing winners and losers in favour of providing the more mundane, but necessary, perpetual and universal support for high cost serving areas.