TIMMINS – MTS Allstream dropped a number, a big one, onto the CRTC’s lap this morning as to what it would cost to serve the remaining 5% of Canadians who can’t get access to broadband because of their remote locations.
Seven billion dollars. More specifically, $700 million spent per year over 10 years.
MTS executives faced the Commission Wednesday morning in Timmins at the CRTC hearing into the telecom industry’s “obligation to serve” and offered a much different opinion than some of its incumbent telco counterparts who said yesterday that the market can take care of getting broadband to the rest of rural Canada and that broadband should not be added to the basic service objective.
MTS president Kelvin Shepherd told the hearing that the basic service objective is obsolete and that broadband should be added to it. Right now, there are about 700,000 Canadian households with no broadband service available he said. The BSO calls for dial-up only and best of luck trying to surf today’s Internet on dial-up, which is “painfully slow, if not impossible,” said Shepherd.
The marketplace, despite assurances from others, will not push broadband to all, he insisted, even with some promised government help.
“The ‘hands-free’ approach that some parties are suggesting will bridge the access gap – that basically either market forces or government funding or both will do the job on their own – will simply not happen,” said Shepherd. “At best, the end result will be an incomplete, unregulated patchwork of coverage of varying quality… What standing back and leaving the problem to market forces and government funding alone will do is perpetuate and widen our broadband access gap at the same time that other countries, with less of a geographic challenge, are taking bold steps to close theirs.”
So, according to MTS, broadband should be included in the basic service objective for all telcos, and revenue from providing broadband service should become applicable to the existing local service subsidy calculation, “to give incumbents, already obligated to serve the basic telephone service objective, both the obligation and the economic support to serve high-cost areas with broadband access service,” he said,
Then, that subsidy itself has to go way up because MTS estimates, based on calculations from this proceeding and the deferral accounts decision, that bringing broadband to every single Canadian will cost an additional $700 million over 10 years.
“We realize that this amount may cause ‘sticker shock’, however, it is actually lower than the contribution requirement for the BSO in 2000 and the burden borne solely by the inter-exchange carrier or long distance carriers prior to 2000,” explained Shepherd.
However, including broadband would boost the contribution-eligible revenue bucket by 30%. Coupling that with an increase of the current contribution rate of that subsidy from 0.73% of a customer’s monthly bill to 2.7% would just about cover MTS’ admittedly big number for the nation. (Then again, Australia is spending north of $40 billion of taxpayers money to bring broadband everywhere Down Under, albeit aiming at 1 Gbps by 2025. The CRTC here has been talking 3-5 Mbps with a shorter deadline.)
“With the additional subsidy from the increased contribution rate, plus the amount from the expanded pool of eligible revenues, we arrive at the $700 million per year necessary to fund a 10-year rollout. Not only do we think this is workable, we think it’s the only way universal broadband can be achieved in a way that ensures that rural and remote Canada can get up to speed, and stay up to speed, with the rest of Canada,” said Shepherd.
When asked by the CRTC chairman Konrad von Finckenstein whether or not MTS considered wireless or satellite a suitable substitute and letting those options filter into the market to fill the gaps, Shepherd was dismissive.
“Those are not a substitute for fixed broadband for business and consumers,” he responded. “The business cases for those are difficult where those technologies have been deployed and coverage quality and reliability is limited.”
Pointing to regions in Manitoba where delivering broadband is a serious challenge, Shepherd continued: “I haven’t seen any evidence today that for typical customers, satellite is a preferred mechanism both in terms of performance and costs. It has issues.”
More to come today.
