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There are still too many Canadian households who lack access to sufficient broadband connectivity.

For many, there are connectivity options available for high speed internet, but not at the CRTC’s aspirational target speed and perhaps not at a price that all consumers are willing to pay. As Canadians enter the 6th week of isolation to slow the spread of the COVID-19 virus, we have become more acutely aware of the gap between the majority of households with broadband internet and those unfortunate homes who lack connectivity.

Thanks to the leadership of service providers like Rogers and TELUS, devices and connections are being made available for free or for very low prices for low income households, students and vulnerable groups. A detailed list of initiatives by various service providers are described in a blog post by the Canadian Wireless Telecommunications Association.]

How do we extend the availability of faster broadband service to more Canadian households located in more sparsely populated regions of the country, with many living in especially challenging geographies?

Billions of dollars have already been spent, and billions more will need to be spent by government and the private sector in order to meet the objectives set by the CRTC in 2016.

I’m not sure I have seen a CRTC document as widely misquoted or misunderstood as Telecom Regulatory Policy CRTC 2016-496, “Modern telecommunications services – The path forward for Canada’s digital economy“. In this document, the CRTC updated its universal service objective, adding broadband service to the definition.

Canadians, in urban areas as well as in rural and remote areas, have access to voice services and broadband Internet access services, on both fixed and mobile wireless networks. To measure the successful achievement of this objective, the Commission has established several criteria, including,

• Canadian residential and business fixed broadband Internet access service subscribers should be able to access speeds of at least 50 megabits per second (Mbps) download and 10 Mbps upload, and to subscribe to a service offering with an unlimited data allowance; and
• the latest generally deployed mobile wireless technology should be available not only in Canadian homes and businesses, but on as many major transportation roads as possible in Canada.

This was not expected to happen over night. At the time of the CRTC’s policy decision (December 21, 2016), the CRTC estimated that 82% of Canadians had “access to fixed broadband Internet access services at speeds of at least 50 Mbps download and 10 Mbps upload.” By the end of 2017, that figure rose to 84.1% and by the end of 2018, 85.7% of Canadian households had access to such speeds. The policy decision set an objective for 90% of households to have such access by the end of 2021, a target well within reach, given the current rate of expanded service.

The CRTC expected that it would take 10-15 years to cover the remaining 10% of households, but specifically said it expected “that intermediate steps will be taken to progress towards these goals.” As I have written before, the CRTC’s philosophy has always been that some broadband internet is better than nothing. CRTC reports indicate that by the end of 2018, 89% of Canadians subscribed to an internet service. As such, a number of proposed rural and remote broadband expansion projects may introduce service with speeds of 25 Mbps down and 5 Mbps up, half of the aspirational target.

The CRTC’s Broadband Fund has a call for funding applications now closing on June 1. The application deadline was delayed for the second time yesterday; it was initially March 27 and then April 30. If the June 1 date holds, the applications will be submitted nearly three and a half years after the idea of a CRTC administered Broadband Fund was first announced.

According to the latest CRTC Communications Monitoring Report, as of the end of 2018, approximately 1 in 10 households did not have a residential internet service. But, 99% of Canadians had access to LTE mobile service, and 95% of households had access to LTE-Advanced – which has the ability to deliver a superior broadband experience.

Some might ask, why we aren’t simply using mobile broadband for residential service?

The challenge is that there are cost limitations associated with providing mobile broadband, especially in rural areas. Mobile networks are engineered to provide both coverage and capacity. In rural areas, the initial priority is to provide coverage and many service providers accomplish this using lower band spectrum which can cover a lot of territory from a single tower; based on demand, the mobile networks are reinforced with additional towers and using additional spectrum bands. Because of the lower density of the population, for mobile use it is often sufficient to design the mobile network for coverage without challenging the inherent capacity constraints of the network antenna.

However, residential internet typically generates 10-20 times the traffic of a mobile device, driven primarily by streaming video applications. It wouldn’t take too many residential users to overwhelm the capacity of a cell. It isn’t enough to simply have a signal. There has to be enough capacity built. In some rural areas, some mobile carriers have specifically engineered their networks to be able to handle the loads from fixed residential services and can then offer wireless home internet.

Wireless technology is an important solution for expanding broadband access in rural and remote settings in an economic way. Mobile service providers and some regional wireless ISPs are deploying a variety of affordable wireless broadband solutions using licensed and unlicensed spectrum. A number of service providers are offering download speeds of 25 Mbps using LTE in a fixed wireless application. For the past 6 weeks, I have been using Xplornet’s LTE and getting faster speeds than my neighbours are getting with DSL-based service.

Canada’s mobile and fixed wireless networks are able to provide coverage for nearly every household in Canada. The biggest challenge is expanding capacity cost effectively to accommodate the kinds of traffic most households would want to generate, using comparable applications to those available in urban homes. Will sufficient spectrum be available for rural broadband applications?

When the Auditor General reviewed the history of government-funded broadband expansion programs, the report identified that “ISED did not implement its broadband improvement program in a way that ensured the maximum broadband expansion for the public money spent.” Would wireless solutions help?

As the CRTC takes the next step with its Broadband Fund, and various provinces join ISED in funding broadband initiatives, we should ask if there is an overall rural broadband expansion strategy? Is there a fundamental objective to maximize the number of households for the public money spent? If not, what is the criteria for judging the merits of one application over another?

In the US, the FCC has taken a number of steps over the past few weeks to help allocate spectrum to service providers prepared to expand rural access during these extraordinary times, such as granting temporary spectrum access to Verizon. It also opened the 6 GHz band for WiFi and other unlicensed uses.

How do we ensure that more spectrum is made available by the Canadian government in a timely way to enable service providers to expand rural and remote fixed broadband access?

A few weeks ago, I wrote a piece called “How long is a piece of string?”, discussing the challenge of defining the price of a mobile service plan. Year over year comparisons are difficult because data usage increases so dramatically and service providers try to design new packages to meet the demand.

So, a question arose on how to measure achievement of a key element in the Minister’s new mandate, requiring him to “Use all available instruments, including the advancement of the 2019 Telecom Policy Directive, to reduce the average cost of cellular phone bills in Canada by 25 per cent.”

As it turns out, there was clarity to be found in the Liberal party’s platform, that set out 2 specific plans and promised a 25% savings within 2 years:

• 2 unlimited nationwide talk and text phone plans, more than two optional features, and 5 GB of data usage per month; and,
• 2 unlimited nationwide talk and text phone plans, more than two optional features, and 2 GB of data usage per month.

The platform priced these out and promised specific savings. The two plans with 5GB per month were said to cost $2,095.68 at the time, and the platform promised to reduce the bill to $1,571.76 for savings of $523.92 per year. The two plans with 2GB were said to cost $1,810.56, promised to drop to $1,357.92 for savings of $452.64. All told, this hypothetical family of 4 would have their annual $3900 phone bill drop by just under $1000 for a total of about $2930.

TELUS decided to test its plans and found that it now offers plans that already meet what it is calling a “True North Affordability” standard.

According to TELUS, the Platform scenario could be delivered with all 4 hypothetical customers each subscribing to TELUS 10 GB Peace of Mind plans, for a total of $2880. The family would save about $50 more than promised, and would receive 2 to 5 times the amount data specified in the Liberal party’s platform promise.

It is clear that Canada’s mobile marketplace has moved faster than anyone in Ottawa could have anticipated. But that doesn’t mean the goal posts should continually be moved.

At a time when service providers are beginning to make the massive capital investments associated with the next generation of technology, regulators and policy makers alike need to be concerned about the unintended consequences of intervening in the market. As the Competition Bureau noted in its conclusion to its November CRTC submission, “competition has not yet reached its full potential and a mandated MVNO policy applied broadly risks undermining the steps taken by wireless disruptors, without much certainty that the MVNO policy will significantly decrease pricing.”

The Competition Bureau is concerned that the regional mobile competitors, the “disruptors” that have acted as catalysts in the marketplace, will be disproportionately harmed by regulatory intervention.

As I wrote earlier this week, we should be talking more seriously about providing direct assistance to those disadvantaged households who really need help accessing affordable wireless technology and services.

Contradicting the popular narrative, a recent set of reports from PwC Canada puts Canadian unlimited mobile wireless plans atop affordability rankings among the G7 countries.

In December, PwC released “Understanding wireless affordability in Canada” [pdf, 4MB] and last week, it released an addendum, “Impact of unlimited data plans on affordability” [pdf, 1.6MB]. According to the reports, “unlimited plans represent a significant increase in value for the average Canadian consumer. By 2020, the price paid per GB of data is estimated to decline by 50% compared to 2018 levels, and by 38% compared to 2019 levels.”

PwC says that Canadian consumers are getting access to the top ranked unlimited data plans among the G7 countries, based on four key dimensions measuring user experience: speed; latency; price per GB; and, access. According to PwC, “Canada performs consistently well across these key dimensions, and performs particularly well on speed.”

PwC’s December affordability study was motivated by consideration of the 7.7% annual growth in Canadian household expenditures on wireless devices and services (between 2010 and 2017) versus much lower increases in disposable income.

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.

Among the results, PwC found that wireless expenditures have reduced spending on such items as landline phone, postal, and photo products and services, as well as audio, video and printed reading materials. In addition, citing ride sharing and alternative accommodation services, PwC says wireless services have “been instrumental in the growth of a number of new businesses that have directly or indirectly improved access, reduced search costs and enhanced choices for the Canadian consumer.”

PwC found that, as mobile video and social media usage increased, the average spend per gigabyte of data consumed dropped at a compound annual rate of nearly 26% between 2014 and 2017. “These trends indicate that value for money from the wireless expenditure increased.” PwC forecasts that the unlimited data plans will reduce the price per GB by a further 50%, between 2018 and 2020.

As evidence that wireless expenditures did not impose an unreasonable burden, PwC observed that across every income quintile, recreational expenditures increased faster than the total expenditures (non-discretionary, wireless, and discretionary expenditures). “It is evident that wireless expenditure did not impose an unreasonable burden on the average Canadian household’s non-discretionary expenditure across income quintiles”. Further, PwC measured affordability against the target threshold from the Alliance for Affordable Internet (A4AI) and found the threshold was met across all income quintiles in 2018.

Quoted in an opinion piece by Rita Trichur in the Globe and Mail, Innovation, Science and Economic Development Canada says “Cellphone and wireless bills are putting too much pressure on Canadian household budgets.” Statistics Canada data simply does not support that assertion. If household budgets were under “too much pressure,” how could recreational spending be increasing across every income quintile?

For the purpose of international benchmarking, PwC compared Canada to the US, Australia and the UK. It found that an average Canadian household spent 1.6% of its disposable income on wireless, less that what was spent by an average US household or Australian household. PwC said that UK households spent 1.3% of disposable income. Looking at the data by income quintile, wireless service was more affordable in the UK across all income quintiles; compared to Australia, wireless was more affordable in Canada across every income quintile except the lowest.

In my year-end wrap-up, I wrote that there are indeed some Canadians unable to find an affordable device or service plan that they may need to participate in today’s economy. We know these technologies can help find a job, maintain health, be in touch with families and friends. In late October, we learned that nearly 1 in 5 Canadians in the lowest income quartile still doesn’t have broadband connection at home.

But, we also know that in many cases, it isn’t just an issue of affordability; the experience learned from targeted programs that deliver low-cost connected computers have helped us to understand that there are a number of factors – not just lower prices – that inhibit adoption of communications technologies among certain demographics.

As I have written in the past, most government programs continue to target increasing “supply”, extending the geographic reach of services.

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.

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An earlier version of this article appeared last week on National Newswatch.

We have been told “hindsight is 20/20.” As a graying consultant, I like to think is helpful to have not just a rich knowledge of the past, but also a deeper understanding of that which has happened, to guide better decisions, like periodically glancing in the rear-view mirror as you drive forward.

Over the holidays, my friend Timo referred me to an interesting piece in the Financial Times, “Why the global telecoms dream turned sour”. There were a few parts of the article that resonated with me, including:

• The discussion of the devastating impact of European 3G spectrum auctions reminded me of a piece I wrote 11 years ago (“Telecom investment in 2009”), saying “We need to consider the extent that capital investment in spectrum auctions impacts the ability of operators to build out their networks.” Also, recall what I wrote this past September (“The cost of spectrum policy”)”: “As Canada moves forward with development of auction policy for the next wave of spectrum, it is critical to consider the potential for unintended consequences to have significant impact on consumers.”
• The article observes “Telecoms has been one of the worst performing sectors for investors over the past five years as global bets have failed to pay off. That has left companies with huge debts even as they are under intense pressure to invest in new 5G and full-fibre networks both in their home markets and across their still-sprawling networks.”

There are some pundits who have questioned the strategies of Canadian carriers to concentrate on domestic markets rather than globally. The FT article demonstrates that the seduction of global markets hasn’t produced the returns that many carriers sought. The article also recognizes the capital intensive nature of the business, historically and moving forward.

As an aside, I often find that many people look at carrier EBITDA margins and forget the need for that metric to service the “I” (interest) and “DA” (depreciation and amortization) portions of the financial statements.

There are also some industry commentators who don’t appear to understand that foreign investment restrictions have largely been removed, permitting foreign-owned companies the opportunity to purchase spectrum and build a competitive network in Canada. The only restriction that remains is one that prevents a foreign company from buying one of the existing major carriers (as defined in the Telecom Act §16(2) as a carrier with more than 10% of the annual Canadian telecommunications services revenues). One would think that if Canadian telecom profits were supra normal, there would be a better business case for market entry. But I digress.

We need to understand the extent to which Canada’s regulatory and policy framework contributes to the state of our current telecommunications marketplace. Is there a way to mitigate unintended consequences that have arisen from well-meaning regulatory and policy decisions of the past? How can Canada move forward to encourage investment in high quality networks, with a wide range of affordable service options? How do we expand our understanding of those factors that inhibit a more universal adoption of information and communications technologies and services?

Which policies and regulations are actually raising prices paid by consumers? Will the CRTC begin to treat consumers as adults, able to choose for themselves between longer or shorter amortization periods to pay for ever increasing device costs, as I have written numerous times before? How will the government make more spectrum available for mobile network expansion, (both capacity and reach)?

How broadly will the Minister interpret his mandate?

These are just some of the issues I look forward to following in the coming year. Hindsight may be 20/20, but as so many investment prospectuses warn, past performance is no guarantee of future results.

Looking in the rear view mirror, the path may appear to be clear, but it doesn’t provide enough information to enable the drive forward, starting with the vision for where we want to go.

What should be the vision for Canadian telecommunications policy for the year 2020?

It’s mid-December and, as has become an annual tradition, it’s that time again for me to write a year-end wrap-up post.

Like last year, over the past 12 months I have published just over 70 blog posts, down from a few years ago in part because I am spending more time on Twitter, and also because of the need to deal with a few important personal issues, especially the two most enjoyable distractions (who have been interfering with my focus for 5 years and 3 years respectively).

The archives for this blog (accessed in the “My back pages” tab) now include more than 2800 articles, chronicling trends and issues as far back as 1997. As I look at the analytics, it is interesting to see the search terms being used. It is especially gratifying to see that a number of older posts continue to attract readers.

I continue to be optimistic about Canada’s telecommunications industry. After more than 39 years working to build advanced competitive communications networks in North America, I still find new challenges that make it a pleasure to get to work each day. Most satisfying is seeing the role played by low cost advanced communications in improving virtually everything we do.

It has never been easier or cheaper to communicate. I can talk with my kids and video-chat with my grandchildren halfway around the world every day as though they live around the corner.

When I was their age, my father would line us up in the kitchen on Sunday afternoons to stand quietly near the kitchen phone, as he prepared to call his dad in New Brunswick during the 60% discount period. Deep discount rates were also available after 11 pm each weeknight, but that just wouldn’t work for calling grandparents in the Atlantic time zone. So my dad would rush each of us through a quick “say hi” moment on the phone since long distance phone rates – even discounted long distance rates – were outrageously expensive. Our family was lucky to be able to afford weekly long distance calls. Regular trans-Canada rates were 50 cents per minute; evenings were about 3 minutes for a dollar, but late at night and on weekends, we could speak for 20 cents per minute – a crazy amount of money in those days. In those days, a McDonalds burger cost the same 20 cents; a Big Mac was 55 cents. No wonder Mother’s Day and Christmas Day were the busiest long distance calling days of the year; for many, calling home needed a special occasion to justify the cost of long distance.

Some groups talk about affordability of communications services but in most cases, they aren’t really talking about being able to find a plan that most of us can afford. There is a big difference between wanting to pay less for a device or service and being able to afford any plan or device.

I won’t get drawn into a discussion about why prices for some plans are lower in some other countries; Canadians pay more than people in other countries for a lot of goods and services, including our weekly grocery shopping bills. We still have government sanctioned ‘marketing boards’ and quota systems that inflate prices for genuine staples such as dairy products and poultry. So please forgive me for sometimes getting cynical about politicians proclaiming that they are seeking to lower costs for the middle class.

On the other hand, there are indeed some Canadians who are genuinely unable to find an affordable device or service plan that they may need to participate in today’s economy, to help find a job, maintain their health, be in touch with their families and friends. In late October, we learned that nearly 1 in 5 Canadians in the lowest income quartile doesn’t have broadband connection at home. In many cases, it isn’t just an issue of affordability; the experience learned from targeted programs that deliver low-cost connected computers have helped us to understand that there are a number of factors – not just lower prices – that inhibit adoption of communications technologies among certain demographics.

I have written a number of posts through the years calling for us to do more to develop a better understanding of those Canadians who have not yet adopted information and communications technologies. For example:

• Building a broadband research agenda • October, 2016: “As Canada invests in its Innovation Agenda, there is a gap in understanding why nearly 1 in 6 Canadian households has no broadband connection. There is an opportunity for better understanding to emerge from a Canadian broadband research plan.”
• Do we know what we don’t know? • November, 2017: “Is Canada doing enough research to explore the nature of its digital divide? How can we find solutions for a problem that we may not fully understand?”
• Understanding the digital divide • March, 2018: “Bridging the digital divide isn’t just about rural infrastructure. Should Canada expand research to improve our understanding of other contributing factors that limit digital adoption?”
• We need more data • October, 2019: “How is Canada supposed to be engaged in evidence-based policy making when there is so little information being gathered about who is online, how Canadians are using the internet and perhaps most importantly, who isn’t online yet and why not?”

As I wrote this past June, “Unfortunately, most government programs continue to focus on increasing “supply”, extending access to broadband. We need to ensure there are strategies to drive “demand”: increasing adoption rates among groups that could subscribe, but have not. That is a problem across all geographies, and is perhaps more pronounced in urban markets.”

If it is a matter of affordability, we can develop programs that target those people or households. Unfortunately, we do not currently know what all the factors inhibiting adoption really are. We need to fund much more research in this area.

In my year-end wrap-up in December 2010 entitled “Digital divide”, I wrote “I’d like to update Hoover’s 1928 promise of prosperity: We need a connected computer for every home.” We now know that it isn’t just price that is keeping people from getting online.

As we close the books on 2019 and set objectives for the coming year, let’s dream of more evidence-based policy making. Let’s dream of developing a greater understanding of those individuals and households on the wrong side of the digital divide. And let’s dream of creating solutions to bridge that gap.

I hope you and your families have a happy, healthy, safe and peaceful holiday season.

I look forward to engaging with you in the New Year.