Who should be paying the bill when the price of broadband is just too high for a household budget to afford?
This is just one of a number of questions that come to mind when looking at a Part I application filed by Matawa First Nations Management (MFNM). In the CRTC filing, MFNM is described as a not-for-profit Tribal Council representing nine First Nations communities in northern Ontario with a combined population of over 10,000. MFNM launched its own telecommunications carrier, Rapid Lynx, which is in the process of deploying a telecom network that will connect all nine of the Matawa First Nations using FTTP technology.
In its CRTC application, MFNM states:
Rapid Lynx has received funding from the Government of Canada through the Universal Broadband Fund and the Government of Ontario through the Improving Connectivity for Ontario program, but this funding is only for capital expenditures related to the network deployment and cannot be used as any form of ongoing retail subsidy for the residents of the Matawa First Nations.
According to press releases, MFNM has received substantial levels of Federal and Provincial funding – more than $130M – for its fibre project:
- $37.1M from Federal Connect to Innovate program (October 2017)
- $2.14M from Indigenous and Northern Affairs (October 2017)
- $30M from Ontario’s Broadband and Cellular Action Plan (October 2019)
- $62.7M from Federal Universal Broadband Fund and Improving Connectivity for Ontario (July 2021)
This works out to $13,000 per person in capital subsidy, or more than $30,000 per household.
It is important to note that retail pricing commitments are conditions associated with receiving funding from the Federal Government for broadband. For example, the Universal Broadband Fund Application guide states “a condition of receiving funding is that successful applicants will be required to make available broadband service(s) at the price(s) specified in their proposal for a minimum of five (5) years from the project completion date.” A similar clause appeared in the Connect to Innovate Application guide [pdf, 4.8MB].
The idea behind the capital subsidy programs is to help with the business case for constructing broadband networks. Proponents identify the costs associated with the build, which are expected to be much higher (on a per-household basis) than urban broadband projects. The business case is supposed to show planned revenues at a prescribed monthly rate, and the government program provides sufficient funding to make the business case break even with a reasonable return on investment.
Through the summer, I asked if our capital funding subsidy programs were fundamentally flawed because the programs typically don’t account for higher ongoing operating costs associated with maintenance of a rural / remote network.
While the business plans submitted as part of the funding applications should be accounting for affordability, we know that price is an issue for many households, even in urban markets. This is why Canada’s major carriers have voluntarily provided targeted subsidy plans like TELUS Connecting for Good portfolio. These are entirely funded by the private sector.
In its CRTC application, MFNM notes that it experimented “using Starlink to offer retail Internet services and saw disconnections when monthly charges proved unaffordable for residents.” MFNM proposes expanding the CRTC’s across-the-board northern subsidy to an additional 75,000 households in First Nations communities, providing each with $36 per month at a total cost of roughly $32M per year.
For more than 15 years, I have been asking if geography should be used to determine needs for broadband subsidies. Rural and remote does not equate to low-income. As I pointed out in a post at the beginning of this year, median incomes in the three territories are substantially higher than median incomes in any of the ten provinces. Doesn’t that fact help illustrate why universal subsidies based on geography would be inappropriate and unnecessary?
If we are concerned with broadband affordability, shouldn’t a subsidy be needs-based, independent of where the person lives? While prices for telecom services may be higher in certain geographies, the price of anything, or indeed everything, may be higher.
Who should be paying the bill associated with subsidies? Why would we expect the CRTC to manage a monthly subsidy for broadband service? Should the affordability of each essential item be addressed by separate regulatory authorities? Should groceries for low income households be subsidized by Canada’s grocery stores? Alternatively, shouldn’t existing government social safety nets be responsible for helping those in need, whether it is for food, housing, broadband or other essential expenditures?
I have frequently complained about the CRTC’s off-the-books social subsidies, managing wealth redistribution on behalf of the government, without it being part of the Parliamentary budget process. At what point do we look to the government agencies responsible for managing our social safety net to be paying the bill for telecom affordability as well?