Search Results for: incentives

Following up on Monday’s posting about building broadband networks, I noticed Verizon’s comments to the US government about the American broadband stimulus bill speaks in similar terms to what I have been suggesting.

Verizon observed that 90 percent of U.S. households already have access to broadband, and that of the households that have computers, 80 percent of them subscribe to broadband services.

Verizon is calling for the program to focus on extending broadband connections to unserved areas, and addressing demand-side factors that hamper growth, such as many households still lacking a computer.

Verizon took issue with those seeking to attach regulatory conditions to broadband funding:

In order to ensure that the recovery act’s broadband programs do not get bogged down in regulatory wrangling that would undermine quick job creation and economic stimulus, [the government] also should avoid imposing regulatory ‘strings’ or eligibility criteria that will deter participation or otherwise inhibit sustainable broadband investment and job creation.

In other words, keep net neutrality restrictions off this program. Recall that last month, we wrote about the kinds of strings that some wanted attached to funding.

We have a session called Building Broadband on June 15 at The 2009 Canadian Telecom Summit. On June 16, we have a panel looking at Net Neutrality. Have you registered yet?

Jeffrey Fan, telecom analyst at UBS, has released a report that looks at the impact of new entrants on the Canadian wireless industry. The report is certain to generate substantial discussions, if not heated arguments in the countdown to Industry Canada’s release of the AWS spectrum auction rules.

Among the most significant findings in the report are:

• Videotron and Shaw have positive business cases for wireless, substantial opportunities for Videotron, even without any incentives from the government. In the case of Videotron, UBS estimates that it can afford to pay 3 times the cost of spectrum in the 2001 auction. Shaw could afford to pay almost double the 2001 price.
• MTS Allstream does not have a business case if it has to pay the average price for spectrum from the last auction. It has a negative NPV and very low IRR. “We fail to find the economic rationale for MTS Allstream to expand its wireless operations nationally.” The UBS model shows a negative NPV of $684M for MTS Allstream – which seems to indicate that the present value of new entrant concessions would need to be that high, just to make the business case break even.
• UBS believes foreign carriers will not find Canada’s AWS auction being sufficiently attractive for invest at a minority position.

What would it take to make the MTS Allstream business case go positive?

To make it viable, we believe MTS would want: 1) little cost incurred for the spectrum licences; and, 2) to build out less than two-thirds of the sites that would typically be required.

UBS raised its target for MTS Allstream last Wednesday, however the new paper discusses a number of factors that could impair MTS Allstream’s success. Among them:

• the company’s ideal customers are seen as a challenge for a wireless business plan since the business services market is already mature;
• business clients would be most demanding on roaming capabilities which would be costly until the national network is largely built;
• the success in developing domestic and international partnerships is not likely; and,
• external capital will be required, given the current dividend stream.

We can expect considerable discussion of this paper, which also quantifies changes in stock market valuations taking into account the potential impact of additional wireless players.

Last week, The Hill Times published a Policy Briefing supplement looking at Rural & Remote Broadband.

I was asked to prepare an Op-Ed for that supplement.

Regular readers will notice that it was largely based on a piece I published last month.

Canada’s national broadband objective is defined as having high-speed (50 Mbps down / 10 Mbps up) connectivity available to all Canadians by the year 2030. I wonder if it may be time for us to declare victory and move on to setting a new objective: increasing adoption among those who still aren’t connected.

Various broadband funding programs (such as the Universal Broadband Fund – UBF, Connect to Innovate, provincial initiatives, the CRTC’s Broadband Fund, etc.) have collectively pushed high‑speed connectivity deeper into rural and remote regions than ever before. Fibre builds now reach thousands of communities once considered uneconomic, and latest generation wireless services have filled many mid‑density gaps. Yet despite billions of dollars of investment, a stubborn last 1–2% of households remain unserved, particularly in the North and in the most sparsely populated rural pockets.

This is where Low Earth Orbit (LEO) satellite networks should be added to the broadband connectivity toolkit. Indeed, we might consider whether direct satellite-to-device is a satisfactory mobile solution for those remote communities currently lacking terrestrial-based coverage.

LEO systems operate a few hundred kilometres above Earth, far closer than traditional geostationary satellites. This enables low‑latency, high‑throughput broadband rivalling terrestrial options. Starlink, the most mature LEO provider, already offers:

• High‑speed service with typical download speeds ranging from 45–280 Mbps.
• Low latency (25–60 ms), suitable for video calls, cloud apps, and real‑time services.
• Global availability, including remote and northern regions.

Other LEO constellations are literally on the horizon. Why isn’t LEO considered to be an obvious tool to fulfil Canada’s broadband ambition? For households beyond the economic reach of fibre or microwave backhaul, LEO solutions eliminate the need for towers, rights‑of‑way, or construction seasons. A dish, a clear view of the sky, and power are enough to provide connectivity.

Based on publicly available coverage maps and service availability data, existing LEO broadband constellations cover all populated regions of Canada.

Where availability issues arise, they are typically due to temporary local capacity constraints, obstructions due to trees, terrain, or building orientation, or weather‑related installation challenges. These are all easily solvable problems, at a cost far less than the $10-20,000 (and more) per household being spent for terrestrial solutions in some communities. Four years ago, the government contributed more than $46.6 million to connect 182 households in northern Ontario, more than $250,000 per household for broadband in an area where houses sell for less than that.

LEO solutions provide full national orbital coverage and can close the final connectivity gap quickly, affordably, and sustainably. One might say that we have walked the last mile of last mile connectivity.

Using LEO, we could (but shouldn’t) provide a permanent subsidy to equalize the prices paid by rural subscribers to those being paid in urban centres. We need to think carefully about subsidies for rural broadband broadband expansion. Subsidies should be based on financial need, not based on geography. There are people in urban centres who need lower cost everything, just as there are people in rural and remote communities who do not need financial aid. For example, a little over a year ago, I observed “Median household incomes in the north are considerably higher than in the rest of Canada.”

With technology now offering a reasonable option for broadband connectivity Canada’s broadband strategy needs to focus on getting the remaining unserved households to get online. This is no longer an engineering challenge that can be solved with money, but one of understanding the factors that inhibit increased adoption in both rural and urban settings.

Programs such as Internet for Good from TELUS, and Connected for Success from Rogers, and the national Connecting Families initiative have made broadband even more affordable for many disadvantaged households, fully funded by Canada’s telecommunications industry. But, we have also learned that there are issues beyond affordability inhibiting some people from connecting.

Integrating LEO into regulatory and policy frameworks, while preserving private sector investment incentives, will allow us to declare victory in meeting Canada’s national broadband objective. It is time to engage partnerships between service providers, government social service agencies, and training facilities to drive adoption, ensuring no Canadian household is left offline.

Are regulatory authorities using best practices when assessing competition in telecommunication markets?

In a new paper [pdf, 364 KB], the International Center for Law & Economics (ICLE) argues that US communications markets are more dynamic and competitive than legacy regulatory frameworks assume. The submission urges the FCC to modernize its analytical approach, emphasizing technological convergence, cross‑platform substitutability, and the centrality of investment incentives in broadband and video markets.

ICLE’s core thesis is that traditional market silos — fixed broadband, mobile, satellite, and video — no longer reflect how consumers behave or how firms compete. Households now switch fluidly among cable, fiber, fixed wireless access (FWA), mobile broadband, and Low Earth Orbit (LEO) satellite. This substitutability constrains pricing power even in markets that appear concentrated on paper. The rise of FWA is a prime example: T‑Mobile’s Home Internet service has grown to millions of subscribers, directly pressuring cable operators and accelerating churn. Cable’s counter‑move — bundling MVNO‑based mobile services — illustrates how formerly distinct markets now operate as a competitive continuum.

ICLE argues that the FCC’s competition assessments must reflect these cross‑technology dynamics. Market definitions built around legacy service categories risk overstating market power and understating the competitive discipline imposed by emerging substitutes.

While convergence increases competitive pressure, ICLE stresses that it does not change the underlying economics of broadband deployment. High fixed and sunk costs, long payback periods, and economies of scale mean that only a limited number of facilities‑based providers can operate sustainably in most markets. Policies aimed at maximizing the number of competitors may therefore undermine the investment needed for next‑generation networks.

ICLE warns that fragmentation — especially in markets with modest density — can reduce per‑firm revenues below sustainable levels, deterring fiber upgrades, 6G deployment, and rural expansion. The organization argues that the FCC should prioritize sustainable competition: lowering deployment costs, streamlining permitting, and ensuring merger policy accounts for investment benefits, not just static concentration metrics.

In video, ICLE contends that broadcast ownership rules and retransmission‑consent frameworks no longer match market realities. Broadcasters now compete with national streaming platforms unconstrained by ownership caps, yet broadcasters remain subject to legacy restrictions rooted in spectrum scarcity—an economic rationale ICLE argues is obsolete.

Retransmission consent, originally designed to counter cable bottlenecks, now creates bargaining asymmetries that can inflate fees and distort negotiations. ICLE recommends comprehensive reform: either phasing out retransmission consent entirely or pairing ownership deregulation with safeguards that reduce blackout risks and limit fee escalation.

ICLE wants the FCC to modernize its analytical framework when assessing competition to reflect converged markets, cross‑platform competition, and the investment‑driven economics of broadband. Interventions by regulators should avoid distorting markets that are already delivering lower prices, improved quality, and greater choice. The role of the regulator is to promote predictable, investment‑supportive policy. “The agency’s guiding principle should be to reduce regulatory distortions, preserve investment incentives, and allow competition — not legacy silos — to discipline communications markets.”

There is much in the ICLE’s paper that is relevant for Canadians. It is worth a look.

Canada’s broadband ambition has been defined as having high-speed (50/10) connectivity available to all Canadians by the year 2030. I wonder if it may be time to declare victory.

Various broadband funding programs (Universal Broadband Fund – UBF, Connect to Innovate, provincial initiatives, the CRTC’s Broadband Fund, etc.) have collectively pushed high‑speed connectivity deeper into rural and remote regions than ever before. Fibre builds now reach thousands of communities once considered uneconomic, and fixed wireless has filled many mid‑density gaps. Yet despite billions invested, a stubborn last 1–2% of households remain unserved, particularly in the North and in the most sparsely populated rural pockets.

This is where Low Earth Orbit (LEO) satellite networks should be added to the broadband connectivity toolkit. Indeed, we might consider whether direct satellite-to-device is a satisfactory mobile solution for those remote communities currently lacking terrestrial-based coverage.

LEO systems operate a few hundred kilometres above Earth, far closer than traditional geostationary satellites. This enables low‑latency, high‑throughput broadband rivalling terrestrial options. Starlink, the most mature LEO provider, now offers:

• High‑speed service with typical download speeds ranging from 45–280 Mbps.
• Low latency (25–60 ms), suitable for video calls, cloud apps, and real‑time services.
• Global availability, including remote and northern regions.

Why isn’t Starlink considered to be an obvious choice to fulfill Canada’s broadband ambition? For households beyond the economic reach of fibre or microwave backhaul, LEO solutions eliminate the need for towers, rights‑of‑way, or construction seasons. A dish, a clear view of the sky, and power are enough.

Based on publicly available coverage maps and service availability data, Starlink’s constellation covers all populated regions of Canada. The service is marketed as globally available across 150+ countries and territories, with Canada included in the active service footprint.

Where availability issues arise, they are typically due to temporary local capacity constraints, obstructions due to trees, terrain, or building orientation, or weather‑related installation challenges. These are all easily solvable problems, at a cost far less than the $10-20,000 (and more) per household being spent for terrestrial solutions in some communities. Using LEO, we could (but shouldn’t) provide a permanent subsidy to equalize the prices paid by rural subscribers to those being paid in urban centres.

We need to think carefully about subsidies for rural broadband broadband expansion.

I have written extensively on issues of affordability. I think subsidies should be based on financial need, not based on geography. There are people in urban centres who need lower cost everything, and people in rural and remote communities who do not need financial aid. For example, a little over a year ago, I observed “Median household incomes in the north are considerably higher than in the rest of Canada.”

Canada’s broadband strategy is reaching the point where the remaining unserved households are no longer an engineering challenge, but one of adoption. LEO solutions provide full national orbital coverage and can close the final connectivity gap quickly, affordably, and sustainably. One might say that we have walked the last mile of last mile connectivity.

The challenge now is integrating LEO into regulatory and policy frameworks, to preserve private sector investment incentives, while engaging partnerships with social service agencies and training facilities to ensure no Canadian household is left offline.