Canada’s Parliamentary Standing Committee on Industry, Science and Technology, better known as “INDU” has released its report “Affordability and Accessibility of Telecommunications Services in Canada: Encouraging Competition to (Finally) Bridge the Digital Divide” [pdf, 3.5 MB].

The 68 page report is largely unintelligible gibberish, representing a complete waste of time for our Parliamentarians, the witnesses and the parties who prepared representations before the Committee. Seven of those pages are completely blank, so a little better than 10% of the report is useful as scratch paper. Not all of the witnesses who appeared are acknowledged in the report, and the list of submissions by parties is incomplete.

I note that the report is not tagged as a preliminary draft. It should be. The release of this report, in this condition, should not be considered one of the prouder moments for the INDU Committee.

Recommendation 3 is indecipherable:

That the Canadian Radio-television and Telecommunications Commission establish an affordability standard for telecommunications services across Canada after consulting with various stakeholders, taking into account an affordability standard for wholesale Internet rates ensuring equitable treatment of network owners and virtual operators in order to significantly reduce the cost of bandwidth among providers, thereby encouraging more competition and reducing the price of consumer packages, and that it issue its decision within a year.

What does it mean to establish an “affordability standard” that takes into account a wholesale affordability standard?

Recommendation number 4 is also a beauty:

That the Government of Canada increase service costs by 50 cents for Canadians who are willing and able to afford the incurred cost in order to come to the aid of neighbors that can not afford high prices.

Isn’t that what we usually consider to be the role of government social benefits?

Recommendations 5 and 6 show that the committee clearly didn’t understand how government has completely failed lower income households in developing affordable connectivity solutions.

Recommendation 5
That the Government of Canada create a benefit for large band services until the end of the pandemic for low-income Canadians, seniors or Canadians who have lost their jobs during the pandemic.

Recommendation 6
That the Government of Canada change some of the parameters for the Connecting Families program to improve accessibility by, for example:

• Changing the eligibility criteria and better targeting families to ensure all low-income households have access to it;
• Requiring service providers to participate in the program and funding them directly; and
• Promoting programs more strategically so that more low-income families are aware of them.

Repeat after me: “Connecting Families is a private sector initiative.” And, as I wrote in “The broadband divide’s little secret”, research has shown that low prices aren’t enough to get more people online.

Oh, can someone tell me what the heck are these “large band services” in Recommendation 5?

Recommendation 12 is just plain silly:

That the Government of Canada put in place a variety of means to support improved connectivity in rural and remote areas. For example, it could:

• Provide financial support to help build infrastructure for carriers or service providers who are in areas where it is not economically beneficial for them to build it on their own in order to help reach the objective of providing an appropriate level of service;
• Ensure or promote competition in areas where there is only a small number of providers by allowing resale, allowing access to third parties to then provide services using the facilities of the incumbent

The first part, subsidizing rural builds, is precisely what governments have been doing since what seems like the beginning of time. The second part says the government should allow competition? Hello? Competition is already allowed by the Government of Canada. The CRTC also allows competition. It just doesn’t mandate certain types of competition, although it does mandate others. There is a difference between allowing competition and mandating resale. How could this committee not know the difference?

The report is, or at least should be, an embarrassment to the members of the committee and the staff who supported it. If I marked this as an undergraduate paper, I would assign a failing grade. It’s really not surprising given the political theatrics that took place during meetings seeking evidence for the report. Perhaps the quality of such studies would benefit from INDU Committee actually listening to witnesses and reading submissions to learn about subject areas, rather than trying to score cheap political points through ‘gotcha’ style cross-examination.

As it stands, the report is unworthy of the seal of the House of Commons coat of arms that adorns its cover page. Given the subject matter, “Affordability and Accessibility of Telecommunications Services in Canada”, that’s especially disappointing.

As I have described before, “When I studied statistics, we were told to look for “outliers” – results that appeared to be inconsistent with the rest of the data. If an observation is a potential outlier, you begin an analysis to determine whether a cause can be identified for the spurious result.”

There has been a lot of noise surrounding last month’s Telecom Decision CRTC 2021-181, the review and vary of the Commission’s 2019 Order (Telecom Order CRTC 2019-288) regarding final rates for aggregated wholesale high-speed access services.

The faux outrage alleges that the Commission has suddenly shown a predisposition favouring ‘facilities-based competition’ over ‘services-based’, when in fact, supporting investment has been the position of the CRTC, and the Competition Bureau, and various expert reports, and the Minister of Industry, (or ISED) for nearly 3 decades (since 1992).

So which decision is the outlier?

The discontinuity in wholesale rate policy was found in the rates set in 2019, not the most recent review of that decision issued in May of 2021. Following last summer’s determination by Cabinet (“Canada’s future depends on connectivity”), there should have been no surprise that the CRTC would need to carefully examine its 2019 determination.

It was pretty easy to see that the “outlier”, or statistical anomaly, in wholesale rate-setting was 2019, with hundreds of millions of dollars in windfall rebates and dramatically lowered forward-looking rates that have since been confirmed to be below the carriers’ costs. Looking at the 2019 rates, last August, Cabinet said “the Governor in Council considers that the rates do not, in all instances, appropriately balance the policy objectives of the wholesale services framework and is concerned that these rates may undermine investment in high-quality networks, particularly in rural and remote areas.”

Those who oppose the CRTC’s most recent decision argue that it leads to higher consumer prices. However, Bell Canada has asserted that its wholesale rates will drop by an average of 7%; in the case of wholesale rates from Canadian cable companies, some cost elements are increasing.

There was a time that the independent internet service providers celebrated the CRTC following its processes. Less than 2 years ago, CNOC recognized the need to balance a range of interests in reaching a decision. “The CRTC regulates the market to protect consumers and promote the public interest.”

CNOC’s own press release seemed to recognize that there are many more considerations involved in determining the “public interest” than simply lowering consumer prices. Indeed, there is a public interest cost associated with low, low prices as we have seen in other markets. Canada needs substantial levels of ongoing investment from the private sector to extend the reach of our networks into unserved and underserved areas. Setting wholesale rates too low can result in lowering incentives for rural investment, as I described, and as Canada’s Federal cabinet stated last August.

As CWTA President and CEO Robert Ghiz recently wrote, “Those who discount this balanced approach and argue in favour of one-dimensional policy-making willingly ignore the impact it would have on Canadians’ access to the internet and their ability to participate in the digital world.”

There has been a long-standing recognition that the most sustainable form of competition is found among those companies making the multi-billion dollar annual investments to “deploy, maintain and continually upgrade the physical networks that enable Canadians to connect to the internet.”

For nearly 30-years, Canada’s policy and regulatory frameworks have consistently favoured policies that support investment by facilities-based carriers. Independent ISPs have been able to thrive in this environment, continuing to gain market share with the wholesale rates that were set in 2016 and re-affirmed last month. Wholesale-based ISPs have grown nearly 50% between 2016 and 2019 (the last year covered by official data); with a 10% market share, independent ISPs are attracting about 20% of new customer growth, with the 2016 rates in place.

It is somewhat disingenuous for independent ISPs to endorse the CRTC and its processes when the Commission rules in their favour but call for regulatory reform and heads to roll at the CRTC when determinations go the other way. The Telecom Act has provisions that enable reviews and appeals of decisions.

The system works.

Canada’s future continues to depend on connectivity. Increasing connectivity depends on regulatory stability and a policy environment that continues to favour investment.

Earlier this week, I wrote about our need for more “non-virtual reality” in the form of genuine, face-to-face human interaction as we emerge from the COVID-19 pandemic.

The International Telecommunications Society is presenting a webinar on June 29 that looks at “Deepfakes: The Coming Infocalypse”, examining Deepfakes.

Recent advances in Artificial Intelligence scanned images of a person to be transformed into new video images to place them in scenarios and situations that never actually happened. Combined with voice and sound manipulation, the results can be convincing.

So-called ‘Deep Fakes’ are not only a real threat for democracy but they take the manipulation of voters to new levels. They will also affect ordinary people. This crisis of misinformation we are facing has been dubbed the ‘Infocalypse’.

In this presentation, Nina Schick will reveal shocking examples of Deep Fakery and explain the dangerous political consequences of the Infocalypse, both in terms of national security and what it means for public trust in politics. She will also examine what it means for us as individuals and what we need to do to prepare and protect ourselves. Too often we build the cool technology and ignore what bad guys can do with it before we start playing catch-up. But when it comes to Deep Fakes, we urgently need to be on the front foot.

Nina Schick is an author, advisor and speaker, specializing in how technology is transforming geopolitics and society, and helping organizations and businesses understand and navigate technological changes.

See you June 29.

Let me apologize in advance for this post being a little different from my usual reflections on telecommunications issues.

The past 15 months, living under the threat of COVID-19, have demonstrated how digital connectivity can enable so many of our life interactions to transition to a virtual environment. For most of us, this digital shift has been a remarkable success. It has been a most remarkable achievement.

We have seen policy makers gain a much greater appreciation for the need for ongoing investment in infrastructure and, we have all developed a better understanding of the need to to find creative solutions to bridge the digital divide. But that isn’t what I want to talk about today.

We also know that we have a need to emerge from the shelter of our virtual cocoons and return to be able to interact with family, friends, colleagues and strangers. Vaccines are the key enabler for the resumption of non-virtual reality.

I have had two grandchildren born over the past year: a 10-month old living overseas and a 10-day old new-born on the other side of the continent. Our 10-month old only knows the sound of our digitally encoded voices and our faces compressed onto a 5-inch mobile screen.

Now that we are double-vaccinated, we felt safe in venturing out to meet our newborn in person, experiencing the much more satisfying full sensory experience with him and his parents.

There is nothing quite like the touch and smell of a new born baby.

I have often said that being a grandparent is the reward that we get for putting up with our kids for all those years. It is a blessing.

I’m grateful that technology has enabled me (and so many others) to work productively for the past year and stay in touch with no-cost video calling and conferencing.

We are forever indebted to those essential workers who put their own safety at risk every day to keep the non-virtual parts of the economy running, providing us with goods and services, sustenance, health care and public safety.

While we have learned that so much can be done to live and work online, we humans tend to be social animals. Many of us can live online, but in my humble opinion, we can only thrive by being able to escape virtual reality with a return to genuine physical reality. I celebrate the achievements of our telecommunications industry and all that we have been able to accomplish thanks to billions of dollars of annual investment, but I never lose sight of our need for face-to-face contact.

As I enjoy this special moment of freedom together with family I haven’t seen in more than a year and a half, it is a reminder of the need for all of us to escape our screens and return really soon to more physical interactions.

Last week, I learned about High Speed Crow, a rural Manitoba broadband provider that has been around since 2003 and laying fibre since 2015.

Haven’t heard of them? Well, neither had I.

In truth, the company should have been on my radar screen; High Speed Crow received federal funding for a rural broadband project 2 years ago.

What I found notable last week was the fibre to the home pricing on its website: $250 per month for symmetric 1 Gbps service. That is a hefty price to pay, but I have no doubt that it is a fair price given the cost of building fibre in rural communities.

For comparison purposes, I took a look at prices for fibre to the home service in Winnipeg. Bell MTS charges $139.95 for 1.5 Gbps service, or $110 per month for symmetric gigabit per second service. But keep in mind, that pricing is for an urban setting.

The pricing differential helps highlight one of the challenges of expanding service to rural markets.

If we can assume that a smaller company like High Speed Crow is charging a price that fairly reflects the cost of it providing service, it isn’t hard to imagine that Bell MTS could do so for roughly the same cost. The overhead costs may be different, and likely the cost of materials may be a little lower due to differences in scale, but it is very unlikely that Bell MTS could have costs that are half of those costs for High Speed Crow. So comparing the prices may be a kind of proxy for comparing the costs in urban versus rural Manitoba.

So, if Bell MTS had tried to offer fibre to the home service in those areas, it would be impossible for the company to offer urban pricing – less than half what is being charged by High Speed Crow. It isn’t hard to imagine the fallout that would arise if a major service provider had differential pricing that offers urban residents service for less than half the price of that offered to people in rural areas.

These kinds of dramatic cost differentials bring to mind numerous questions, such as:

• What are the implications for expansion into certain areas by major carriers when the costs make it impossible to offer uniform prices across the province?
• How do government broadband funding programs deal with service providers already operating in regions offering high priced services without a subsidy?
• Many funding programs are designed to enable urban pricing to be offered in higher cost areas. If a service provider is already operating nearby with pricing that is double the urban rate, should it be eligible for funding (after the fact) to help reduce its rates?
• Alternatively, how how do we expect it to survive, competing against a government subsidized service provider?

Rural subsidy programs can introduce complications with the potential to distort the investment efforts of service providers, both large and small.

Care is needed by subsidizing agencies to avoid distorting the marketplace and damaging the ground-breaking efforts of rural broadband pioneers.