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At the April 30 meeting of The Standing Committee on Industry, Science and Technology, Minister of Innovation, Science and Industry Navdeep Bains engaged with Bloc Québécois communications critic Martin Champoux in a discussion about the need to improve rural broadband, a problem accentuated by the current pandemic.

Mr. Martin Champoux: Minister Bains, I’ll come back to my question. You acknowledged that a high-speed Internet connection is now an essential service in 2020. We can see this clearly with the current crisis. When we spoke, you said that you intended to speed up the process and shorten the time frame for connecting Canadians. This means that 100% of Canadians and Quebeckers will be connected within a much more reasonable time frame than initially anticipated

Hon. Navdeep Bains: Once again, thank you for your question. You’re right. We must adjust the time frames for high-speed Internet. My colleague Maryam Monsef is responsible for this initiative. I’m sure that she’ll outline solutions that will help people in rural communities.

Mr. Martin Champoux: Am I to understand that you can’t provide an estimate at this time, that there’s still some uncertainty and that we don’t know whether this will take two years or five years?

Hon. Navdeep Bains: Yes. My colleague Maryam Monsef will outline exactly how long this may take and the relevant programs. All I know for sure at this point is that the time frame must be changed, because the current reality is very problematic. This issue is a priority for our government.

Mr. Martin Champoux: Thank you. You also said that you would get this work started as soon as the crisis is over. However, this matter is urgent right now. I imagine that teams are ready to proceed with the installation or, at least, to continue to implement measures to speed up the project. Why can’t this work begin immediately, Minister Bains?

Hon. Navdeep Bains: We’ll start soon. The strategy and the program already exist. We invested a great deal of money in them in the most recent budget, about $1.7 billion. I’m sure that my colleague Maryam Monsef will be outlining solutions soon.

A little over a month later, on June 8, Rural Economic Development Minister Maryam Monsef told the Rural and Remote Broadband Conference that a call for applications for Canada’s Universal Broadband Fund would be issued “in the coming days.”

That was 2 months ago. It is now more than 3 months since we were told there was a recognition that the “current reality is very problematic”, and the “issue is a priority for our government”.

A few weeks ago, I wrote, “It is sometimes painful to watch the glacial pace of government responding to the need for more investment in broadband facilities.” Sometimes, it seems governmental timetables can be measured better in geological terms.

What is taking so long? Part of the delay has to be in the mapping exercise: what areas should have the highest priority for funding? Government subsidies for broadband facilities creates a distortion in the market. The government subsidy means one service provider will have an advantage over any other provider that hopes to offer service, now or in the future. That is why funding programs need to target areas that do not appear to have any other economic way for service to be launched.

“Almost everyone who is already connected needs, or at least wants, to get connected faster and connect more devices to that faster connection.” [see: Too many pots; too little being served]

A month ago, I suggested a quick, low cost way for ISED to help rural ISPs increase broadband speeds [“An easy way to increase rural broadband speeds”]. Problem is, the theoretical reduction in collected spectrum fees means the solution requires interdepartmental approval. When Cabinet is dealing with multi-billion dollar bail-out programs, it must be tough to get the attention of other Ministers with a relatively low cost proposal. It is unfortunately a missed opportunity that could have brought immediate increases in speed and capacity to many rural areas.

The fact is, even if a rural broadband funding program was announced today, money won’t start flowing until next year. In many areas, construction season is effectively over for 2020. It is too late for detailed engineering, equipment ordering and delivery, permitting and installation before winter.

With kids heading back to school in just a month, most households will need access to computers and broadband, even if some classrooms open up for in-person instruction. The state of internet access must be frustrating for many parents.

How do we move forward?

Stakeholders need to have realistic expectations. Management consultants like to say goals should be specific, measurable, attainable. relevant and timely. There was a good reason why the CRTC didn’t set universal gigabit internet as its aspirational goal; that wouldn’t be attainable.

Further, contrary to the assertion by North Grenville Mayor Nancy Peckford in her Ottawa Citizen column, the CRTC did not set 50/10 internet as a “basic minimum standard for internet service”; it was part of a CRTC aspirational goal, to be achieved over the next 10 years (not this summer). And while just 43% of rural Canadians had access to 50 Mbps download speeds in 2018 (the latest year of data), nearly double that (72.1%) had access to at least 25 Mbps.

Those are two year old data points.

Already this year, even without federal government funding, there have been a number of significant announcements for extending higher speed rural broadband to more households [such as here, here, here, here, and here].

The federal government isn’t the only source of funding for broadband expansion, as we saw with last week’s announcement from SWIFT, awarding funding to Teksavvy for fibre-construction to serve Delaware Nation, a First Nation community located in Chatham-Kent, Ontario.

The CRTC has recognized that certain regions may need to take steps toward achieving that target. I wrote about that in “Isn’t some broadband better than nothing?”

It isn’t helpful for so-called internet advocates like Open Media to tell its followers to expect rural Canadians to have access to the same services and the same prices as urban Canadians. That simply isn’t realistic. Affordable internet doesn’t necessarily mean low cost, or low price; it doesn’t mean rural prices should be identical to urban.

Building rural broadband in Canada is expensive and low population densities mean those capital expenditures are amortized across very few people. As a country, we believe broadband should be affordable to all Canadians, but someone has to pay. Lower household densities also means more unproductive “windshield time” for technicians making service and installation calls.

As such, fibre simply isn’t an economic option for many areas. We can, and should, expect wireless to be a significant part of the rural broadband solution space for the foreseeable future. For 5 months now, I have been living and working in rural Ontario with a 25 Mbps fixed wireless service, consistently delivering service, able to support multiple HDTV streams and multiple simultaneous video conference sessions.

How do we improve the business cases for rural broadband?

How can the government help wireless ISPs expand capacity to connect towers?

How can local land use authorities simplify and expedite the process for new antennas?

Are there other regulatory or policy levers that don’t require direct subsidies to improve the business cases for rural expansion?

Like many, I’m expecting an announcement that is certain to impact rural broadband.

It will be coming any day now. But, I’m not holding my breath.

Final comments for the CRTC’s Review of Wireless Services consultation were submitted last Wednesday evening and the file is now in the hands of the Commission for determinations on whether to mandate MVNOs as well as a host of other issues.

Going into the hearing, the CRTC’s Notice of Consultation set out a preliminary view [at ¶39]:

that it would be appropriate to mandate that the national wireless carriers provide wholesale MVNO access as an outcome of this proceeding. The Commission considers that, on balance, it is likely that the benefits that a well-developed MVNO market would deliver to Canadians are now more likely to outweigh any negative impacts that a policy of mandated wholesale MVNO access might have on wireless carriers’ network investments, particularly given the extensive investments that have been made in recent years. Further, properly structured rates, terms, and conditions should further mitigate potential negative impacts on future investments.

However, 2 months ago, the CRTC re-opened the evidentiary record, asking parties to comment on a new interrogatory:

Does the ongoing situation with respect to the Covid-19 pandemic change the views you have previously put forward on any of the issues being examined in this proceeding? Explain why or why not with supporting rationale and evidence, as necessary.

What significance should we place on the Commission’s May 15 letter? To what extent, does the letter reflect an understanding at the Commission of the significant change in circumstances, that could change its preliminary view on the potential impacts on network investment? Or conversely, was the Commission papering the record, preparing a preemptive defense against a future appeal on the basis that it didn’t consider the change in circumstances?

The importance of maintaining incentives for investment figures prominently in the final comments submitted last week.

The Competition Bureau’s comments open with “This proceeding is more important than ever for consumers, businesses and the Canadian economy. The COVID-19 pandemic reinforces the need for robust competition in the wireless sector, to drive the provision of ubiquitous, high-quality wireless networks that are accessible and affordable for all Canadians.”

TELUS’ comments open with, “COVID-19 demonstrates the fundamental importance of network connectivity.”

Bell worked its way up to the subject, using 4 introductory paragraphs before stating “It [mandated resale] 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.”

For Rogers, the COVID-19 factor was midway through the executive summary:

It is critical that regulatory policy continue to take a long-term view. Canada will require substantial ongoing investments to improve productivity, maintain its competitiveness globally, and to realize the promise of 5G. The importance of ongoing investments in high quality, resilient broadband networks across Canada, and of extending these networks to remaining and underserved areas of Canada, have been dramatically underscored by the current COVID-19 crisis. The ongoing COVID-19 pandemic has heightened awareness of the critical importance of our wireless networks to Canadians and the Canadian economy. Canada’s networks have performed among the best in the world during this unprecedented time. Mandated wholesale access to mobile wireless networks will significantly undermine incentives, and the ability, to invest going forward, jeopardizing Canada’s recovery and future success.

In the second paragraph of its final comments, Shaw warns against “artificial support for resale models that would destroy the economics of competitive investment”:

As this proceeding draws to a close, the world continues to struggle with the COVID-19 pandemic, which has illuminated the power and importance of robust, resilient and competitive telecommunications networks. These networks, and the investment capital that sustains and nourishes them for the future, cannot be taken for granted. New competitors like Shaw have invested many billions of dollars in spectrum and new wireless infrastructure that form our footing in the fight for sustainable competition. We are not done.

Videotron’s introduction to its executive summary is entitled “Introduction – les leçons de la crise COVID-19”, concluding the introduction with “Compte tenu de ce qui précède, il nous apparaît évident qu’il est dans l’intérêt national de maintenir une approche de réglementation privilégiant la concurrence axée sur les investissements.”

In its comments, CWTA was more reserved, deciding to close its executive summary with the COVID card: “As Canada emerges from the health and financial crisis caused by COVID-19, the wireless industry will play an important role in Canada’s economic recovery. The demand for high-quality, reliable wireless services will continue to grow.”

Even the potential new entrants put COVID front and centre. In the second paragraph of Cogeco’s submission, we read “This need [investments in all types of telecommunication infrastructure] is now even greater, as society has shifted many location-based activities (work, shopping, cultural activities, etc.) online in response to the current COVID-19 pandemic.”

DOT Mobile’s first paragraph opens “The ongoing COVID-19 pandemic has made acute the needs of the underserved Canadians who must rely on communication services more than ever. The underserved are now faced with severe impacts from the pandemic, such as a decrease or complete loss of income, reduction of job opportunities or mental health issues caused by COVID-19 induced stress, social distancing and solitude.”

Teksavvy said “Covid19 has brought an additional urgency to the completion of these proceedings. It has revealed how people rely on general network connectivity, as well as exposing gaps in that connectivity caused by the incumbents’ profit-seeking behaviour.” I’m not sure I understand the implicit pejorative nature of “profit-seeking behaviour”, but I am equally unclear how Teksavvy believes reductions in revenues and profits will help close those connectivity gaps.

The Coalition for Cheaper Wireless Services said in its opening paragraph “The COVID-19 pandemic has only increased Canadians’ individual
technological dependency.”

This is just a small sampling excerpted from the final comments submitted Wednesday night.

It is clear that COVID-19 is the wild card in the CRTC deliberations. What is less clear is whether the CRTC has been swayed from its preliminary view favouring mandated MVNO, despite explicitly recognizing the “negative impacts that a policy of mandated wholesale MVNO access might have on wireless carriers’ network investments.”

We’ll share more in the coming days.

A new report by PwC (released by CWTA this morning) says mandating wholesale access to MVNOs may deliver some pricing benefits to Canadians but would also bring significant negative consequences. The report, “Understanding the likely impacts of MVNOs in Canada” [3.7MB, pdf], warns that the reductions in the industry’s financial capacity would result in delays or cancellation of investments in fibre and 5G networks, leading to a wider digital divide emerging between urban and rural Canadians. Ultimately, according to PwC, Canadian competitiveness on the global stage could be jeopardized.

during the unfolding of the COVID-19 crisis, Canadian telecoms were the connectivity backbone of the country. Policymakers, regulators, the business community, and consumers all have an interest in the future of Canada’s telecommunications infrastructure. And everyone will feel the impact if regulation mandating wholesale MVNO access is introduced.

The report cites OpenSignal’s recent study showing that Canada maintained some of the world’s fastest wireless speeds, with little to no decline in speeds compared to data before the pandemic crisis. “The curtailing of network investments that could result from mandating wholesale MVNO access would hamper the ability of network operators to support crisis response efforts in the future.”

PwC’s models show that EBITDA margins could fall from 42% (2019) to 38% by 2025. Recall, in the past I have lamented how some confuse EBITDA margin with profit, inappropriately ignoring the massive capital outlays that must be covered by the “ITDA” portion. PwC notes that average return on invested capital (ROIC) generated by Canadian mobile carriers is already below the US and Australia and PwC expects that carriers will be unable to absorb the decline in revenues expected from a mandated MVNO model. To date, the report says Canada’s facilities-based mobile service providers have invested more than $70 billion in building Canada’s wireless networks; the wireless industry contributed more than $48 billion to Canada’s GDP in 2018 alone.

In the short term, according to PwC, mandating MVNO entry will lead to cuts of $5B in annual operating costs and $3B in annual capital expenditures.

We are of the view that the Canadian telecom industry today is healthy, with high-quality services offered at affordable prices via world-class networks that drives Canadian competitiveness and contributes to Canadian GDP, employment, government tax revenue and shareholder returns. Based on our analysis, we conclude that if the CRTC were to adopt the regulatory intervention some have proposed, it would lead to significant negative consequences. Ultimately, it could lead to a deterioration in the health of the telecom industry and negative outcomes for Canadians.

Under the third revision to the original schedule for CRTC Notice of Consultation 2019-57, final submissions in the “Review of mobile wireless services” are due today (July 15).

Today’s report is Part 1, looking at impacts on the Canadian telecom industry and the economy. Part 2 of PwC’s study, examining how Canada’s transition to 5G could be affected, is slated to be released in the coming weeks.

Earlier this week, PwC released another report, “The importance of a healthy telecommunications industry to Canada’s high-tech success” [pdf, 2.4 MB] as a follow-up to the study titled “Understanding affordability of consumer mobile wireless services in Canada” released last December and discussed on my blog in January. This report confirmed:

• Canadian telecommunications providers (telcos) spend approximately 5.3 percentage points more on capital expenditures (CapEx) as a percentage of revenue than comparison countries, due to higher factors of production largely driven by geography, scale, and spectrum costs
• The higher factors of production for Canadian telcos require higher EBITDA levels than comparison countries to maintain investment levels while keeping healthy free cash flows
• Canadian telecom free cash flow yields, a measure of financial solvency (health), are 26% below the S&P 500 median, suggesting that Canadian telcos are not producing abnormal earnings

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[Update: July 27, 2020] The second half of PwC’s study has been released, “Understanding the likely impacts of MVNOs in Canada – Part 2: Impact on Canada’s transition to 5G” [pdf, 2.6MB]

This part is composed of 4 sections:

1. The importance of 5G to Canada
2. What can we learn from the global 3G and 4G transitions?
3. The opportunity cost of delayed 5G rollout in Canada
4. A 2030 lookback: What could delayed 5G rollout mean for Canadians?

PwC says “Our analysis in Part 2 of this study supports the conclusions made in Part 1, namely that mandating wholesale MVNO access in order to reduce consumer wireless prices will lead to an unhealthy Canadian telecom industry and result in unintended negative consequences for the Canadian economy.”

We need more broadband.

People who aren’t connected need to get connected. Almost everyone who is already connected needs, or at least wants, to get connected faster and connect more devices to that faster connection.

So, I think it’s safe to say, “we need more broadband.”

The points of disagreement are found in trying to answer the question of “how do we get there?”

Over the past few weeks, I have written a number of posts looking at some of the arguments being set out. I think it’s worth your time to have a look at these posts:

• Fact checking rural broadband • May 4, 2020
• Words matter. Accuracy matters • May 13, 2020
• A more evidenced based approach is warranted • May 19, 2020
• A key to recovery? Communications leadership • May 25, 2020
• Policy-based evidence making • June 1, 2020
• Hey buddy, can you spare a computer? • June 2, 2020
• Great networks are just a part of the equation • June 8, 2020
• Should broadband be a ‘public utility’? • June 15, 2020
• Announcing a coming announcement • June 17, 2020
• An easy way to increase rural broadband speeds • June 22, 2020

But, of course I think it’s worth your time to follow those links and read those pieces. After all, I wrote them. There have been a lot of articles over the past few months – indeed over the past few decades – discussing broadband issues.

There is a real challenge for policy makers.

Despite everyone calling for more investment in rural broadband, and lots of levels of governments allocating money, there is a feeling that our wheels are spinning without getting us anywhere, or at least not moving fast enough toward the objective.

As we approach the Canada Day holiday, the mid-point of the year, it is pretty much too late for any of the government funding programs to have a material impact on rural broadband expansion in 2020. And, we still don’t seem to have any kind of focus on working to understand the factors that are standing in the way of broadband adoption among those who already have access to affordable connectivity.

Do we have too many layers of bureaucracy working on rural broadband funding programs? Despite multiple agencies at regional, provincial and federal levels, there just doesn’t seem to be enough progress being made.

Those spinning wheels, the “announcing a coming announcement” effect, led me to write last week’s “An easy way to increase rural broadband speeds”. That post describes a way for government to simply accelerate the already planned lowering of license fees for point-to-point radio spectrum, the kind of connection that rural broadband service providers use to connect their fixed wireless towers to their core networks. The government was already planning to lower the fees, recognizing that the current high rates for spectrum fees are inhibiting capacity expansion by rural ISPs.

Accelerating the spectrum fee reduction is a move that is consistent with a philosophy I have long espoused: for government to create an environment that encourages private sector investment and then get out of the way.

I wonder if broadband expansion is sometimes being inhibited, not stimulated, due to process delays associated with some of the government funding programs. When an ISP submits a proposal for funding, how often is work on that area frozen until a response is received?

Can our government agencies to do better? Can broadband programs be structured better? Are there more efficient ways to deal with allocating funding to stimulate supply? Will some of those efficiencies enable agencies to start work at stimulating demand, and not just supply?

With so many different agencies at every level of government creating broadband funding programs, I’m not sure it is a case of too many cooks stirring the pot; one might ask if we just might have too many pots, generating too much overhead and frankly, not delivering enough results.

Perhaps more than ever before, the availability of universal on-line connectivity has been a prominent part of the public conversation. With people stuck at home, awareness of the digital divide has never been more profound.

It is worthwhile taking a look at intermediate successes that should be celebrated. We should take the time to understand the significance of factors that lead to success, to see if we can replicate them in other areas.

Canadian carriers’ investment in mobile wireless has resulted in Opensignal declaring last month that Canada has the world’s fastest mobile networks. A follow-up Opensignal report tells us that “rural users in Canada on the networks of Telus, Bell Mobility and Rogers have download speeds that surpass those experienced by users in most countries.” Indeed, the report continues, saying “rural Canadian users have far better download speeds than users in five of the seven G7 countries in the world.”

While there is more work to be done in 4G availability in rural markets, Opensignal indicated that rural 4G access climbed to nearly 90%, up to 10% higher than last year.

Canada’s policy framework favouring facilities-based competition in mobile services has delivered world leading network quality, in urban and rural markets.

How do we make sure that all Canadians have access to reliable, high-speed fixed communications, including voice and high speed internet?

How should the various levels of government create the right policy environment, policies, stimulus and incentives to accelerate investment programs in un-served and under-served markets?

Still, at the end of the day, it takes more than technology to get everyone online. Universal adoption needs universal access and universal demand. Most government programs have targeted the denominator side of the equation, without sufficient focus on the numerator.

It just takes money to stimulate supply. And that over-sized ceremonial cheque makes for a great photo op.

Stimulating demand is a lot harder.

We need to start working harder at doing that hard stuff.

Statistics Canada data shows that household computer ownership has stagnated at 84-85% since around 2013. Indeed there are apparently more households that have internet service than those with computers.

Do we understand why?

What steps will we take to address the needs of Canadians who have access to affordable services, but still have chosen not to adopt digital connectivity.

As I have written before, “A national broadband strategy needs leadership to understand and deal with concerns and fears that may inhibit adoption. It will take more than technology to get everyone online.”