February 8, 2016 1 year 8 months ago

Basic Service Review preview: Should broadband be basic? If so, at what speed? And, who should pay for it?

Hearing starts Monday

TORONTO — CRTC commissioners have a lot of reading ahead of them, judging by the hundreds of submissions already made to the Commission’s review of basic telecommunications services, from industry players, consumer organizations, end-user businesses, and local and provincial governments. Then there are the thousands of individual consumers who have submitted questionnaires related to their usage of telecom services.

(Ed note: This is a re-post of a story we ran in February previewing the 14-day hearing that begins Monday. Cartt.ca will have daily coverage of the hearing, which will be available to hear on the Commission's  website, as well as to watch on CPAC.ca.)

Just prior to the deadline for filing interventions to the CRTC’s basic service review (CRTC 2015-134), in Phase 2 of the proceeding, a flurry of supplementary submissions were made last week by interested parties who wanted to expand on and respond to Phase 1 interventions submitted in July 2015. (Cartt.ca covered the July interventions here and also here.)

At issue, primarily, is whether or not broadband should be included in the Basic Service Objective (BSO), and if so, what should the minimum target broadband speed be, and to what extent should the Commission step in to ensure broadband deployment is funded by industry and government, in areas where it is not economical, or among groups which can not afford the retail price.

The Affordable Access Coalition (AAC) is a telecom consumer advocacy group, comprised of six consumer groups and in its original intervention last summer, it advocated for broadband to be declared a basic telecom service and asked the Commission to set 5 Mbps as the basic level of broadband download speed. In its second intervention, the AAC revised its position and said the 5 Mbps broadband target set by the CRTC in 2011 is out of date and inadequate.

“Broadband, of at least 10 Mbps download, is an essential telecommunications service for Canadians, although a higher baseline speed will be necessary soon,” the AAC wrote in its February 1 intervention. The AAC said more up-to-date information about the state of broadband connectivity in Canada has become available, including the release of the CRTC’s 2015 Communications Monitoring Report last October.

In its latest Communications Monitoring Report, the Commission reported 77% of Canadian households currently subscribe to 5 Mbps broadband, with the majority of households (55%) now subscribing to Internet services with speeds of 10 Mbps or higher. In addition, the CRTC found the price of communications services outpaced overall consumer prices between 2013 and 2014, with Internet service prices increasing by 8%, and home telephone and TV services increasing by 3.4% and 2.3%, respectively. The AAC noted in its second intervention that Internet access service prices are increasing at accelerated rates, compared to telephone and BDU services.

The AAC’s position is market forces and government funding have not solved the dual problems of availability and affordability of basic levels of broadband services for all Canadians. The AAC is proposing the CRTC establish a new Broadband Deployment Funding Mechanism, to be financed through the existing National Contribution Fund (NCF), which would be expanded to support broadband deployment through new contributions.

To support telecom affordability, the AAC also proposes the Commission implement an Affordability Funding Mechanism (essentially a subsidy for low-income households) also financed through the existing but expanded NCF, and capped annually. The two funding mechanisms proposed by the AAC would supplement the CRTC’s current residential local wireline subsidy regime and the new video relay service (VRS) funding regime, the AAC said. (The Canadian Administrator of VRS expects to launch the service in the fall of 2016, according to the CRTC’s website).

The AAC noted in its second intervention that Bell Canada has initiated challenges to the Commission’s Telecom Regulatory Policy CRTC 2015-326 review of wholesale wireline services (which Cartt.ca wrote about here and also here), which directly relates to the issue of broadband availability and telecom affordability. “These challenges have not been ruled on at the time of this submission, and therefore there is uncertainty over the wholesale services regime,” the AAC wrote.

Bell’s further intervention said the determination of whether or not a service is a basic telecom service depends on whether funding is needed to support access to the service, pursuant to section 46.5 of the Telecom Act. Bell went on to suggest it was premature for the Commission to establish a broadband fund before the new federal Liberal government makes clear how much of its previously announced $125 billion investment in new infrastructure in Canada will go toward improving access to broadband in underserved and unserved areas of the country. Furthermore, Bell said the Commission should create a detailed report regarding Canadians’ needs, using evidence from the basic service proceeding to provide details on the state of broadband availability in rural and remote areas, in order to advise the federal government on its proposed broadband investments.

“We do not believe that the AAC has justified why such a fund is required. But even if there were a need for such a fund, Internet service providers (ISPs) should not be expected to subsidize low income Canadians’ access to broadband — that is a role for the Government, not a regulatory issue.” – Bell Canada

However, if a broadband fund is deemed necessary, it should not require additional contributions from parties required to pay into the fund, but should reallocate existing contributions made to other telecom funds, Bell proposed. For example, by reallocating funds used for voice in Bands E and F to a broadband fund over a three-year transition period, almost $350 million would be available to invest in broadband within the first five years.

Responding to the AAC’s proposal for an Affordability Funding Mechanism, Bell said the Commission should reject the AAC’s proposed subsidy for low-income customers.

“We do not believe that the AAC has justified why such a fund is required. But even if there were a need for such a fund, Internet service providers (ISPs) should not be expected to subsidize low income Canadians’ access to broadband — that is a role for the Government, not a regulatory issue,” Bell wrote in its second intervention.

In general, Bell’s position is the funding of broadband should be done through a transition of current contributions. But specifically, Bell proposes that the Commission fund 10 Mbps download broadband where 5 Mbps download speeds are not available. (Bell has said 5 Mbps broadband is adequate as a basic service, but in areas where it isn’t already available, funding 10 Mbps deployment would help to meet future service needs.)

In addition, although Bell has suggested the Commission should wait for the federal government to announce its broadband investment plans, if a broadband fund is established, the company recommends funding be limited to only Bands G and H1, to the extent the areas served by those bands have not been addressed previously by government funding.

Unlike Bell, Rogers Communications clearly supports the view that broadband Internet service should be considered to be a basic telecom service. In its second intervention, Rogers proposed a minimum standard of 5 Mbps download and 1 Mbps upload should be part of the definition of basic telecom service.

“The evidence… has demonstrated that broadband Internet service delivered at this standard enables a broad range of activities, including access to education and government online resources. This would establish the minimum level of service available to Canadians. It is consistent with existing federal and provincial government funding initiatives. And it can be achieved without a new subsidy program to support deployment of broadband facilities,” Rogers wrote in its second intervention.

Rogers added any service gaps in certain regions of the country that may continue to exist after current government initiatives are completed will be addressed by private sector initiatives using advanced satellite and other technologies that are expected to extend broadband Internet access to all households. On the question of the need for a subsidy support mechanism, Rogers’s position is market forces drive competition, leading to lower prices and improved service, and therefore it isn’t necessary for regulatory intervention in the market.

“Surveys by a number of research organizations show that price of service is not the sole, or even primary, barrier to adoption; rather, the key barriers to adopting Internet service are lack of interest and lack of skills,” Rogers wrote, referring to surveys by Statistics Canada, Environics and Ipsos. (The Environics study was included as an appendix to the AAC’s first intervention in July 2015. Environics found 37% of survey respondents said they weren’t interested in having home Internet, while 18% said they lacked the skills. However, 30% said cost was a key reason they did not have Internet service at home.)

Telus also said broadband service with at least 5 Mbps download and 1 Mbps upload speeds should be considered a basic telecom service. In its second intervention, Telus expanded on its position, saying broadband speeds faster than 5/1 Mbps are not required by Internet users to participate meaningfully in the digital economy. Telus added that other parties’ assertions that broadband speeds higher than 5/1 Mbps are necessary “are linked to the consumption of discretionary entertainment such as high definition video, multiple users simultaneously downloading high definition video, and specialized applications such as those for medical treatment” — uses the company says do not meet the definition of basic telecom services.

According to Telus, any subsidy required for availability, affordability or adoption of broadband access “is most efficiently funded out of general tax revenues or, failing that, from a broad-based charge on all telecommunications services.” The company’s submission said proposals for new subsidy schemes should be rejected by the Commission, adding that existing government and private sector initiatives will be sufficient to meet the CRTC’s 5/1 Mbps broadband target speed by 2017.

Furthermore, Telus referred to Bell’s proposal to fund broadband investments by transitioning (effectively eliminating) existing voice subsidies in Bands E and F, while maintaining subsidies in Bands G and H1, as “unprincipled, based on faulty analysis and may potentially jeopardize telephone service to Canadians in high cost serving areas.”

“Market forces have succeeded in rolling out broadband services to the far reaches of our country without imposing onerous subsidy burdens on Canadian consumers.” – Shaw Communications

Shaw Cablesystems also weighed in on the issue of broadband subsidies in its second intervention to the CRTC, saying “a light-handed regulatory environment” is needed to allow market forces to continue to prevail.

“Market forces have succeeded in rolling out broadband services to the far reaches of our country without imposing onerous subsidy burdens on Canadian consumers. Today, 97% of Canadians have access to broadband at the Commission’s target speeds of 5 Mbps download and 1 Mbps upload. In addition, through a range of mobile platforms — advanced Wi-Fi, HSPA+ and LTE — wireless broadband now covers 99% of households over diverse mobile platforms,” Shaw wrote in its second intervention.

“Focused government funding, which is based on technology agnostic competitive bidding processes and is drawn from the widest possible base of revenues, continues to be the best way to close any remaining service gaps.”

In its supplementary intervention, Xplornet Communications took the stance that the CRTC’s target speed of 5/1 Mbps broadband has already been met and therefore regulatory intervention and new subsidy programs are not needed. Calling the Internet market in Canada “very dynamic”, with constant expansion and improvement in service, Xplornet said “if public policy is made on the basis of such a dynamic snapshot, it is likely to be flawed.”

Xplornet argued that even the market data in CRTC’s latest Communications Monitoring Report is a year old. But at the time the study was conducted, it showed broadband Internet services are available to 99% of Canadian households, with 96% of households able to obtain access at speeds of 5/1 Mbps (although it should be noted only 77% of households actually subscribe to services offering this speed).

According to Xplornet, the recently completed upgrade of its Anik F2 satellite has now made it possible for all Canadians to access 5/1 Mbps broadband, with availability of 25/1 Mbps broadband service expected in 2017 after the launch of two new high-throughput satellites planned by Xplornet later this year.

In its intervention, Xplornet urged the CRTC to set 5/1 Mbps as the current standard for broadband, with an aspirational goal of 25/1 Mbps broadband when the Commission next reviews the marketplace (Xplornet CEO Allison Lenehan last June during the Canadian Telecom Summit actually challenged the industry to get to 100 Mbps by 2020). Both Telus and Shaw suggested there are potential pitfalls to setting aspirational targets, while Rogers and Bell recommended the Commission set a 25/1 Mbps broadband target, with Rogers proposing the goal be met by 2020.

“Market forces have been the primary impetus for extending broadband service… and will continue to provide the impetus for faster speeds and lower prices in the future.” – Xplornet

“Market forces have been the primary impetus for extending broadband service to 100% of the Canadian population and will continue to provide the impetus for faster speeds and lower prices in the future,” Xplornet wrote in its supplementary intervention.

However, another satellite and broadband services provider, the SSi Group of Companies headquartered in Yellowknife, argued in its second intervention that broadband needs to be formally included as a basic telecom service in the CRTC’s BSO. In fact, broadband must become “the central component” of the BSO, SSi proposed.

SSi said regulatory intervention should focus on improving backbone transport to communities in Canada’s North, which are mostly served by satellite and where broadband is either inadequate or unavailable today. SSi has proposed a Backbone Assistance Program be established to provide open and affordable access to backbone connectivity and gateway service in satellite-served communities. In addition, SSi recommended the Commission establish a minimum Consumer Broadband Offer to provide consumers in high cost serving areas with affordable and quality broadband service as part of the BSO.

The CRTC is still accepting questionnaires from Canadian consumers until February 29. Interested Canadians can access the Let’s Talk Broadband Internet questionnaire here.

The Commission will hold its public hearing on basic telecom services in Gatineau, starting on April 11. The hearing is expected to last between 10 and 15 days.