How do we measure broadband affordability?

Some people think we should use international comparisons; if broadband costs more in Canada than it does in another country, can one really conclude the service is over priced and something needs to be done? A couple posts from February disproved that theory: “Let’s talk seriously about affordable wireless” and “Higher? Maybe. But too high? No.”

Others look at the percentage of annual income required to pay for the average communications services bill and conclude that people in the lowest income quintile are paying a higher percentage of their income for those services than people in the higher income quintiles. Well, that is just basic arithmetic and will always be true for all services, all goods. Anything divided by a smaller number will be a bigger percentage than anything divided by a bigger number. So yes, if you make more money, you will find everything to be more affordable. In and of itself, that doesn’t mean that it isn’t affordable for people at the lower end of the income scales, but with a limited amount of income, spending priorities have to be set.

The current global health pandemic has turned everyone’s life and livelihoods upside down. Unemployment rates are levels never seen by current generations. School classrooms have been closed for weeks and will likely remain that way through the end of this school year. Most people who are still working are doing so from home and many are using internet connections to continue classes. To a far greater extent, those without home broadband internet are isolated far more than the majority of us who are maintaining physical distance, but socially connected. It is tougher to communicate with family, tougher to order necessities, tougher to maintain employment, school, social connections.

The industry has taken a number of steps to help consumers who have home internet, like raising download restrictions, and establishing favourable financial arrangements for those having trouble making ends meet.

How can we respond to those who aren’t yet online, in need of affordable home connectivity?

TELUS announced a significant expansion of its Internet for Good program [BC Announcement; and, Alberta Announcement], in cooperation with local school boards in British Columbia and Alberta.

“At TELUS, leveraging our technology to help young people realise their full potential is fundamental to the passionate social purpose we all embrace. As classrooms remain closed in order to support important physical distancing, keeping families safe, this new initiative ensures every student can stay connected to exciting learning opportunities from their homes,” said Darren Entwistle, TELUS President and CEO. “TELUS has a longstanding commitment to building stronger, more connected and compassionate communities, as reflected through our Internet for Good program, which provides more than 122,000 low-income Albertan families [100,000 low-income British Columbian families] with access to high speed internet and digital literacy training tools. The partnership announced today builds on this program and exemplifies our team’s passionate dedication to keeping young people safe and connected during this unprecedented health crisis.”

School Boards working with TELUS will be responsible for identifying families in need of an internet connection at home, and will provide that family with a unique TELUS Internet for Good promotion code, which the family can use to call TELUS and register for the program. Families will also have access to free educational activities through TELUS WISE and the ‘Learn, Do and Share’ educational hub through a partnership between TELUS and Microsoft.

Before the Federal Government helped coordinate the national Connecting Families program, TELUS had launched its Internet for Good service in cooperation with provincial social service agencies in Alberta and BC. Yesterday’s announcements are a remarkably generous expansion of this industry-leading program.

There was an opinion piece on NNSL (Northern News Services Limited) saying “It’s time for a WE revolution in Canada – WEB EQUALITY for Northerners”. It seeks more affordable broadband choices for Canadians living in the far north:

The logic that the 35 million people with an internet connection should pay for the national communication grid south of 60, while 109,000 Northerners pay more for the remaining third of the country is absurd. That’s like putting a toll on the Trans-Canada Highway and charging people in Alberta and B.C. over twice as much because they live so far away from Ottawa.

There are real technological challenges in serving the north, and as a result, there really is a problem with providing comparable services at comparable prices when compared with what we have come to expect as the standard of service in our urban centres.

In the olden days – about 30 years ago – the regulator could have ordered that service in the rest of Canada would cross subsidize the north and it would just be done; when there are multiple competing service providers in north and south there are issues that arise: who should pay for the subsidy, and who should receive the subsidy?

Should the funding come from a tax on everyone’s telecom services? Should the funding come from the federal treasury? While in theory, both are taxing the same body of consumers, the government has liked to have telecom users cover various cross subsidy schemes for telecom services. The challenge with that approach is that the funding model impacts the affordability of services for all. In addition, as many services migrate to global cloud-based services, there are many substitutable services that aren’t contributing to the subsidy. The tax creates an added arbitrage opportunity to incent the growth of these services resulting in an ever shrinking pool of contributors, raising the tax rate and feeding a vicious cycle. On the other hand, the federal treasury is funded by those most able to pay and would be the least distortionary source of a subsidy.

As to distributing the subsidy, traditionally, broadband programs have tended to subsidize a selected service provider based on a proposed geographic expansion without regard to the financial need of the consumers who will be served. This also had the effect of picking a winner in each area, forever enshrining a particular service provider and specific technology. Can we find a better way, to enable the marketplace to pick winners? What if we turned that model around, to subsidize users based on need without regard to geography? I have written about this kind of approach in the past [such as “Affordable broadband isn’t just a rural issue”]

Around the world, people are depending on residential broadband more than ever before; economic uncertainty has impacted everyone. Governments at all levels are helping citizens face these challenges and telecom companies and their employees have performed admirably in managing these shifts in communication patterns, with dramatic increases in loads. There remain some households that do not have access to even a modest level of broadband service, and recall, “Isn’t some broadband better than nothing?” and “Do we offer a sip of water to the thirsty?”

As economic stimulus programs are being developed by government, should some funding be aimed at shovel-ready projects that can extend the availability of broadband services? Can direct subsidies help Canadians in remote areas afford the services needed to communicate during these difficult circumstances?

A few weeks ago, I wrote a blog post looking at whether the internet would be able to sustain the shift in demand patterns as measures to control the spread of COVID-19 began to drive people to isolate themselves at home. In “Are Canada’s networks ready for work from home?”, I looked at the bandwidth requirements of the most common videoconferencing applications.

The networks have done remarkably well. As I told IT World Canada, “The network management teams and engineering departments are doing heroic work identifying pain points and providing relief, despite obviously trying conditions. It’s remarkable that we see so few problems so far. Truly a testament to the quality of the network infrastructure that we have in Canada.”

As I learned that teachers in Ontario will begin leading remote learning over the next week, I started to wonder how much contention we will find in households with multiple kids needing access to computers at the same time. Parents may need machines for work as well.

Some households have struggled to afford one connected computer to be shared among everyone. How many homes have a screen available for each child? This isn’t just a digital divide based on socio-economic class; there are many reasons for people blessed with the financial means may choose to not have a connected device for each kid.

And even if a household has enough devices, is the home big enough for the kids to not interfere with each other and with parents trying to work from home? How do the kids participate in their own on-line learning while parents are also engaged in work from home?

So what happens when there is competition for a device? Multiple conference calls at work, multiple classes from multiple teachers and multiple students in a household. There is bound to be contention for devices, and for space to work.

Do we need to take a look at the applications and models being used for classes? Is real time necessary or can some classes be taught lecture style, available on-demand at any time of day?

Canada’s communications networks generally have proven themselves capable of managing with the massive shift in traffic, as we run our lives sequestered at home.

How will households manage the competing demands for devices and physical space, when family members contend for access to the family PC or a quiet corner.

I’d like to see your comments and suggestions.

In The Daily on Wednesday, Statistics Canada reported “Capital expenditures on Canadian infrastructure, 2018”. The statistical agency reported that total capital spending on Canadian infrastructure in 2018 was $93.3B.

An associated table [Table 34-10-0280-01 Capital expenditures, infrastructure assets, by ownership] provides a breakdown by category and ownership, indicating that $5.128B of the 2018 total was for “Communications networks” infrastructure, of which nearly 99% ($5.063B) was in the hands of the private sector.

This caught my eye. The figure seemed lighter than I expected. So I decided to take a look at the annual reports for the major carriers that file public reports to see what was reported for 2018 capital.

So, looking at just the 5 largest public reporting mobile companies, we see more than double the amount of capital spending in telecommunications than Statistics Canada reported. Note that the table above excluded media spending by the integrated companies. The table also excludes Cogeco, privately held Eastlink and Xplornet, crown-owned Sasktel, and the hundreds of smaller carriers that deployed communications infrastructure in 2018.

We will try to find out why the capital spending figures are so different from the Communications Networks infrastructure numbers released by Statistics Canada.

A friend of mine in government once told me that what may be good public policy doesn’t always make for good politics. And vice versa.

I nodded in agreement, but thought that strong political leaders should be able to help lead public opinion to support good policy, and failing that, should be willing to do what is right, not necessarily falling back on the easy route of doing what is popular.

An Intelligence Memo was released last week by the CD Howe Institute entitled “Coronavirus Crisis Shows Value of Robust Digital Infrastructure”.

In that memo, William Robson and Grant Bishop observe that Canadian telecommunications services have “held up robustly” to the unprecedented traffic demand levels created by Canadians shut-in by work-place closures and the isolation measures in the effort to contain the COVID-19 virus. The Intelligence Memo says “Lower quality networks would have buckled under the increased demand.”

“Why did this acceleration in digital activity and heightened virtual connectivity work? Because generations of technological progress and physical investment now deliver unprecedented amounts of data across wires and airwaves close to the speed of light.”

The memo refers to a report from BCG’s Centre for Canada’s Future (about which I wrote in late January), highlighting “the history of capital investments in Canadian telecommunications facilities that have yielded world-leading network quality.”

The memo concludes with a message to policy makers: “Recent experience demonstrates that, whatever discontents the federal government may be channeling, the quality and coverage of Canada’s networks, the cost of services, and the variety of platforms and carriers available, is impressive. Our telecommunications infrastructure is a vital asset. Good public policy should strengthen it.”

If good telecom policy isn’t working out to be good politics, strong political leaders will lead and do what’s right.

As various jurisdictions increase restrictions on movement in an attempt to slow the spread of the COVID-19 virus, Canada’s two largest provinces, Ontario and Quebec announced the mandatory closure of non-essential workplaces effective tonight (March 24) at midnight.

So, what is an essential workplace? The Government of Ontario released a list last night. Many of the locations were expected, such as grocery stores and pharmacies. Some were greeted with a measure of relief, such as liquor, wine and beer stores. For those who can’t cook, or those who just a need a little more variety, they will be pleased to see that “Restaurants and other food facilities that prepare and serve food, but only for delivery or takeaway, together with food delivery services” made the list of essential workplaces.

Did I mention telecommunications? It is captured in a section with its own heading:

Telecommunications and IT Infrastructure/Service Providers
14. Businesses engaged in providing or supporting Information Technology (IT) including online services, software products and related services, as well as the technical facilities such as data centres and other network facilities necessary for their operation and delivery; 
15. Businesses providing telecommunications services (phone, internet, radio, cell phones etc) as well as support facilities such as call centres necessary for their operation and delivery;

The province then lists a number of other areas: Transportation, Manufacturing and Production, Agriculture and food production, Construction, Financial activities, Resources, Environmental Services, Utilities and Community Services, which includes waste collection, water, power, natural gas, roads, police, fire.

Oh, did we include telecommunications on the list? I’m glad you asked. Despite already being listed near the top of the list, telecommunications shows up again, alongside newspaper publishers and radio and television broadcasters:

Communications Industries
43. Newspaper publishers;
44. Radio & Television Broadcasting;
45. Telecommunications providers;

Anyone doubting whether telecommunications is essential? Just ask the Premier of Ontario. You won’t get an argument from me.