Access to broadband internet service isn’t an issue for the vast majority of Canadians. Almost all Canadians have access to superfast broadband. Still, so many people focus on the “supply” side of the adoption calculation, rather than the much more difficult question of stimulating “demand”.

As a result, a number of articles attack the government for setting “unambitious” goals for its broadband strategy [Digital Canada 150, 3MB pdf], without understanding the real challenges of providing broadband service in rural markets (see “Rural broadband isn’t easy“).

There are companies making substantial investments to improve rural broadband coverage and service quality. The release of the 2500 MHz spectrum auction results last week saw millions of dollars being invested by Xplornet and Corridor Communications to improve the reach and speeds for their broadband services.

The biggest challenge restricting Canadians’ ability to participate meaningfully in the digital economy isn’t access to broadband, it is the question of affordability.

How do we determine what is affordable? Of course, we all want to pay less that what we are paying today. Affordability isn’t measured by what we want to pay, but more by what we are willing to pay. In the interests of rural and urban parity, people sometimes point to the prices being charged in urban markets as an appropriate target for affordable broadband service.

The problem is that there simply isn’t a “one size fits all” price point for universal broadband. Should a system of subsidies be set up to bring rural pricing down to urban levels? Such a “geographic-based” system appears to be premised on a belief that higher rural prices are not affordable. Equally, such a system also presumes that urban prices are, in fact, affordable to all.

Neither of these presumptions are supported by the data.

We continue to have a problem with broadband adoption in low-income households, whether urban or rural, despite government programs continuing to define digital adoption as a problem framed in terms of geography, not affordability.

The CRTC’s consultation launching a “Review of basic telecommunications services” examines the issue, but there is a risk that the consultation will also approach the problem with the same prejudice:

In phase 1, the Commission will review its policies regarding basic telecommunications services in Canada. The Commission will also gather information from the industry to better understand which telecommunications services are being offered across Canada and whether any areas in Canada are underserved or unserved.

The CRTC is starting with an examination of what areas might be underserved when it might be more useful to start by trying to understand “who in Canada is underserved or unserved”? The preamble of the consultation starts with a presumption that the problem is geographic, not based on any other factor. It is as though we are already asking about solutions for “where” before asking about “who” needs help.

In paragraph 3 of the Basic Service public notice, the CRTC acknowledges that Section 7 of the Telecom Act sets the following relevant policy objectives:

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada; and
(h) to respond to the economic and social requirements of users of telecommunications services;

The Appendix to the public notice does in fact seek input in terms of economic requirements of users. The CRTC asks participants to “Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.”

However, in seeking public comments on solutions, we continue to see the terminology of a geographic bias. “What action, if any, should the Commission take where Canadians do not have access…” and “What action, if any, should the Commission take in cases where its target speeds will not be achieved…”

What evidence do we have that says “affordability” is a rural/urban issue? Why is there no discussion specifically seeking comments on the advisability of lifeline services [such as Lifeline Services described by the FCC] based on income?

When last produced, Statistics Canada showed that more than a quarter of households in Montreal had no internet use from home; the same was true for 1 in six households in Toronto and Vancouver; 1 in 5 in Regina.

Our telecom policy seeks to render affordable telecommunications services in both urban and rural areas in Canada, which requires substantially more information about economic and social factors that inhibit service adoption, in accordance with Section 7(h). Based on Statistics Canada’s information, there may be more Canadians in urban markets who are not subscribing to internet service than in rural markets.

Who are they and why are they not on-line?

Who will speak for the households that don’t have internet access?

The Commission says it “will consider what its role should be in ensuring the availability of basic telecommunications services, particularly in rural and remote regions of Canada.”

Before we answer the question about “where” the CRTC should be acting, perhaps we need to have a more clear understanding of “who” needs help and “why”.

We may need to find a solution that turns the current subsidy system upside down. Rather than subsidizing the “where”, has anyone looked at providing subsidies directly to those who need it?

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Update: [May 19, 7:45 am]

An article today at AEI’s Tech Policy Daily by Bronwyn Howell looks at “The rural-urban divide on broadband adoption and pricing: Fact or fiction?” from an econometric perspective. “The bottom line is that broadband adoption is complicated, and that price is only one of its many determinants. When regulators are facing a problem where the root causes are ill-defined (or perhaps the problem is even non-existent and simply a statistics-mirage), a high degree of regulatory humility becomes important.”

Providing broadband in rural and remote areas isn’t easy. If it was easy, we wouldn’t have needed billions of dollars of government incentives directed to improve access over the past decade.

It comes down to economics. On a per customer basis, it is costlier to connect rural homes and distances mean that it can take longer to install and service these connections.

No single technology can be relied upon to deliver broadband internet to everyone. The biggest challenge is in delivering service in markets with extremely low household density.

For wireline based services, there is the cost of running cable. With the greater distances between rural households, these long cable runs – with costs measured in dollars per foot – can lead to initial placement costs that simply cannot be recovered from monthly service fees. And that assumes the distances even permit a broadband connection. For many households in rural markets, a wireline connection simply isn’t practical.

When wires aren’t economic, fixed and mobile wireless can be effective if there are enough households within the reach of the base station. These solutions use spectrum; more customers and higher speed services need more spectrum. That is why reports about this week’s results from the 2500 MHz spectrum auction have referred to rural consumers being the big winners.

But there are still some residences that cannot be served by conventional wireless technologies and the only viable solution available today is satellite. New fourth generation satellites are able to provide broadband speeds that can deliver two-way video calling and streaming media. While there is a longer latency – it takes a quarter second for a signal to go up and down to a geo-stationary satellite – satellites enable broadband connections for households that are beyond the reach of terrestrial technologies.

Other countries have recognized the role of satellites in providing broadband access for rural markets. Despite massive levels of government subsidy, satellite and fixed-wireless are part of the solution for universal broadband in Australia and even the UK.

In February, I wrote about the common misinformation about Australia’s NBN as a universal fibre to the home initiative. Last year, I wrote about an interim report from Australia that showed that after spending more than $7B, only 260,000 premises had access to fibre with only 78,000 subscribers – a cost to taxpayers of nearly $100,000 each. In the UK, despite far greater population density compared to Canada, “Superfast Broadband” includes satellite for rural markets: “The Government will be working with local projects and suppliers to launch a scheme which will offer people with less than 2Mbps broadband services the option of taking up superfast capable satellite service”.

One technology simply doesn’t fit every application.

On June 3, Xplornet President and CEO Allison Lenehan will be talking about delivering advanced services to rural Canadians at The 2015 Canadian Telecom Summit.

Have you registered yet?

A few weeks ago, I wrote a piece about “Connecting the unconnected,” which looked at a couple initiatives that could help expand digital connectivity for low income Canadians.

An update to that article referenced a op-ed published by FCC Commissioner Jessica Rosenworcel describing the “Homework Gap”:

Students who lack broadband access at home are unable to complete basic schoolwork. They have trouble keeping up in the classroom. More than that, they are holding our educational efforts back.
…
The homework gap is the cruelest part of the digital divide. But we can take steps now to tackle it — steps that will help students get their schoolwork done, help expand access to the Internet, and help grow our digital economy.

Where do Canada’s policy leaders stand on such issues?

Silence, so far.

Which political parties will look at digital inclusion in their election platforms this year?

The Montreal Economic Institute released a report this morning examining “The State of Competition in Canada’s Telecommunications Industry“.

Last year, the 2014 edition of the report concluded Ottawa is harming consumers of telecommunications services by encouraging artificial competition. That report countered the oft-repeated mantra that Canadians pay noncompetitive prices for low quality telecommunications services. The report argued that interventions aiming to increase the number of players through subsidies and mandated access were not likely to have the intended effects and might instead jeopardize investments and innovation.

The 2015 report has 4 key sections:

• Chapter 1: How Does Canada Measure Up?
• Chapter 2: An Update on Wireless Competition in Canada
• Chapter 3: Mandatory Sharing of Broadband Networks: Fostering or Hindering Innovation?
• Chapter 4: The Impact of Technological Changes on Competition in the Telecommunications Sector

So, how does Canada measure up? According to the report, Canada has among the world’s most advanced and efficient wireless networks. “Canadians continue to be among the biggest consumers of telecommunications services in the world, an indication that we enjoy competitive, quality services.”

The authors suggest that “The government and the CRTC should stop emulating the failed policies of Europe and revive Canada’s historically less interventionist wireless regulation, which has served consumers well.”

The conclusion is entitled “Endangered Benefits.”

Canadians continue to enjoy one of the most advanced telecommunications networks on the planet, and while prices are higher than in Europe, they are lower than in the United States and Japan. This explains in part why Canadians are among the biggest consumers of telecommunications services in the world.

These benefits, however, are endangered. The numerous interventions carried out by the federal government to encourage the establishment of a 4^th wireless telephony player across the country could end up hurting consumers by undermining innovation in this industry.
…
The most appropriate public policies are those that will allow Canadian telecommunications companies to face this global competition and that will offer the best investment climate. The debate over a fourth wireless player, and the government’s interventions in the matter, which continued this year, are just a costly distraction that could well backfire for Canadian consumers.

How do lawyers and economists examine the impact of regulation on investment and innovation? That is precisely the subject of one of the panels at The 2015 Canadian Telecom Summit, taking place in just over 3 weeks, on June 1. The session, “Competition in Telecom: Net Neutrality and Innovation,” brings together leaders from Canada and the United States and will feature:

• Dvai Ghose (moderator), Global Head of Equity Research at Canaccord Genuity, has consistently been ranked as an all-star Canadian Telecom and Cable Services Analyst by Brendan Wood International. He has also been ranked the number one equity analyst for stock picking and EPS estimate accuracy in the Telecommunication sector in North America by Starmine and Forbes Magazine.
• Ariel Katz is an Associate Professor at the Faculty of Law, University of Toronto, where he holds the Innovation Chair in Electronic Commerce. His general area of research involves economic analysis of competition law and intellectual property law, with allied interests in electronic commerce, pharmaceutical regulation, the regulation of international trade, and particularly the intersection of these fields.
• John Lawford is Executive Director and General Counsel of the Public Interest Advocacy Centre (PIAC), a national non-profit organization that provides legal and research services on behalf of consumer interests, and, in particular, vulnerable consumer interests, concerning the provision of important public services.
• Len Waverman has been a professor of economics at the University of Toronto and the London Business School and Dean of the Haskayne School of Business as well as professor of strategy at the University of Calgary. He is currently Dean of the DeGroote School of Business.
• Christopher Yoo, Director, Center for Technology, Innovation & Competition at University of Pennsylvania Law School, has emerged as one of the leading authorities on law and technology. His research focuses on how the principles of network engineering and the economics of imperfect competition can provide insights into the regulation of electronic communications.

This session should be interesting and provoke considerable discussion.

Have you registered yet for The 2015 Canadian Telecom Summit?

A few weeks ago, I wrote about “Connecting the unconnected“, taking a look at various strategies to provide introductory connectivity to people who cannot otherwise afford devices or broadband service.

Some of these strategies involve providing access to a limited number of “zero-rated” services, such as Wikipedia.

Through the years, carriers have used (and continue to use) zero-rated offerings as a way to get people to expand their use of services. To this day, many companies have “social plans”, providing limited access to some social networking sites for a flat monthly rate.

Internet.org is a zero-rated service being offered in less developed countries seeking to provide affordable access to a limited number of sites. “Internet.org is a Facebook-led initiative bringing together technology leaders, nonprofits and local communities to connect the two thirds of the world that doesn’t have internet access.”

Like flat rate services in Canada, activists have criticized Internet.org for violating “net neutrality”, favoring Facebook over other websites and services.

In a news story this morning, BBC quotes Facebook’s founder, Mark Zuckerberg, striking back at the activists:

But Facebook’s founder Mark Zuckerberg said it was “not sustainable to offer the whole internet for free”.

“It costs tens of billions of dollars every year to run the internet, and no operator could afford this if everything were free,” he said in an online video posted to Internet.org’s website.

…

Mr Zuckerberg said that people should not prevent others from using the internet in order to defend an “extreme definition of net neutrality”.

“Are we a community that values people and improving people’s lives above all else, or are we a community that puts the intellectual purity of technology above people’s needs?” he asked.

In announcing the Internet.org Platform, Zuckerberg says “For most people who aren’t online, the biggest barrier to connecting isn’t lack of infrastructure – more than 80% of the world’s population already lives within range of a mobile signal. Instead, the biggest challenges are affordability of the internet, and awareness of how internet services are valuable to them.”

Should carriers and applications be restricted in exploring business models that increase adoption of digital technology and services? Or, as Zuckerberg asks, will an “extreme definition of net neutrality” put “the intellectual purity of technology above people’s needs?”

Zero rating of services is certain to be raised by a number of the panels at The 2015 Canadian Telecom Summit, which opens in 4 weeks in Toronto. On Monday June 1, a panel of top telecom economists from Canada and the US will be exploring “Competition in telecom: net neutrality and innovation“. On June 2, the regulatory executives from Canada’s leading communications service providers will debate the full range of issues facing regulation and government policy. and, on June 3, two panels will related issues with “Hyper Connectivity: Shaping Personal & Business Digital Relationships” and “Coming to Any Screen Near You: The video revolution“.

Check out the full conference program. Have you registered yet?