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The CRTC has launched the second phase of its “Review of basic telecommunications services” consultation, with a study being conducted by Ekos Research.

Although the CRTC said in its public notice that it contracted Ekos “to conduct a study of Canadians’ usage of telecommunications services”, the questionnaire itself is called “Let’s Talk Broadband Internet”, perhaps leading the respondents toward a pre-ordained conclusion. When the respondent is asked “Which of these telecommunications services do you use most frequently?”and “Which of these telecommunications services do you expect to use most frequently 5 years from now?” underneath a bold banner (in all caps) saying “Let’s Talk Broadband Internet”, one might sense there could be a bias that leads the respondent to choose “Home Internet data service” as the response over the other choices “Home (i.e. landline) phone service” or “Mobile phone service (i.e. cellphone for voice, text or data)”. Note that the word “Internet” does not appear in the description of “Mobile phone service”. So for many non-technically inclined, there was not really an option, for example, to indicate an expectation to migrate to all mobile services in 5 years.

Survey bias aside, it is worthwhile looking at what is meant by defining what is included in “basic” services. As the CRTC indicates in the consultation document, there are several regulatory measures to provide Canadians with access to basic telecommunications services: the obligation to serve; the basic service objective; and, the local service subsidy regime.

In its description, the CRTC connects the obligation to serve and the basic service objective. This is an important bundling.

The obligation to serve requires the ILECs to provide telephone service to (i) existing customers, (ii) new customers requesting service where the ILECs have facilities, and (iii) new customers requesting service beyond the limits of the ILECs’ facilities.

The Commission established the basic service objective in 1999, which reflected the level of service available at that time to most Canadians. The basic service objective ensures that Canadians in all regions have access to affordable, high-quality telecommunications services. Currently, the basic service objective consists of the following:

• individual line local touch-tone service;
• capability to connect to the Internet via low-speed data transmission at local rates;
• access to the long distance network, operator/directory assistance services, enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and
• a printed copy of the current local telephone directory upon request.

I’m not sure anyone reading this blog post would see a need for a printed copy of a phone book, but you can always ask for one, perhaps most useful for Toronto and Montreal residents to use instead of buying a booster seat for visiting children.

It gets interesting when we look at the third regulatory measure, namely, the local service subsidy regime. In certain areas, the cost to provide service that meets the basic service objective exceeds the price. Most telecom service providers pay a fixed percentage of their revenues into a fund – known as the National Contribution Fund – to cover the shortfall. Note that the cost of video relay services are also covered by this fund. (In 2015, the percentage was set at 0.55% of revenues.)

Now, many people instinctively want to say that internet service has to be considered to be a basic telecommunications service. After all, how can one survive in a digital age without it. But, look beneath the emotional reaction to consider what it means to declare internet access as part of the basic service obligation.

Upon whom would an “obligation to serve” fall? After all, the incumbent local phone companies were not the first to offer broadband internet service in Canada. Should they be obligated to provide the service in unserved areas? Would they be the only ones eligible to be compensated out of the Contribution Fund? In many of these regions, there are niche internet service providers; what are the implications for their business plans if suddenly there is a subsidized ILEC obliged to extend its service?

The Government of Canada has poured hundred of millions of dollars into various rural and remote broadband service programs, such as Tuesday’s announced project in Newfoundland. Connected Canadians has been budgeted for $305M to extend broadband to 280,000 households, an average cost of about $1100 per household.

The current Contribution Fund subsidizes the cost of providing basic phone service (with no internet) for about one million phone lines – about 900,000 in the territory of major telcos and over 100,000 in smaller phone companies’ operating areas. The subsidy for those lines, as well as a couple million dollars for video relay services, came to a total of $113M in 2015, including $800,000 in administrative costs. Most of the readers of this post paid a non-tax deductible extra 0.55% on top of your phone bill to cover that donation to rural and remote customers.

Now, consider the hundreds of millions of dollars that has already been poured into rural and remote broadband and consider the kinds of additional ongoing subsidies that could be required, if broadband internet is added to the definition of basic service. Also, consider that internet services are currently exempt from paying into the National Contribution Fund. If internet service in high cost serving areas are going to be subsidized, would there be any reason why the majority of Canadian internet users (in lower cost urban centres) should not be funding that subsidy? Is this kind of internet tax one that Canadians would find to be acceptable?

As my frequent readers know, I am not a fan of subsidies based on geography rather than financial need. I have stated before that the CRTC should have started by looking at “who” doesn’t subscribe to broadband, not perpetuating and potentially extending the system of telecommunications subsidies based on “where” you are located, regardless of your ability to pay.

As I wrote last May, affordable broadband isn’t just a rural issue.

Incidentally, this isn’t the first time that the CRTC has looked at including broadband in the basic service objective. Back in 2010, the CRTC also asked for public input on that issue as well as exploring whether mobile service could be considered a substitute (see my post from that time: “Asking for help to define ‘basic service’“). As a result of its 2010 consultation, the CRTC elected to “continue to rely on market forces and targeted government funding” when it determined “that it would not be appropriate at this time to establish a funding mechanism to subsidize the deployment of broadband Internet access services.”

Do we want all Canadians to have a broadband connection at home? Of course. But with all of these considerations, should broadband be included in what the CRTC defines as “basic telecommunications services”?

Roslyn Layton posted an article this morning “Zero rating: Who bears the cost of bans?” that is a worthwhile read.

…those who wish to ban zero rating assert that all mobile plans must be “affordable full access,” and that anything less would be robbing consumers of the complete Internet experience. But this is tantamount to mandating that everyone fly first class.

Clearly, this one-size-fits-all attitude ignores the fact that consumers have widely varying needs and preferences. In the same way that people want to pick and choose their cable channels, they want the same freedom when it comes to their Internet service.

Earlier this year, I wrote about “Intellectual purity of technology over people” and “Connecting the unconnected“, taking a look at a variety of approaches being pursued to provide introductory internet connectivity to people who cannot otherwise afford devices or broadband service.

Should carriers and applications be restricted in exploring business models that increase adoption of digital technology and services? Or, as [Facebook founder, Mark] Zuckerberg asks, will an “extreme definition of net neutrality” put “the intellectual purity of technology above people’s needs?”

A few years ago, in a piece called “Restricting trade“, I wrote “It is difficult to understand how consumers can benefit from restrictions in the types of offers available to them.”

Almost 2 million Canadian households still don’t have a broadband connection and most of them are located in urban centres. As I wrote in May, “Affordable broadband isn’t just a rural issue“.

Canada continues to have a problem with broadband adoption in low-income households, whether urban or rural, despite government programs continuing to define digital adoption as a problem framed in terms of geography, not affordability. Pricing discrimination, including zero-rating, should be considered as we recognize the challenges of broadband affordability among low-income households.

It is going to take creativity from all stakeholders to develop solutions for universal connectivity; why would we limit the options under a guise of “intellectual purity”?

To my knowledge, no ISP has imposed a “cap” on internet usage. A “cap” would mean there is an “upper limit“.

Yet the pejorative term found its way into a Globe and Mail headline: “Eastlink plan to cap ‘Rural Connect’ service draws scorn in Nova Scotia“. The article describes Eastlink’s plan to bundle 15 GB of data usage into its $46.95 monthly fee for “Rural Connect” service, with a charge of $2 per GB, up to a maximum of $20 in overage fees.

In other words, Eastlink will offer unlimited internet usage for $66.95.

How is that a cap on Rural Connect service?

Usage tiers allow entry level internet users a lower fee, without restricting their ability to use more internet services if they choose. Having a cap on overage fees, especially a low $20 fee cap, provides unlimited access at an affordable price.

Price tiers aren’t usage caps.

Yesterday, US President Obama unveiled ConnectHome, a new initiative to bring Internet connections to low-income households, targeting students living in public and assisted housing.

A new analysis by the US Council of Economic Advisors shows a strong correlation between household income and internet use, a relationship that I discussed more than 4 years ago.

As the White House background paper says, students in low-income households risk a widening “homework-gap”:

While many middle-class U.S. students go home to Internet access, allowing them to do research, write papers, and communicate digitally with their teachers and other students, too many lower-income children go unplugged every afternoon when school ends. This “homework gap” runs the risk of widening the achievement gap, denying hardworking students the benefit of a technology-enriched education.

Industry Minister James Moore issued an update on its Digital Canada 150 “digital strategy” that still doesn’t address the need to increase adoption of digital technologies among Canada’s lowest income households.

As part of its submission to the CRTC’s “Review of basic telecommunications” proceeding, the Affordable Access Coalition has put forward an “Affordability proposal”, to “provide low-income Canadians with a monthly subsidy to use on the telecommunications service of their choice (broadband, home phone or cellphone service) and from the service provider of their choice.”

As Rogers has demonstrated with its Connected for Success program, the private sector in Canada can be a partner in delivering a solution for many low-income households. A story in the Globe and Mail indicated that Rogers is currently providing 7000 households in Toronto Community Housing with service for just $9.99 per month.

It is gratifying to see the issue brought forward by the Affordable Access coalition.

How will industry and government policy makers respond?

In case you weren’t there (or you were there but wanted to see what we said), the following were the opening remarks delivered by my co-chair, Michael Sone, and me at The 2015 Canadian Telecom Summit.

GST Conferences was created to produce our inaugural conference in 2002, “Celebrating 10 Years of Long Distance Competition in Canada.”

Twenty three years of competitive telecommunications and today’s landscape of services, of providers, of modalities of communication looks nothing like it did in 1992. A generation of Canadians has no idea what it was like gathering around the phone on Sundays to place long distance calls to out of town grandparents or other relatives, because long distance calls could cost an hour’s pay for each minute on the phone.

In fact, in many ways, with wireless still an expensive novelty and Internet usage in its infancy, telecom of the early-‘90s had more in common with the analogue environment of 1950s and ‘60s than it does with the all-digital, hyper-connected, socially-networked world of 2015. The Internet of Everything is the reality that cuts across and impacts, well, everything. And we’ll hear all about that this week.

Each year, we observe that wireless services flourish with new gadgets and a never-ending stream of new apps and services raising connectivity and instantaneous communication to new heights.

Each year we continue to increase our consumption of bits, of radio spectrum, of fiber capacity.

This trend continues to raise substantive policy issues as service providers – new entrant and incumbent alike – try to stay ahead of demand and seek to invest in newer, faster, higher capacity technologies.

Among the subjects we will examine over the next 3 days is creating the right policy framework to attract and incent continued investment in Canadian telecommunications.

On both sides of the river, our regulator and policy makers in Ottawa and Gatineau continue to disappoint many of us by failing to provide the leadership needed to guide the development of Canada’s digital economy. Neither the CRTC Chair, nor the Minister of Industry have stepped up to seriously address the challenge of getting low income Canadians online. It is perhaps the most glaring omission from Canada’s so-called digital strategy.

I will repeat what I said last year: “Kids need computers at home to do homework.”

Six weeks ago, south of the border, FCC Commissioner Jessica Rosenworcel wrote:

Students who lack broadband access at home are unable to complete basic schoolwork. They have trouble keeping up in the classroom. More than that, they are holding our educational efforts back.
…
The homework gap is the cruelest part of the digital divide. But we can take steps now to tackle it — steps that will help students get their schoolwork done, help expand access to the Internet, and help grow our digital economy.

Canada’s Digital Strategy, follows the politically attractive path that continues (and expands) the subsidy systems based on geography. Hundreds of millions of dollars have flowed to subsidize rural and remote regions without regard to the actual financial needs of consumers.

In the most recent example, a couple of weeks ago, Industry Canada announced that it has exceeded its initial target of connecting 280,000 rural, remote and northern households at minimum speeds of 5 Mbps by more than 75,000, and said that “most” other projects will be done within the next two years – in time for Canada’s Sesquicentennial in 2017.

The minister said, over 98 percent of Canadian households will be able to subscribe to new or improved high-speed Internet services by that time.

While we applaud programs aimed at increased connectedness to everyone, even if this latest objective is met, we wonder if the speeds offered will be sufficient for many of today’s common online tasks. The service providers will only deploy where there is a good business case for doing so and, therefore, universal broadband depends on creative approaches – whether financial or technical – for delivering a positive return. And second, most of Canada’s digitally challenged citizens are in the urban areas.

Low income Canadians, who tend to be concentrated in urban areas across the country, have no programs to help them pay for service. Prices that may seem affordable to most Canadians, are out of reach for those who are living from week-to-week, let alone month-to-month. All of us may complain about the price of service – who wouldn’t like lower bills for everything – but more than 80% of us have computers at home connected to the internet. As I have written many times, there are too many low income households that don’t even have a computer, let alone a broadband connection.

Isador Rabi, the 1944 Nobel Prize winner in Physics credited his mother for making him a scientist. Each day, instead of asking him what he learned in school, she asked him if he asked a good question today. In its Basic Service public notice, I am concerned that the CRTC didn’t ask the right questions. Questions were based on “where” the CRTC should act, pointing to a pre-disposition to continue the patronizing but politically expedient rural subsidy regime. We should first be asking “who”. Who doesn’t subscribe? And then move on to “why”.

Canada needs to make changes to its approach if we want to bridge the gap between those who can and those who cannot afford to participate in a digital economy.

We will be heading into an election this fall. To what extent will digital issues play a part in party platforms?

What should we be looking for to drive a greater degree of digital inclusiveness for all Canadians, young and old, urban and rural, regardless of their economic station?

• We need programs that increase digital literacy and promote connectivity for economically disadvantaged Canadians.
• We need to set a goal of having a connected computer in every home with a school aged child. Every household with school aged children needs to be digitally connected. We need to eliminate the Homework Gap.
• We need to drive increased adoption of Information and Communications Technology in business
• We need to improve ICT adoption in all dealings with government, and government funded agencies, especially in improving the quality and efficiency of health care delivery.
• We need our customers to be confident that they can engage online securely and with their privacy safeguarded.

Let’s see if Digital Canada 150 can be more than a slogan in the October election.