A taxing proposal

At the CRTC’s hearing in Timmins yesterday, one of the companies suggested imposing a tax on everyone’s internet access in order to fund phone company expansion into territories that are currently served only by competing independent service providers.

That wasn’t how it was characterized, of course. But here is how it went.

The CRTC’s Communications Monitoring Report was interpretted as saying that there are 700K households that have no broadband access. That number refers to households that aren’t within reach of DSL, cable or the fixed wireless access of reporting ISPs.

This proposal would have the CRTC to create a subsidy pool of $700M per year (for 10 years), that would be given only to incumbent phone companies to fund extending the reach of their networks. That is $1000 per year per potential new subscriber. (I use the term “potential” because, even in urban areas, we still don’t have 100% penetration.)

That is an eye-popping $10,000 per household transfer of wealth, without any consideration given to the ability to pay the tax or the need to receive the largesse.

And under the proposal, the $700M is going to be generated from a new tax on internet services – services that are currently exempt from funding universal phone service. It will work out to a tax of at least 1.7% – roughly 75 cents to a dollar per month – for those of us subscribing to mainstream broadband plans.

What impact will this have on broadband penetration among marginal income households in urban centres? We know that there is an enormous digital divide based on household income, as Statistics Canada reported in May: 94% of households in the top income quartile (over $85,000) have broadband service compared to only 56% penetration in the quarter of Canadians that have household  income less than $30,000. So, more than 10% of Canadians – 44% of those in the lowest income quartile – aren’t subscribing already.

I don’t see how broadband adoption will improve by raising prices.