$7-billion rural broadband plan put to CRTC

The telecommunications regulator should force phone operators to pay $7 billion over 10 years to ensure rural Canadians have equal access to affordable high speed Internet as the rest of the country, a public hearing has been told.

“It’s simply unrealistic to claim market forces will do the job,” Kelvin Shepherd, president of Manitoba Telecom Services Inc., told the Canadian Radio-television and Telecommunications Commission (CRTC) on Wednesday.

Ultimately the cost would be passed on to phone customers across the country, he acknowledged. When pressed by the commission, he guessed it could amount to an extra one or two per cent to their monthly bills.

“We realize this may cause a bit of sticker shock,” he said at the total figure. But he maintained that it is a worthy goal.

The commission is looking at whether it should change the 10-year-old basic services obligations it imposes on incumbent phone providers, which includes offering at least dialup Internet access. Usually that’s much less than 1 megabit per second.

Dialup is “virtually obsolete” at time when 60 per cent of Canadian households can get at least 5 Mbps, Shepherd told the commission.

He estimated some 700,000 households in underserved areas don’t have even access to broadband because they are in rural or northern part of the country no operator wants to serve because of the cost of installing facilities.

While most operators who have either testified so for or have put in pre-hearing written submissions insist the regulator stay away from upgrading the basic services obligation to broadband, MTS said emphatically it must – as long as the operators have a guaranteed reasonable opportunity of getting a return on investment.

He said the CRTC set a broadband standard capable of supporting full-motion video. As a starting point, he suggested it be at least 3 to 4 Mbps.

The money would be collected through the existing subsidy framework which pays small phone companies in high-cost unregulated areas (that is, designated communities where there’s no competition) by increasing the contribution from larger carriers and independent Internet providers. The calculation of the base of that fund would increase by including the amount of retail revenue from ISPs and the paging, or text, revenue from carriers.

However, under questioning from commissioners Shepherd said the plan is a “high level” estimate.

In its pre-hearing written submission, MTS estimated the plan could cost $15 million, but Shepherd said the calculation has been updated.

“Not only do we think this is workable,” he said, “we think this is the only way universal broadband can be achieved that assures rural and remote Canada can get up to speed and stay up to speed with the rest of the country.”

Setting the technical framework for increasing the basic services rules to broadband would require a separate CRTC hearing.

“The commission is in the best position to close the broadband gap” with underserved areas instead of relying on carriers and ISPs waiting until the economics are right, or getting government grants, Shepherd insisted.”

There’s no question, he added, that unlike the opinion of other carriers, MTS believes the commission has the legal power to oblige operators in unregulated areas to offer broadband.
MTS’ proposal is expected to be heavily criticized by other providers at a two-day rebuttal session scheduled to start the afternoon of Nov. 3.
An executive of Halifax-based Bragg Communications Inc., whos Eastlink cable division services communities in nine provinces, joined those who urged the commission not to include broadband as a basic service. “All indications are that today we are witnessing an agressive and active marketplace with regard to broadband rollout,” Natalie MacDonald, Bragg’s vice-president of regulatory affairs, told the commission.
Saskatchewan’s provincially-owned phone company, SaskTel supported MTS’ position that the regulator establish a subsidy to help extend broadband to underserved areas.  However, one member of the team that testified Wednesday said the need for $7 billion “is on the high side.”
SaskTel CEO Ron Styles told the commission that through wireline, wireless and satellite coverage it already offers broadband to all households in the province at 1.5 Gbps. However, he added, that’s by scraping for every provincial and federal subsidy it can find. Without help it won’t be able to upgrade to the 4 to 5 Mbps the telco expects subscribers will want soon.

Like MTS, SaskTel says that for now the commission should add broadband to the basic service, then hold a separate hearing to work out details like what the speeds and timetable should be.