{"id":18963,"date":"2025-03-05T05:03:39","date_gmt":"2025-03-05T10:03:39","guid":{"rendered":"https:\/\/mhgoldberg.com\/blog\/?p=18963"},"modified":"2025-03-03T06:18:08","modified_gmt":"2025-03-03T11:18:08","slug":"serving-high-cost-areas","status":"publish","type":"post","link":"https:\/\/mhgoldberg.com\/blog\/?p=18963","title":{"rendered":"The high cost of serving high cost areas"},"content":{"rendered":"

Last May, I discussed an interesting CRTC proceeding looking at high cost serving areas<\/a>.<\/p>\n

At the time, I described an interesting CRTC proceeding underway to examine the future of voice telephone service to a total of 110 households and 5 businesses located in 8 communities served by 3 telephone exchanges located off the beaten track in British Columbia. The communities are connected to the TELUS backbone network using microwave radio links using the 3500MHz band. The radio systems used in these communities are outdated, manufacturer discontinued, so the equipment is no longer supported. Indeed, the manufacturer (SR Telecom) went bankrupt more than 15 years ago. As if that wasn\u2019t enough, the 3500MHz band is being reallocated by ISED. <\/p>\n

ISED told TELUS that it could no longer guarantee its use of the spectrum beyond the end of March, 2025.<\/p>\n

So a year ago, TELUS told their remaining subscribers that it would be sending each one $1400, enough to pay to get connected to a satellite-based voice-over-IP service. That amount would cover the costs of the equipment, installation and the service fees for a full year. TELUS filed its plan with the CRTC in May, 2024, which is what stimulated my high cost blog post<\/a> last year. <\/p>\n

The CRTC decision<\/a> on the matter was released two weeks ago, which is what brings us to today’s story.<\/p>\n

Basically, the CRTC agreed with TELUS that it is not viable to modify (and maintain) the SR Telecom equipment operating on another frequency. The CRTC agreed that satellite-based VoIP was a reasonable substitute, but was concerned with the monthly price differential after the initial gift of $1400 runs out. So, the CRTC awarded residents an additional $4,428. That amount represents 3 years of the price differential between current rates of $32 per month, compared to a total of $155 per month for a satellite-based VoIP service. Never mind the fact that these households will effectively be getting residential broadband for free as part of the deal.<\/p>\n

The CRTC basically waved its hands over the contentious issue of whether the “Obligation to Serve” continues to exist for these communities. The Commission acknowledged that TELUS tariffs contain an explicit exception “when it cannot acquire or maintain the equipment or rights of access that are necessary to provide service.” And the decision itself agrees that the status quo is not viable.<\/p>\n

\n
    \n
  1. While the Commission agrees with TELUS that there are limits to the obligation to serve, the Commission considers that the obligation continues to apply when there is a loss of access to spectrum or other existing facilities. All facilities will eventually require replacement due to technological advancements and regular wear and tear. If the obligation to serve no longer applied when a provider was unable to maintain its facilities, this would effectively time-limit the obligation to serve. This would be particularly problematic in high-cost serving areas. Instead, the Commission considers that ILECs are obligated to serve where they can reasonably replace those facilities or find alternative methods to serve customers.<\/li>\n<\/ol>\n<\/blockquote>\n

    The Commission seems to have forgotten that the Obligation to Serve comes from an era that included a subsidy for high cost serving areas. Expenditures to build and maintain infrastructure were recovered from a kind of regulatory tax on other service and other regions – the national contribution fund in later years.<\/p>\n

    Once again, the CRTC is demonstrating that it lacks appropriate tools to deal with high monthly costs on an ongoing basis for certain remote communities. For a number of years, I have written about what the CRTC itself recognized as a consequence of its 2016 Broadband Decision<\/a>. <\/p>\n

    As I wrote in 2020<\/a>:<\/p>\n

    Many people didn\u2019t give much thought to what the CRTC termed a consequence of that decision, “As a result, the Commission will begin to phase out the subsidy that supports local telephone service.” In other words, the Commission swapped out a program for ongoing support for all high cost serving areas, in favour of awarding one-time payments to specific winning projects.<\/p><\/blockquote>\n

    I wrote about the CRTC’s former high cost serving area subsidy regime in my post about wealth redistribution<\/a> last month. In today’s case, the CRTC decided that TELUS should cover the shortfall, now that the Commission’s own subsidy regime has collapsed.<\/p>\n

    The decision’s analysis of the Obligation to Serve strikes me as overly simplistic. The Decision says “the Commission considers that ILECs are obligated to serve where they can reasonably replace those facilities or find alternative methods to serve customers”. Then, the CRTC agrees that TELUS cannot reasonably replace those facilities, but still maintain that TELUS has an ongoing obligation to serve. The alternative is another facilities-based service provider: Starlink. Why is TELUS still involved?<\/p>\n

    To its credit, the CRTC found that a third-party satellite-based VoIP service was a satisfactory solution for service continuity for these communities, similar to a finding 2 years ago<\/a> when Bell withdrew its exchange radio service. <\/p>\n

    The total amount we are talking about here is just half a million dollars (115 households at $4,428 each). A court challenge could easily cost that and more. Is this a precedent that TELUS will allow to stand? How many other communities will be left in a similar situation across the country because of the CRTC’s decision in 2016 “to phase out the subsidy that supports local telephone service”? Why is Starlink considered to be an appropriate solution for these communities, but not for the 3 communities I described a month ago in “Fifteen million of other people\u2019s money”<\/a>?<\/p>\n

    That particular decision<\/a> really needs to be revisited. <\/p>\n

    The CRTC is continuing to be quite comfortable spending other people’s money. Are Canadians getting value?<\/p>\n","protected":false},"excerpt":{"rendered":"

    Last May, I discussed an interesting CRTC proceeding looking at high cost serving areas. At the time, I described an interesting CRTC proceeding underway to examine the future of voice telephone service to a total of 110 households and 5 businesses located in 8 communities served by 3 telephone exchanges located off the beaten track …<\/p>\n

    The high cost of serving high cost areas<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","two_page_speed":[],"footnotes":""},"categories":[1],"tags":[],"class_list":["post-18963","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nThe high cost of serving high cost areas • Telecom Trends<\/title>\n<meta name=\"description\" content=\"Last May, I discussed an interesting CRTC proceeding looking at high cost serving areas. 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