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A few weeks ago, I wrote about “Connecting the unconnected“, taking a look at various strategies to provide introductory connectivity to people who cannot otherwise afford devices or broadband service.

Some of these strategies involve providing access to a limited number of “zero-rated” services, such as Wikipedia.

Through the years, carriers have used (and continue to use) zero-rated offerings as a way to get people to expand their use of services. To this day, many companies have “social plans”, providing limited access to some social networking sites for a flat monthly rate.

Internet.org is a zero-rated service being offered in less developed countries seeking to provide affordable access to a limited number of sites. “Internet.org is a Facebook-led initiative bringing together technology leaders, nonprofits and local communities to connect the two thirds of the world that doesn’t have internet access.”

Like flat rate services in Canada, activists have criticized Internet.org for violating “net neutrality”, favoring Facebook over other websites and services.

In a news story this morning, BBC quotes Facebook’s founder, Mark Zuckerberg, striking back at the activists:

But Facebook’s founder Mark Zuckerberg said it was “not sustainable to offer the whole internet for free”.

“It costs tens of billions of dollars every year to run the internet, and no operator could afford this if everything were free,” he said in an online video posted to Internet.org’s website.

…

Mr Zuckerberg said that people should not prevent others from using the internet in order to defend an “extreme definition of net neutrality”.

“Are we a community that values people and improving people’s lives above all else, or are we a community that puts the intellectual purity of technology above people’s needs?” he asked.

In announcing the Internet.org Platform, Zuckerberg says “For most people who aren’t online, the biggest barrier to connecting isn’t lack of infrastructure – more than 80% of the world’s population already lives within range of a mobile signal. Instead, the biggest challenges are affordability of the internet, and awareness of how internet services are valuable to them.”

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

Zero rating of services is certain to be raised by a number of the panels at The 2015 Canadian Telecom Summit, which opens in 4 weeks in Toronto. On Monday June 1, a panel of top telecom economists from Canada and the US will be exploring “Competition in telecom: net neutrality and innovation“. On June 2, the regulatory executives from Canada’s leading communications service providers will debate the full range of issues facing regulation and government policy. and, on June 3, two panels will related issues with “Hyper Connectivity: Shaping Personal & Business Digital Relationships” and “Coming to Any Screen Near You: The video revolution“.

Check out the full conference program. Have you registered yet?

Over the weekend, I read about a couple initiatives that could help expand digital connectivity for low income Canadians.

A New York Times article, “Fighting Homelessness, One Smartphone at a Time“, talks about a program that is distributing 1000 Nexus 5 smartphones donated by Google to homeless people in San Jose. “People don’t put out ‘for rent’ signs anymore, so the Internet is the best way. You can’t even go get a paper application for a lot of things. You can’t get a job unless you get online. Before I got a free phone, it was like you’re almost nonexistent.”

And an unrelated article from last summer on the Wikimedia Blog surfaced in my Twitter feed “Wikipedia Zero and Net Neutrality: Protecting the Internet as a Public Space.” That article talks bout an initiative by South African cell phone providers to provide access to Wikipedia free of charge, under the umbrella of a Wikimedia Foundation program known as Wikipedia Zero.

Wikipedia Zero launched in 2012 to bring free access to Wikipedia on mobile phones. Today, Wikipedia Zero is available to an estimated 350 million people in 29 countries; it serves more than 65 million pageviews for free, every month.

According to Wikimedia’s description, implementing Wikipedia Zero is simple:

The operator “zero-rates” access to Wikimedia sites in their billing system, so their subscribers will not incur data charges while accessing Wikipedia and the sister projects on the mobile web or apps. Wikimedia recognizes the user is on that operator’s network and serves a banner on the top of the page indicating free data courtesy of their mobile operator, which reinforces a positive brand experience for the operator. When the user leaves the Wikimedia sites, they see a warning message and are asked to confirm, so there is no confusion or risk of surprise charges.

These are initiatives that could be adopted by any or all of Canada’s wireless companies, although there is a regulatory risk that could put a chill on zero-rated applications.

The CRTC’s Mobile TV decision included a section on prospective undue preference that could discourage carriers from advantaging “Wikipedia” over any other potential information service. When the CRTC “acknowledge[d] that no complaints or interventions were filed by competing service providers”, one might wonder if an unintended consequence could be that the commission created a hurdle for services that target disadvantaged communities.

Will Digital Canada 150 begin to examine solutions to address the challenge of low income adoption of information technologies? As Canada moves toward an election this year, which political parties’ platforms will discuss digital inclusiveness?

In the absence of government leadership, perhaps Canada’s communications industry can make a difference on its own, one smartphone or one website at a time.

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Update: [April 20, 12:30 pm]
Greg O’Brien pointed out a recent opinion piece in the Detroit Free Press written by FCC Commissioner Jessica Rosenworcel. In it, she writes:

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.

As I wrote earlier this year, it is politically attractive to continue (and expand) the subsidy systems we have in Canada, which have been based on geography. Hundreds of millions of dollars flow to subsidize rural and remote regions without regard to financial needs.

On the other hand, 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 seem affordable to most Canadians, may be 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 have a computer, let alone a broadband connection.

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.

In anticipation of the release of another piece of the CRTC’s Let’s Talk TV proceeding, an article in the Toronto Star this weekend looked “Behind the scenes of Ontario’s campaign for a Netflix tax“. This week, the CRTC plans to release “The way forward – Creating compelling and diverse Canadian programming.”

The Star article predicts that “the CRTC is likely to side with consumers, effectively rejecting what had been an expensive Ontario government campaign to convince the regulator to establish a Netflix tax.”

Unfortunately, the Star didn’t share an alternative. While it is easy to ridicule a “Netflix tax”, serious thought needs to be applied to resolve the funding challenge.

The achievement of a number of social objectives in Canada is funded through surcharges on communications services, rather than through the general revenues of the government.

For example, there is a general tax on telecommunications services providers (TSPs) that is used to subsidize phone service in high cost serving areas. Broadcast distributors contribute to funds that support the development of Canadian programming.

In a monopoly era, it didn’t matter too much that these social benefits were funded by cable companies and phone companies rather than the government. There seemed to be an appropriateness to having people who can afford phone service in low cost areas pay a little bit more to help cover the cost of service in high cost areas. Nearly everyone had a phone, so the tax was pretty much universal.

Similarly, when nearly every Canadian household with a TV was paying for cable or satellite service, why wouldn’t those be the people who pay into a fund to finance Canadian production?

The problem is that now we have competitors providing these services, not all of which are captured by the subsidy system. For example, for administrative reasons, there is a minimum revenue threshold in order not to burden small companies with the extra financial reporting. Further, there are non-traditional substitutes for the traditional services, leading to fewer contributors as people “cut the cord.” Indeed, even the chair of the CRTC seemed to be encouraging people to exit the subsidy payment system with his pitch for digital tv antennas in late January:

I have with me today some special items. You could call them magic items. After all, they can make television service bills disappear into thin air.

What’s more, when you install them in your home or on your roof here in downtown London, they can give you access to eight Canadian television signals with a picture quality superior to anything delivered by a satellite or cable provider. Channels that show all the best local and national information, American entertainment and educational programming – for the low monthly rate of zero dollars.

It is basic mathematics that tells us that if there are fewer people paying a given amount, the total being collected will be smaller. Or if the total amount being collected is held constant, with fewer people from whom to collect, each one remaining will have to pay more. That increases the price of legacy services, further increasing the number of people who leave the system, which increases the price, and the vicious cycle continues.

We have these basic social objectives: support development of Canadian media production and support affordable access to communications services in higher cost serving areas. We have a transition in the market that sees fewer people buying the traditional services that currently fund these social programs.

In an era of tight government spending, we shouldn’t expect the government to pick up the funding obligations.

Last week’s Northwestel decision shows what can happen when there is failure to examine the obligations and the funding holistically. The CRTC ordered price reductions in internet services – services that were already being provided below cost – with no source of the funding. If the CRTC chair thought we should refer to digital antennas as “magic items”, then northern internet services must be thaumaturgic.

With the precedent of the US FCC declaration of internet service as a basic utility, it may be more palatable for the CRTC to explore treating all communications access services the same. Technology enables a variety of services to be delivered over an increasingly wide array of accesses.

Perhaps such matters will come up in the CRTC’s review of basic services, as was suggested in the Northwestel decision. I doubt it will go far enough. There is a tendancy for the CRTC to separate broadcasting and telecom issues, making it unlikely that funding of media production would be seen to intersect with telecommunications services. Still, if internet access is being considered to be part of the basic service obligation, is there a reason why it wouldn’t be considered for contributing to the various social obligations of other basic services?

The funding of social objectives is a broad area – perhaps yet another one of those matters that should be part of the long overdue comprehensive communication policy review.

Heading into a federal election later this year, the government could create precisely such an expert panel in advance of the formal campaigning. It would allow the government to deflect criticism of its skeletal Digital Canada 150 policy and demonstrate that it is seriously concerned with the digital economy. At this point, a Communications Policy Review panel could deliver a report no sooner than 2016 – fully 10 years after the report of the Telecommunications Policy Review panel.

Canadians deserve a comprehensive communications policy review, crafted with the depth and gravitas of the 2006 Telecom Policy Review panel. That’s nothing magical.

Canadian communications is all we talk about at The 2015 Canadian Telecom Summit, June 1-3, in Toronto. It is where leaders gather to talk about all aspects of the industry, policy and technology, improving service delivery and exploring the challenges and opportunities arising from new innovations. Have you registered yet?

According to its three-year plan, later this year the CRTC will launch a proceeding to examine what should be considered basic telecommunications service.

The CRTC will initiate a comprehensive review to determine what services (e.g. voice and broadband) are required by all Canadians to fully participate in the digital economy and whether there should be changes to the subsidy regime and national contribution mechanism.

In general, the subsidy systems we have in Canada have been based on geography without regard to financial needs. We subsidize rural telecom service, trying to deal with higher cost of providing service to such regions. That has been the basis of the “contribution” subsidy regime for traditional local telephone service. Industry Canada has given out hundreds of millions of dollars to reduce the cost of providing internet service in rural and remote regions.

These subsidies go to everyone in the region, not just those who have a financial need.

Such an approach is politically attractive. Oversized ceremonial subsidy cheques create a number of photo ops for politicians: at the time of the announcement; when construction starts; and, when service launches. All of the households in a given region get a handout, whether they need or not, so all of the households are grateful to the politician who delivered savings.

On the other hand, 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 seem affordable to most Canadians, may be 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 have a computer, let alone a broadband connection.

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.

In the United States, there is “Lifeline“, a program that provides targeted discounts on monthly telephone service, funded by the universal service fund (USF). The USF is somewhat analogous to Canada’s National Contribution Fund in that it is funded by a levy on telecommunications service provider revenues.

Two and a half years ago, the US cable industry launched “Connect2Compete” to increase adoption of connected computers in low-income households with children. When asked about such a program in February 2013, Christian Paradis (the Industry Minister at that time) said “the CRTC has jurisdiction over this.”

A program that targets low income Canadians won’t directly deliver votes to the government; the recipients of the program benefits are too widely distributed across the country. Still, it is the right thing to do.

A Thomas Friedman interview with former Israeli President Shimon Peres at the World Economic Forum in Davos is worth watching to gain insights from the 91 year old Nobel Laureate. Peres talks about the need to invest in long term societal change, believing strongly in investing in education, especially science: “You cannot escape poverty without science.” Later in the interview, he says that in the future, countries won’t be counting how many square miles they have, but rather, how many scientists they have per square mile.

It seems to me that you cannot deliver science education without access to modern communications services. For Canada to be a leader in a global digital economy, we need to expand the inclusiveness of opportunity to those Canadians who are economically disadvantaged.

Delivering subsidies based on financial need will stimulate the demand side of the adoption equation. Increased demand will in turn, stimulate supply, without advantaging one supplier over another.

Targeting low-income Canadians may not deliver votes as directly as a series of photo ops in rural communities, but it is the right thing to do. That’s what I would vote for.

An essay in Time Magazine by Clemson economist Thomas Hazlett caught my eye. He opens “How to Neuter the Net Revolution” with a quote from Professor Lawrence Lessig:

The Internet revolution has ended just as surprisingly as it began. None expected the explosion of creativity that the network produced; few expected that explosion to collapse as quickly and profoundly as it has.

The kicker is that these words are from a paper written in 2001 promoting rules to ensure an open internet.

At that time, Lessig wrote:

The Internet promised the world — particularly the weakest in the world—the fastest and most dramatic change to existing barriers to growth. That promise depends on the network remaining open to innovation. That openness depends upon policy that better understands the Internet’s past.

The internet revolution didn’t come to an end in 2001 as Lessig warned. I agree that the openness of the internet “depends upon policy that better understands the Internet’s past.” However, I am not convinced that share the same understanding of that history.

Some observers are challenging some of the more idealized assumptions being set forth to justify government regulation. Hazlett writes “the idea that the Internet is everywhere neutral, that all bits are treated equally, is false.” Further, Frost & Sullivan principal analyst says Dan Rayburn wrote: “There has never been any rule or understanding that certain networks must carry traffic for free.” and in the Washington Post, Larry Downes writes “The engineering of the Internet has never been “neutral,” nor could it be. Voice and streaming video traffic, for example, which is much more sensitive to delays, is regularly given priority.”

Downes also writes in the Harvard Business Review:

As far back as 1999, at the dawn of broadband Internet access through DSL and cable modems, the same advocates were making the same urgent pleas. Absent immediate nationalization of the Internet, they argued, ISPs were certain to block or otherwise disadvantage start-ups, leaving the Internet in the hands of a few dominant content providers. You know, like AOL, GeoCities, and Blue Mountain electronic cards. (Google search was still in beta.)

Back then, fortunately, the White House, Congress, and the FCC ignored the doomsayers. Instead, a rare bipartisan coalition held fast to the view that for emerging technologies, light-touch regulation was more likely to encourage competition and discipline market participants than the heavy hand of regulators.

Plus ça change…

To better understand the past, it may be helpful to look to an FCC working paper from 1999 [pdf], entitled “The FCC and the Unregulation of the Internet“.

The author, Jason Oxman, cites 5 key FCC policy decisions that benefited the development of the internet:

• Fostering the development of an interconnected telecommunications network that ensured near universal availability of a reliable and affordable telephone system over which data services could be offered.
• Determining through the Computer Inquiry proceedings that computer applications offered over that network were not subject to regulation, giving rise to the unregulated growth of the Internet.
• Exempting enhanced service providers from the access charges paid by interexchange carriers, helping drive the availability of inexpensive dial-up Internet access.
• Deregulating the telecommunications equipment market while requiring carriers to allow users to connect their own terminal equipment, helping to foster the widespread deployment of the modem and other data equipment tools that can be easily attached to the public switched network.
• Implementing flexible spectrum licensing policies that permit innovative uses of wireless data services, leading to the development of wireless Internet applications.

And the paper cited fundamental lessons learned from 30 years of application of a deregulatory approach by the FCC:

• Do not automatically impose legacy regulations on new technologies,
• When Internet-based services replace traditional legacy services, begin to deregulate the old instead of regulate the new; and
• Maintain a watchful eye to ensure that anticompetitive behavior does not develop, do not regulate based on the perception of potential future bottlenecks, and be careful that any regulatory responses are the minimum necessary and outweigh the costs of regulation.

Prescient words from a paper from 15 years ago: “Do not regulate based on the perception of potential future bottlenecks, and be careful that any regulatory responses are the minimum necessary and outweigh the costs of regulation.”

A few weeks ago, I asked if Canada’s net neutrality rules has delivered the benefits to justify the costs of regulation:

Five years later, how many countries have followed Canada’s lead? Should we be reviewing the policy framework for traffic management and content delivery examining whether our rules are appropriate?

Canada may have been first, but one might ask if Canada can be considered a leader if other countries haven’t followed behind. Are Canadians – consumers, creators and carriers – well served by the current “comprehensive approach to Internet traffic management practices”?

As Dan Rayburn observed “Net neutrality is an incredibly complex set of problems that people keep trying to simplify and politicians try to turn into sound bytes.”

What lessons from the past can continue to be applied?

When the FCC issues its determination, it may be worthwhile for the CRTC to begin a fresh look at its regulatory policy framework to ensure that Canadians continue to be positioned to lead in a global digital economy.