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When the CRTC issued its landmark 2016 broadband decision, “Modern telecommunications services – The path forward for Canada’s digital economy” [TRP 2016-496], I observed at the time that there was “a high likelihood that the basic service objective will not be much more than a score card bound to disappoint.”

At the time, the CRTC set an ambitious broadband objective relative to its peers in other countries: that within 10-15 years, all Canadians should have access to subscribe to an unlimited broadband service with speeds of 50 Mbps down and 10 Mbps up, as well as access to the latest generally deployed mobile technology in our homes, our businesses and major transportation roads. Since the ten to fifteen year target was issued at the end of 2016, the government objective has set 2030 as the target for universal access. To help achieve that objective, the CRTC decided that it would also get into the funding game, with its Broadband Fund joining a myriad of other government agencies at all levels who pick winners and losers in handing out ceremonial cheques to provide a one-time funding stimulus.

Many people didn’t give much thought to what the CRTC termed a consequence of that decision, “As a result, the Commission will begin to phase out the subsidy that supports local telephone service”. In other words, the Commission swapped out a program for ongoing support for all high cost serving areas, in favour of awarding one-time payments to specific winning projects.

As I wrote last week, the current environment may be creating an ‘expense gap’ for rural telecommunications service providers. Capital stimulus programs, whether by the CRTC or any other government agency, provide a one-time incentive payment to offset the higher costs of building networks in rural and remote areas. The forecasted business cases used in funding applications have a finite time horizon.

There remains a much higher ongoing cost to operate and maintain rural and remote networks. What happens at the end of that application funding period?

Will service providers be able to sustain service at affordable prices at the end of the funded business plan?

There is always a great photo-op and media coverage when a big capital funding cheque is awarded. A short while later, there might be a second press release when service is actually launched and a ceremonial ribbon gets cut.

The problem is that the need for ongoing support tends to be ignored (present company excepted, of course). But these support payments can be critical to maintaining affordable service in certain areas, as well as enabling ongoing upgrades. As I observed last week, a report from the FCC (“Improving the Nation’s Digital Infrastructure” [pdf]) recognized the need for $2B in annual support to accompany $40B in one time subsidies in the US context.

Did the CRTC err in phasing out its ongoing subsidy of local services in rural and remote markets? Was there a way to add broadband to the contribution eligible services to provide ongoing funding of service providers operating in high cost serving areas?

When other agencies and departments at federal provincial and regional levels of government are already in the business of awarding grants, did we need the CRTC to create yet another broadband capital funding program?

The CRTC acknowledges it “may conduct future consultation processes to review the eligibility and assessment criteria for the fund as needed.”

Perhaps such a review should consider whether the CRTC should exit the game of choosing winners and losers in favour of providing the more mundane, but necessary, perpetual and universal support for high cost serving areas.

The response to the global pandemic has forced dramatic shifts in the way classes are being taught at all levels, from pre-school through university and ongoing continuing education.

Trust me.

As someone who organized live business conferences for nearly 20 years, the transition to online isn’t an easy one. From a distance, I have watched my grandson entering first grade and having to shift to learning on-line after just one week of learning in-person. His younger brother has meet-ups by Zoom with his nursery school classmates, doing arts and crafts with materials dropped off by his teacher. A friend’s daughter, who finished high school (virtually) in June, entered university last month, without the traditional frosh week festivities and restricted to meeting her classmates in cloud based chat rooms. It can’t be the same immersive university experience that her older sister (who graduated in April) enjoyed. No graduation ceremonies. Diplomas arrived in the mail.

While each of these examples demonstrate a downside to the online experience, there are positive experiences emerging. Professor Mark Lautens of the University of Toronto wrote in Monday’s Globe and Mail, “Online learning can be eye-opening for both teachers and students”:

Professors are a fortunate lot. We get to interact with some of the brightest minds of the future when they are still at their most open and receptive. Traditionally students would travel great distances to gain the best education that was open to them. Now they rearrange their lives in order to learn and interact in real-time.

Don’t get me wrong. I am not a fan of online teaching and would never choose this option if given the choice. On the other hand, it might provide a way to service communities that have historically been underserviced and under-represented.

Life often gives us no choice or two less-than-ideal choices. These students have chosen to be deeply engaged, despite the inconvenience this presents. Our future may be brighter than we often imagine.

I have found time to participate in regular online luncheon learning in my community, thanks to being able to avoid commuting time to the location. More significantly, I was also able to frequently drop into a class being conducted online from San Francisco, joining my son for an hour each week. Over the summer, I participated in a couple sessions hosted by the Public Utilities Research Center at the University of Florida.

Unrestricted by the cost and time associated with travel and being able to avoid expensive accommodations, we now have the ability to participate in sessions around the world. You can pop into a class hosted in Florida in the morning and another in California for lunch.

I have started to participate in the webinar series offered by the International Telecommunications Society, gaining a global perspective on a wide variety of policy issues. The sessions are scheduled in the morning for the East Coast of North America, making it mid-afternoon in Europe and late night viewing in Asia. There was a global round-table on COVID notification apps last month, and coming up in the next few weeks, there are a couple sessions of interest to readers of this blog:

• The Future of Remote Work, October 23, 10:00am – 11:00am Eastern
• ICT Cybersecurity: Industrial Strengths and Weaknesses, October 28, 9:00am – 11:45am Eastern
• AI: International Impact on Economy and Society, November 19, 8:00am – 9:30am Eastern

And of course, The Canadian Telecom Summit (virtual edition) is coming up next month, November 17-19.

In an environment with budgetary challenges due to the economic impact of the pandemic, virtual learning provides affordable access to global leaders. In the case of the ITS webinar series, registration is free.

As Professor Lautens wrote, given the choice I would prefer to engage with my colleagues face-to-face, up close and personal. But in the meantime, take the opportunity to undertake some continuing education. You just may find there can be advantages to learning online.

Last week, an article in the Globe and Mail called for a reboot of Canada’s digital agenda.

On that headline point, I agree. A reboot may be needed.

As part of a typical reboot process, systems start fresh with clean data, clearing out faulty information. Some systems apply filters to improve the signal to noise ratios. As part of the reboot process, the government should ensure the information being loaded for processing passes error checks.

Unfortunately, I found a few points in the article that would fail error detection algorithms.

For example, in the second paragraph, we read:

The Liberals identified consumer telecom pricing, privacy protection and a modernized internet legal framework as priorities, but have struggled to develop an effective approach. Navdeep Bains, the Innovation, Science and Industry Minister, surprisingly backed a reversal on the affordability of communications services last month and has done little on privacy reform.

There is a little sleight of hand at work in those two sentences. Although affordability and prices are related, they are not the same and the terms should not have been used interchangeably. Indeed, recall from my post in January that a report from PwC found Canada’s telecom services to be the most affordable of all our G7 partners.

Contrary to the article’s assertion, it isn’t true that Minister Bains “backed a reversal on the affordability of communications services last month.” That simply didn’t happen.

The article is apparently referring to last month’s Order in Council responding to a petition to review the CRTC’s wholesale rates Order of August 2019. Minister Bains explicitly said “Canada’s future depends on connectivity,” and indicated that Cabinet was concerned the CRTC had not balanced the objectives in a manner consistent with the government’s priorities. Minister Bains specifically chose not to act at this time, recognizing that the CRTC was already reviewing its decision. Instead, the Minister more clearly indicated the policy of the government. That is precisely what the government is supposed to be doing.

The government’s telecom policy has never had a single-minded focus on price. As I wrote a couple weeks ago, for years now, Minister Bains has consistently spoken of 3 priorities: Quality, Coverage, and Price. Price is just one element. Last month’s Order in Council should be recognized for helping guide the regulator through the challenges of balancing the policy objectives.

Look at the language of the Order in Council:

• “the Commission… is bound… to exercise its powers and perform its duties with a view to implementing the Canadian telecommunications policy objectives and in accordance with any orders made by the Governor in Council”
• “improved consumer choice and competition, further investment in high-quality networks, innovative service offerings and reasonable prices for consumers”
• “considers that the final rates set by the decision do not, in all instances, appropriately balance the objectives of the wholesale services framework… and that they will, in some instances, undermine investment in high-quality networks.”

The Order in Council sought to clarify the need for maintaining the balance.

Indeed, the Globe article itself acknowledges that “fast internet access is a must for all Canadians”, as we have all seen over the past 6 months of being home-bound. Unfortunately, the reader of the Globe article is left without an understanding of the tension between the objectives of quality, coverage and price.

Around the world, we can see what happens when low prices constrain investment, or what I have called the “high cost of low prices”.

The message from Cabinet was clear.

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.

This should not be viewed as a “reversal on the affordability of communications services.” Instead, as should be evident to most Canadians over the past 6 months, the pandemic has helped elevate awareness in the importance of Quality and Coverage, the other two legs of the Minister’s priorities. The government called for improving the balance to preserve incentives for investment, the key input to ensure Canadians have access to world leading network quality, covering urban and rural areas.

The vast majority of investment in networks – rural and urban, wireless and wireline – the overwhelming majority of capital investment in Canadian networks comes from the private sector, not government. While governments support and supplement network investment by carriers, large and small, governments do not (and generally should not) supplant private sector investment. An approach based on strategic, targeted support helps to ensure a greater reliance on market forces to achieve the objectives of Canada’s telecom policy.

As Cabinet understands, in many cases support for private sector investment does not require cash as much as it requires a policy environment that encourages investment. Cabinet more clearly understands the economics the drive network investment, as I discussed a few weeks ago in “The economics of broadband expansion”.

The Globe article also seems to be confused between judicial appeals and cabinet appeals of regulatory decisions. The article says “the government’s approach seems particularly troubling given that the Federal Court of Appeal last week upheld the CRTC decision.” In reality, this should not be troubling at all; there is no linkage between the two appeals.

In fact, the ruling of the Federal Court of Appeal itself answers the concerns that the article finds “troubling”. As stated by the Court at paragraph 23:

[23] Significantly, neither section 62 nor subsection 12(1) circumscribe the types of questions that may be raised before the CRTC or the Governor in Council. This stands in contradistinction to the prescription in subsection 64(1) that limits this Court to reviewing questions of law or jurisdiction.

The Court is limited to ruling only on “questions of law or jurisdiction” while there are no limits on the scope of issues that may be raised in appeals to Cabinet (the “Governor in Council”) or the CRTC. So, it is completely consistent for a Court to find no fault with questions of law or jurisdiction, but have Cabinet to take issue with a CRTC decision on the basis of matters of policy.

There are valid concerns raised about delays in launching new broadband funding programs and we have unfortunately squandered 3 months of prime broadband construction season in failing to implement what I described as “An easy way to increase rural broadband speeds”.

Looking forward, we need serious discussions on the role of government in implementing the recommendations of the Broadcast and Telecom Legislative Review and updates to other areas impacting the digital economy.

But we need to make sure that when the government does its reboot, it carefully examines the data being input for processing. Much of it needs error-checking.

What does it mean to act in the public interest for telecommunications?

Does it mean working to get Canadians universal access to the fastest internet speeds? The lowest prices? The greatest coverage? All of the above?

There are few people who would say they oppose lower prices, faster speeds or improving coverage. In his remarks opening The 2017 Canadian Telecom Summit, Minister Bains said:

our government understands that Canadians want three things from their telecom services.

• Quality. Is the service fast enough to do what I want it to do?
• Coverage. Is the service available where I want it to be?
• and lastly, Price. Is this service affordable?

These three areas are clearly where providers need to compete and that’s why our Government is doing our part to promote competition and investment. The goal is very clear. We want to improve quality, coverage and price for all Canadians.

There is a tension that ties these together. Quality and coverage each require capital investment, which in the Canadian context is measured in billions of dollars each year. Canada has achieved world leading quality scores for our mobile and fixed line networks. The overwhelming majority of Canadians have access to the latest generation of wireless technology, delivering the fastest speeds in the world.

The Minister carefully defined “Price” as offering service at an affordable level. An affordable price is not necessarily the same as the lowest price. PwC recently looked at Canada’s mobile affordability and described its analytic process in concluding “Canadian mobile services top G7 affordability ranking”:

To provide a holistic view of wireless affordability in Canada, this report examined a number of aspects related to the overall affordability of consumer wireless in Canada, including:

1. The changing pattern of household expenditures, as wireless data use is enabling a different delivery of products and services – including the substitution of select historic spend categories by wireless.
2. The assessment of wireless affordability in Canada, as measured by recognized affordability metrics.
3. The affordability of wireless services for Canadians in proportion to their income relative to other jurisdictions.

As I concluded at the time, “We need to focus on strategies to drive “demand”: increasing adoption rates among groups that could subscribe, but have not. That is a problem across all geographies, and perhaps more pronounced in urban markets. That should start with developing a greater understanding of those individuals and households on the wrong side of the digital divide.” Last week, I wrote more about “Using evidence to solve the digital divide.”

The third leg, coverage, is a real challenge. Many countries define regions as “rural” in terms of population densities that Canada considers to be “suburban”. Not only are there remarkably low population densities in some areas, but some of these are in extremely harsh geographies or so far north to be difficult for equatorial geostationary orbit satellites to “see”. Other underserved areas are close to high quality networks but located just beyond the economic reach of existing service providers. These households are perhaps the most frustrated, and understandably so.

In some cases, it means direct subsidy to offset the uneconomic costs associated with building to an area. Government subsidy programs only amount to a fraction of the level of investment required to extend coverage to unserved and underserved areas. The balance comes from the private sector.

The challenge is how do we create the right environment to incent investment. In some cases, there can be policy incentives, ranging from simplifying approval processes, making available government owned (or government controlled) passive infrastructure, or changing regulatory disincentives. It is important to understand that the current regulatory and financial conditions do not support the business case for extending service to other regions. To incent investment, there has to be an increase in top line revenue or a reduction in costs. Some of these levers are within the control of regulators and policy makers.

Acting in the public interest involves balancing priorities to achieve an optimal outcome. It isn’t all about price. As a nation, we can use targeted subsidies, or programs like Connecting Families to aid with affordability.

It takes a certain level of intellectual maturity to understand that reaching an optimal balance of Quality, Coverage, and Price is a challenge in the Canadian environment. There are trade-offs and prioritization required, especially in these difficult economic times with extraordinary and shift demands for connectivity.

Ultimately, the responsibility for determining the policy priorities rests with the government. Given the response to the pandemic, it is understandable that the federal Cabinet decided Canada’s future depends on connectivity.

How does this shift the equilibrium between Quality, Coverage, and Price?

“Canada’s future depends on connectivity.” Those were the opening words in the statement issued by Innovation, Science and Industry Minister Navdeep Bains in discussing Cabinet’s decision not to formally intervene in last summer’s wholesale internet Order by the CRTC. While declining to take action, Cabinet sent a clear message that it expects significant changes to those rates in the pending outcome of the Commission’s own review of the Order.

The CRTC’s Order was issued August 15, 2019. Under Section 12(1) the Telecom Act, subsequent to a ‘petition’, “within one year after a decision by the Commission”, Cabinet (the Governor in Council) could “vary or rescind the decision or refer it back to the Commission”.

Exactly one year later, Cabinet decided not to take any of those actions, at this time.

The statement from Minister Bains explicitly acknowledges that the original CRTC Order got the rates wrong and says that the Commission did not strike the appropriate balance between the competing objectives of the Telecom Act, failing to apply sufficient weight to Section 7(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”. Cabinet recognized that wholesale rates got set so low that carriers were unable to continue expanding their networks into unserved and under-served regions.

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. Given that the CRTC is already reviewing its decision, it is unnecessary to refer the decision back to the CRTC for reconsideration at this time.

With such strong views about the CRTC’s Order, some may ask why Cabinet didn’t exercise its power to formally “refer it back to the Commission.”

The better question is “Why would it bother referring it back to the CRTC?” All that would do is cause a delay.

The CRTC already has its own review of the Decision underway. That process began last November and submissions have already been received. Had Cabinet chosen to exercise its option to “refer it back to the Commission”, the resultant process might have to start over.

By setting forth a statement outlining its expectations for the Commission’s own review process, Cabinet is expediting the process that will ultimately release wholesale rates that balance the competing objectives. Although it declined to act, Cabinet is sending a signal to the Commission for what could trigger a subsequent review of the CRTC’s reconsideration proceeding.

[The CRTC’s Order was also the subject of a judicial process that was heard by the Federal Court of Appeal this past June. The Court imposed a stay of the Order, saying “the implementation of the CRTC Order that could result in a permanent market distortion which would be difficult to remedy posteriori.”]

A little over a week ago, I wrote that there are “other regulatory or policy levers that don’t require direct subsidies to improve the business cases for rural expansion”. In today’s release, we see Cabinet pulling a powerful policy lever that will significantly improve the business case for network investment including rural expansion.

Sometimes, the best decision is choosing not to make a decision at all.

A few months ago, in “A key to recovery? Communications leadership”, I wrote “Set clear objectives; Align activities with the achievement of those objectives; Stop doing things that are contrary to the objectives.”

Canada’s future depends on connectivity.

That is a strong statement, around which we can build objectives.

Last month, in “The COVID wild card”, I wrote about the supplementary comments filed in the CRTC’s mobile services review. “The importance of maintaining incentives for investment figures prominently in the final comments submitted last week.” On the subject of mandated resale of mobile services, I noted that Bell wrote “It would be particularly destructive now, during a period of unprecedented economic turmoil brought on by the COVID-19 pandemic and at a time when large investments of private capital are required to support rapidly expanding usage, the roll-out of 5G, and the continued extension of access to underserved rural and remote communities.”

With the ability to declare victory on falling prices for mobile services, the government is rightly turning its focus on maintaining incentives for investment in advanced facilities and expansion in unserved and under-served markets. What implications can we extract from today’s Cabinet release that may guide the outcome of the CRTC’s review of mobile services?

After all, Canada’s future depends on connectivity.