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In a post last fall (“Canada needs to be a global leader in 5G”), I wrote about a Policy Options article that said “Market forces alone will not deliver fast 5G internet to rural areas.”

Canadians need 5G. A recent paper describes at least 3 new areas of industrial change enabled by 5G: the Internet of Things (IoT) (enabling smart homes and smart cities); vehicle automation, healthcare and smart farms; and, augmented reality and virtual reality.

These innovations are important for rural and urban Canadians alike, and we have seen 5G services being made available in some rural markets already.

Over the past two years, a number of government policy announcements have helped create a climate that encourages investment by the private sector to extend the reach of advanced technologies beyond urban centres. “Canada’s future depends on connectivity” has been guiding regulatory determinations and telecom policy, balancing the objectives of expanding network coverage, delivering world-leading service quality, and affordable prices.

As I described last week, the cost of delivering rural broadband can be substantial. A recent government announcement awarded $163M in subsidies for less than 8000 households, including one project that cost more than a quarter million dollars per household.

What if there was another approach to encourage more private sector investment in rural broadband and 5G wireless?

Is that precisely what the government is looking at with the rumoured proposal to have Xplornet acquire the divested Freedom Mobile assets from the acquisition of Shaw by Rogers?

There are other groups that have apparently submitted bids, but it is difficult to envision how any would have a plan that could result in a sustainable business where previous incarnations of Freedom have failed. As a stand-alone business, where are the synergies to promote continued investment? As I wrote in “A Kobayashi Maru scenario”, Xplornet would be able to leverage the unused rural spectrum held by Freedom to improve the quality of broadband services it offers to its fixed wireless customers.

That would improve coverage, quality and price for hundreds of thousands of rural households, funded by private sector investment.

It is important for rural Canadians to have access to applications like smart farms, healthcare telematics, smart communities, automation.

In its review of the Rogers-Shaw transaction, will we see the government continue to maintain consistency in its policy approach to telecommunications, “balancing the competing objectives of extending the reach of networks, delivering world-leading service quality, and affordable prices”?

In its recent rejection of a Cabinet appeal of the CRTC’s Review of Wireless Services, Canada has maintained consistency in its approach to telecom policy, balancing the often competing objectives of extending the reach of networks, delivering world-leading service quality, and affordable prices.

We read “the Governor in Council considers that the Commission’s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers”.

It hasn’t always been that way. Over the past ten years, I have referred to Canada’s telecom policy environment as being like “Calvinball” at least a dozen times. “The only permanent rule in Calvinball is that you can’t play it the same way twice.”

That is hardly the way to provide policy leadership for an economic segment at the core of the digital economy.

In a dissenting opinion a few years ago, former CRTC Commissioner Candace Molnar wrote “Citizens and regulated entities alike deserve a Commission that is fair, predictable, and transparent.”

In upholding the CRTC’s decision, the determination was consistent with an Order in Council from August 2020, which declared, “Canada’s Future Depends On Connectivity”.

At that time, Cabinet said:

On the basis of its review, 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. Retroactive payments to affected wholesale clients are appropriate in principle and can foster cooperation in regulatory proceedings. However, these payments, which reflect the rates, must be balanced so as not to stifle network investments. Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates.

Recall that CRTC Chair Ian Scott’s welcome letter, the Ministers of Heritage and of Innovation, Science and Economic Development said “The Government’s objectives are to improve the quality, coverage, and price of services.” At the time, I wrote “It is a delicate balance. Quality and coverage require significant levels of capital investment, especially in a country like Canada.”

Consistency in policy and regulation is critical for the investment community. “Citizens and regulated entities alike deserve a Commission that is fair, predictable, and transparent.”

Canadian telecom policy appears to be clear. Canada’s future depends on connectivity.

We frequently hear the term affordability used interchangeably with lower prices. That’s a mistake.

Certainly, there is a relationship between the terms. Lower prices make items more affordable, but stable prices with rising incomes can have the same effect. As I have previously written, mobile services prices have been coming down over the past few years, more than 25% in two years. So mobile services are certainly more affordable than before.

There is some interesting monthly household spending data on the Statistics Canada “Telecommunications: Connecting Canadians” portal. Mobile phone service is different from wireline services, like TV and home phones. Mobile phones are a personal service. We can expect a household with two adults to have two mobile phone subscriptions. It would be unusual for that same household to have more than one TV subscription. As it turns out, there is considerable variability in household size based on income.

The first three rows of data can be found on the portal itself.

The bottom row is from my calculations, based on Statistics Canada household size data, to derive average monthly spending for cell and pager per household member:

Monthly spending on cell phone services as a percent of total expenditures after tax, by income quintile, 2019

	All quintiles	Lowest quintile	Second quintile	Third quintile	Fourth quintile	Highest quintile
Monthly expenditure after tax	6,379.75	3,069.33	4,288.92	5,822.17	7,674.33	11,024.08
Monthly cell phone and pager services	$111.92	$56.08	$79.92	$109.67	$140.50	$173.42
Percentage of expenditure on cell service	1.8%	1.8%	1.9%	1.9%	1.8%	1.6%
Average size of household	2.48	1.49	2.11	2.49	2.95	3.34
Monthly cell and pager per household member	$45.12	$37.63	$37.88	$44.04	$47.63	$51.92

I thought it was interesting to see relatively little variation between the income quintiles in cell service spending as a percentage of total household after tax expenditures. As my calculations indicate, most of the variation in actual spending per household is explained by the difference in size of households; on average, with 1.49 members, lower income households are less than half the size of high income households (3.34 members).

What leads to the remaining difference? There is most likely a variability in adoption rates, and in spending per subscription. Interestingly, lower income households have typically been more likely to be “mobile only”, but we might want to take a further look at per capita mobile adoption rates by income. As the price of smartphones continues to climb above the $2000, we may need to re-examine the CRTC’s 24-month limit on device amortization as an inhibitor for low income Canadians.

In other jurisdictions, there are targeted subsidies, funded by the government, to encourage adoption of mobile and fixed broadband services. For example, in the US, the FCC’s Lifeline Support for Affordable Communications “provides up to a $9.25 monthly discount on service for eligible low-income subscribers and up to $34.25 per month for those on Tribal lands.”

In Canada, affordable broadband programs, such as the recently enhanced Connecting Families, have been completely funded by participating service providers. Last week, Connecting Families 2.0 was launched, significantly enhancing the original $10 residential broadband program with additional options and increased eligibility. These programs target residential fixed broadband service.

A number of service providers have an even wider array of options for targeted disadvantaged communities.

Mobility for Good from TELUS was first launched in 2017 as a youth focused program in BC. Mobility for Good has now grown to support youth nationally. TELUS extended the program to seniors in 2020, and to at risk Indigenous women in 2021. The program offers a free refurbished smartphone and mobile plan for youth leaving foster care, and for Indigenous women at risk or surviving violence. In addition, Mobility for Good offers low-income seniors subsidized plans and the option to buy a discounted device.

The CRTC’s Review of mobile wireless services last April established certain retail price regulations, establishing what the Commission calls “low-cost and occasional-use plans”, not tied to income qualification. As such, the plans, with specific characteristics, are not necessarily geared to meet the requirements of low-income users or help increase subscriptions among user groups with lower rates of adoption. It is not known whether these plans are actually filling a significant market void.

Lower prices are not enough.

As I wrote last year, “Unfortunately, after introducing Connected for Success, Internet for Good, Connecting Families and other targeted programs, we have learned that getting people online isn’t just a matter of price.”

There are a number of questions and issues that come to mind from all of this. There is a need to look beyond price. In addition, we know that seeking lower pricing is not the same as affordability. The consumer interest needs to balance value, affordability and investment, a corollary to the mantra of “Canada’s future depends on connectivity”.

Should the government be directly funding programs to encourage adoption of mobile and residential broadband, akin to Lifeline Support in the US?

That can be the subject of future posts. Your comments are encouraged.

Please forgive the amount of time that I have been spending looking at a proposal for the City of Toronto to build a municipal broadband network. I do not subscribe to the view that the world revolves around Toronto (how many Torontonians does it take to change a lightbulb?). There are some important issues being discussed concerning the role of government ownership of digital infrastructure that have broader application beyond the greater Toronto area.

As you read in my post last week, on March 30, the Executive Committee of Toronto City Council reviewed an update of plans for ConnectTO, a project that I have criticized considerably over the past year.

Fortunately, members of the Executive Committee shared my concerns and paused for what Councillor Pasternak called a “sober second look”, seeking a more comprehensive business case before allowing ConnectTO to move forward. Consideration of the project has been deferred to the May meeting of the Executive Committee.

While we all agree that internet connectivity is important in the twenty-first century, not every household will choose to subscribe. Councillors recognized that broadband connections are only one part of the equation; some people still need devices.

Through the Connecting Families initiative, as well as research from other countries, we have learned that price is not the only inhibitor for adoption of the internet in disadvantaged communities. It is worth noting that Connecting Families was enhanced yesterday to add higher speed options. Rogers Connected for Success offers a wider range of options starting at $10 per month for 25 Mbps, and Rogers includes unlimited downloads in each of its options.

The Executive Committee asked for more information, passing this motion:

That Executive Committee defer Item EX31.8 to the May 4, 2022 Executive Committee Meeting, to permit the Deputy City Manager, Corporate Services, and the Chief Technology Officer, Technology Services to submit a supplementary report on:

1. the further questions and issues raised at the Executive Committee meeting on March 30, 2022.
2. a time frame for developing a ConnectTO Business Plan, which will include:

   a. the short, medium and long term costs of building and maintaining the proposed networks;
   b. the end-user price and download/upload capacity that will be available through the City’s Municipal Broadband Network;
   c. proof of the City’s ability to create better access and pricing for high speed internet than established Internet Service Providers, when the city does not have existing infrastructure or funding;
   d. address how ConnectTO will gain access to apartment buildings that already have contracts with other Internet Service Providers;
   e. the number of Full Time Equivalent (FTE) staff required for the planning, implementation, and on-going operations and management of this project, in addition to the 1000+ existing Technology Services FTEs;
   f. evidence that price is the main factor that challenges the use of internet services in priority neighbourhoods, and not lack of computers, computer literacy, or other fears or concerns about internet use; and
   g. a statement of the metrics for success, including the anticipated number of new internet subscriptions from residents who previously could not afford and/or lacked access to high speed internet.

3. the justification for creating this new internet infrastructure, given that most buildings already have high speed internet, and affordable high speed internet plans are available to low income families with sufficient download/upload capacity for video streaming for classroom use.
4. a comparative analysis of short and long term costs, capital and operating, of existing service versus the proposed service; such cost analysis should separate the costs for service to city properties from service to residential communities and should also show the cost differences between using private sector providers for internet service versus City-owned and managed assets.

As I have said before, Toronto is certainly not a broadband backwater. It is one of the world’s most connected cities. Every single one of the buildings that were proposed for Toronto’s initial phase of a municipal broadband network already had high-speed internet available, and 41 of the 42 buildings had more than one facilities-based service provider offering those connections. As such, it will be a challenge for proponents of the municipal network to answer point 3 from the motion, “the justification for creating this new internet infrastructure, given that most buildings already have high speed internet, and affordable high speed internet plans are available to low income families with sufficient download/upload capacity for video streaming for classroom use.”

Those providers offer a range of heavily discounted services – as low as $10 per month – to households that need assistance. The issue of broadband adoption in Toronto isn’t a question of service availability; and, it isn’t a matter of service affordability. As an aside, contrary to what some speakers at the Executive Committee meeting said, the CRTC did not say that the minimum service for broadband connections should be 50 Mbps down, 10 Mbps up with unlimited data. The CRTC’s objective is for all Canadians to have such a service available to them, not necessarily for them to subscribe to such a service. In Toronto, there are no known gaps in meeting this objective.

As such, simply building a municipal network is not going to help get internet to more people in Toronto. Increasing adoption in Toronto cannot be addressed by investing in technology to build a redundant, municipally owned fibre network.

Toronto should focus more on the social service aspects, understanding the factors that inhibit adoption, and dealing with them on a case-by-case basis.

Point 2f of the Executive Committee motion alludes to factors other than price challenging the adoption of internet services in Toronto’s priority neighbourhoods, thanks the availability of affordable internet programs in those areas from Rogers and Bell. These programs also help make computers available at affordable prices.

Although training may be available to help with computer literacy, how do we tackle the fears or concerns about internet use, and help people gain a better appreciation for the opportunities enabled by a home broadband connection? This is a key area of understanding for all level of governments to improve.

Applying less technology and more social research is an area where the city and its academic partners could show real leadership moving forward.

Some technology problems just might be handled better without more technology.

For the past two years, my wife and I have been isolating in rural Ontario with our broadband connectivity supplied by Xplornet fixed wireless, more than adequately powering our 2 computers, 2 smart phones, and 2 HD TVs.

My experience over this period confirms my belief that wireless should continue to be a viable component of Canada’s rural broadband strategy.

Worldwide, Ericsson estimates that 70% of service providers offer fixed wireless access services. Over the next 4 years, the company expects 5G technology to reach 70 million fixed broadband connections worldwide, representing 40% of total fixed wireless connections. Ericsson believes fixed wireless connections will drive about 25% of the world’s wireless data traffic.

By year end 2020, the CRTC reports 89.5% of Canadian households had access to the target broadband service objective of an unlimited plan with 50 Mbps download and 10 Mbps upload speeds. More than 99.5% of Canadians were covered by an LTE mobile connection. As Canada works to steadily close the broadband access gap for the remaining 10%, 5G fixed wireless is a promising technology to deliver highspeed connectivity.

Microwave backhaul is often seen as the best way to connect these rural 5G towers to the network, contributing to additional spectrum requirements.

All of this contributes to continued growth in spectrum requirements for service providers that are extending network connectivity, and such use needs to be incorporated into spectrum policy.

Keep in mind, a number of studies and reports have suggested that Canadian spectrum policy contributes to higher costs for wireless service providers. Last month, in “Improving outcomes from Canada’s spectrum policy”, I wrote “spectrum policy in Canada has seemed to singularly focus on stimulating mobile competition, without sufficient focus on other policy objectives”.

As ISED moves forward with determinations from its Consultation on a Policy and Licensing Framework for Spectrum in the 3800 MHz Band (and other consultations in the future), the Government needs to ensure that it considers the impact of spectrum policy on the economics of rural broadband connectivity. Section 14 of the Consultation was entitled “Measures to support Canada’s Connectivity Strategy”, seeking comment on issues including “potential measures or conditions of license that could accelerate Canada’s Connectivity Strategy’s target of 100% of the households covered with 50/10 Mbps within the timeframe of 2030.”

Fixed wireless, with 5G technology, is a promising solution to accelerate universal access to affordable broadband connectivity in Canada. It will be important to ensure there is adequate spectrum available, at a reasonable cost, for carriers offering residential broadband applications in underserved areas.