In my post on Wednesday, I raised the question of whether it is appropriate to continue the system of subsidizing telecommunications services based on the cost of providing service to certain geographies.

rural and remote does not equate to low-income; often, there are substantial savings in housing costs that can offset higher prices for other services. Similarly, lower cost areas may still have prices for services that exceed the affordability level for some households.

When telecom services are usually a fraction of housing costs, why are we so focussed on subsidizing everyone in a certain geographic area to offer discounts of a few dollars per month. If we are so concerned with broadband affordability, shouldn’t the subsidy be needs based independent of where the person lives? Shouldn’t low income families in an urban setting be more deserving of help paying the bill than someone who can afford the upkeep on an estate in the country?

Two years ago, in our opening remarks at The 2008 Canadian Telecom Summit, we called for a needs based subsidy program to enable affordability, regardless of where people live. Such a system would be competitively neutral and would focus on demand, rather than supply.

Isn’t it time to try a new approach?

If you haven’t attended The Canadian Telecom Summit, you have no idea about how entertaining debates on regulatory and policy issues can be, while various constituents bring forward their positions on the key issues of the day. That is why the regulatory blockbuster, taking place this year on Tuesday June 8, is certain to be a highlight at The 2010 Canadian Telecom Summit.

There will be lots to talk about. As I wrote yesterday,  parties filed their initial positions earlier this week on the issue of broadband being part of the universal service obligation. Is a universal service subsidy still needed? Should broadband in high cost areas be subsidized by users in lower cost areas?

In May, the CRTC will hold hearings into whether it should mandate wholesale access to certain high speed access services, which could shape the competitive landscape for alternate ISPs and other business services.

National digital strategies, consumer complaints, anti-spam legislation, competitive disputes. All these issues and more will spring to life when the gladiators of government policy enter the arena for the regulatory blockbuster.

The 2010 Canadian Telecom Summit takes place June 7-9. Have you registered yet?

On Monday, most parties filed their proposals in respect of the CRTC’s Consultation (2010-43): Obligation to serve and other matters. A few straglers came in late. Most of the material will be available shortly on the Commission website. In the meantime, the hyperlinks in this post will take you to a Scribd version of the referenced filings.

PIAC, representing a coalition of consumer groups, stood with the government of Saskatchewan and Sasktel as parties calling for an expansion of the current contribution regime to include a sustainable subsidy for high cost high speed internet services. The current system involves a tax on telecommunications services (other than internet services) to fund basic telephone services in high cost areas.

PIAC introduces its plan with a cautionary note, warning against doing any harm to the current system:

The Commission’s first goal in this proceeding should be to preserve Canada’s commitment to achieving universal and affordable voice (telephone) service. Therefore, whatever other adjustments are made for example to the basic service objective, obligation to serve or the local service subsidy, the Commission should ensure that such service is accounted for and protected.

Interestingly, on first review of the filings, it is hard to find service providers who support a subsidy program, even among the independent ISPs. The CRTC is urged to:

Not make any changes to the contribution regime that would increase the amount of contribution payable or result in the payment of contribution on retail Internet service revenues

and

Not introduce a high-speed Internet access element to the basic service objective
or to levy contribution on retail Internet services

This becomes one of the challenges of the universal service funding. How would the CRTC create a program to subsidize high cost broadband and avoid applying a tax on broadband internet services to fund the subsidy. If only legacy telecom services are taxed, then it artificially inflates the costs, serving to stimulate migration to IP-based over-the-top services, leaving fewer to fund the subsidy fund, raising the tax rate and thereby accelerating the migration.

How could this be considered technology neutral?

Although I did not go through all of the filings yet, it would be interesting to see evidence that there is actually a universal need to provide subsidies to all residents of high cost serving areas.

As we have observed before, rural and remote does not equate to low-income; often, there are substantial savings in housing costs that can offset higher prices for other services. Similarly, lower cost areas may still have prices for services that exceed the affordability level for some households.

Is it appropriate to artificially raise prices for economically disadvantaged households who happen to be in lower cost urban areas in order to benefit all residents of high cost serving areas?

Has anyone looked to see if there are more rural and remote residents who will be brought online by universal service proposals than the number of low income people who may be chased off the network?

Which group is representing these households?

The ITU has released its latest report on the state of the information society around the world [pdf, 4.28MB].

There is a lot of information in there to be digested, but for now, let me highlight a couple observations.

The first point that I found interesting was a table in Annex 3, that is the basis for computing the IDI – defined as the ICT Development Index. In passing, allow me to applaud the ITU for its use of a SRT: a Secondary Recursive TLA: a rarely used three letter acronym that embeds a second TLA within it.

In that Annex 3 table, we can see that in 2008, Canada had computers in 80% of our households and broadband in 75.1% of the households. Assuming that households with computers would be the only ones that would subscribe to broadband service, it appears that close to 94% of Canadian households with computers had broadband service. As a comparison, Sweden has 87% of households equipped with computers, 84% with broadband. It seems to me that ensuring computer accessibility, through increased digital literacy and affordability, is one of the things that needs to be looked at when we try to increase broadband penetration.

Section 2 of the report has a couple important text boxes that speak about the challenges of international data comparisons. Box 2.1 talks about the importance of shifting to household survey data, using mobile penetration as an example of the distortions created by use of supply side data from operators.

Box 2.3 looks at specific limitations of international data comparisons, looking at the Korean and Japanese cases as examples.

‘International Internet bandwidth per user’ is another indicator where the performance of the Republic of Korea is relatively weak (ranked 58th globally). International bandwidth is low since Korean Internet users rely mainly on national bandwidth, available abundantly and at relatively low cost. Koreans have produced a large amount of national Internet content in local language and surf ‘at home’ (on web sites that are hosted within the country, not abroad), in their local language. The top twenty most popular Korean websites are all hosted in Korea. Few Koreans visit websites abroad due to language constraints.

The box doesn’t mention the anomaly for Korea with computer penetration (80.9%), yet 94.3% of households are reported as having broadband. Interesting?

Canada’s international bandwidth is most certainly understated since there is no mechanism by which cross-border connections can accurately be counted. In addition, to what extent do domestic sites satisfy the needs of francophones, similar to Korea’s domestic content producers.

As the ITU report itself cautions:

These data issues make international comparisons difficult and prevent policy makers from truly assessing the development of the information society.

There is no substitute for applying critical thought to any set of simple metrics.

Digital issues will be covered with lots of critical thought at at The 2010 Canadian Telecom Summit. Have you registered yet?

As I flipped through the National Post Saturday morning, my eyes were drawn to two stories placed on pages FP2 and FP3.

There is the conclusion of an article by Matt Hartley carrying a headline of “Canada’s privacy boss setting rules for the world,” describing Privacy Commissioner Jennifer Stoddart as “Global Web Cop”. The story talks about the success of Canada’s Privacy Commission in taking on social media titan Facebook and now anchoring a coalition of global colleagues to take on Google. In the story, she is quoted saying:

There’s a growing impatience among privacy regulatory authorities with the kind of behaviour that doesn’t take privacy regulation into account

Juxtapose this with a Q&A on the opposite page, interviewing Heather Reisman: “Booked for a big future.” Superimposed on a photo of Ms. Reisman is a quote from the interview: “The government realizes that you cannot put legislation on a digital business.”

There used to be a view that digital content could operate in an anarchistic environment. Perhaps it is less a situation that legislation cannot be imposed, and more a case of of what legislation should appropriately be applied.

Don’t miss the regulatory blockbuster, an annual highlight at The 2010 Canadian Telecom Summit. Have you registered yet?