Will Canada get wired?

In the Canadian media, hackles are often raised when the words “billions of dollars” and “government task force” are used in the same sentence. This was the case with the release of The Broadband Task Force report on high speed Internet access.

The story’s plot runs far deeper than the scant attempt made by big city editorialists to understand it, as they compared wiring Canada to building an eight lane highway to nowhere. But neither is it the panacea as championed by others.

The task force was brought together to make recommendations and calculate the cost of getting broadband Internet access to all 6,000 plus Canadian communities by 2004. The tally for total Canadian connectivity came in at $4.5 billion.

Anyone who has studied Canadian geography knows this land is as vast as they come. And with population densities in many areas smaller than a Tim Bit, the net result is no business case to bring broadband access to the majority of Canadian communities.

Two questions arise. First, do all Canadians have a right to broadband Internet access? Secondly, what is the true cost of obtaining this goal?

media indifference

The media’s apathy toward the needs of rural Canadians shocked some task force participants and government officials.

“[The] belief is that this access is going to be critical to the development of government services, of business services, or health and education,” said Toronto-based Bill Linton, CEO of Sprint Canada Inc. and task force participant. “So it is mandatory to deliver services to the group of Canadians that doesn’t live in the cities.”

Linton was dismayed by the media reaction.

“There are certain unwritten rules in this country to which I thought more people agreed such as the obligation to provide goods and services to all citizens no matter where they live,” he said.

“[Internet access] is essential for basic information for schools, for learning…and that requires bandwidth and speed,” said Michael Binder, a spectrum, information technologies and telecommunications Assistant Deputy Minister with Industry Canada in Ottawa.

“There is an enormous demand for DSL and cable in this country,” he said.

“What we have committed (to do) however is to try take the challenge of geography out of remote communities.”

The debate is about the government’s role in getting broadband access to all Canadian communities. In today’s political climate keeping the government out of the Internet is the general consensus. And therein lies the problem. Though the majority of Canadians live in areas deemed to be concentrated enough to eventually bring in high speed Internet access, there are thousands of communities which will not get it unless there is some outside help.

Based on population, about two-thirds of the broadband needed by Canadians is commercially viable, said Gaylen Duncan, president of ITAC in Mississauga, Ont.

“All that is being done is asking companies to speed up their capital plan. These are communities companies would be going to normally but on their own timetable,” Duncan said. “So, essentially it is the government doing something to help companies to invest faster.”

access to all

As for the remaining third of the population – which represents about 70 to 80 per cent of Canadian communities – there is no business case according to Binder and Duncan. This is where government funding is needed if broadband access is ever to arrive.

This lack of business case is a huge problem, said Joe Greene, vice-president telecom and Internet research with IDC Canada in Toronto.

“The concept, from my perspective, is laudable but it is unrealistic simply because they (the government) are going to have to subsidize it more heavily than initially thought,” he said.

“I don’t know if we are ever going to see the Internet viewed the same way telephone is…the telephone is viewed as a right; it is not a luxury,” Greene said.

This is the conundrum. Should all Canadians have a right to high speed Internet access, as is the case with schooling, healthcare and telephone service?

“If this is really a right and in the task force we did use that word several times ‘right of every Canadian,’ then let’s make it tax deductible (for individuals),” Duncan said.

Tax deductions and other forms of subsidy are hardly new to Canadians.

“There is no doubt that this country pays a huge subsidy from the rich provinces to the poor provinces and urban to rural,” Linton said.

“What really irritates me is than most Canadians and most reporters who were writing about [this], are not aware that as we speak today voice telephone services are subsidized from urban Canada into high cost areas. Last year it was $900 million,” Binder said.

“The government used long distance rates to build out for universal access,” Linton agreed.

Bill St. Arnaud, senior director, advanced networks at CANARIE Inc. in Ottawa, says Canadians may be a bit too forgetful.

“It is mostly political rants and ideological divisions, people have forgotten historically in the States and Canada, that this (government spending) is how these (telephone) networks were built,” he said.

“The government has always been in the telecommunication and infrastructure business,” Binder said.

St. Arnaud noted that universal broadband access is not a uniquely Canadian dream. Governments around the world are involved in wiring entire nations. Countries such as France, Japan, Britain and the U.S. all have plans similar to Canada’s, he said.

“Relative to most of the world, we are doing very well [but] there are countries that have got more ambitious plans and have moved ahead of us,” Duncan agreed. He cited Finland, Sweden and Australia as other examples.

“I am also very pleased to see places like Alberta, which is probably considered the most conservative right-wing government in Canada, has seen and recognized the importance of government investment in this type of infrastructure,” St. Arnaud said.

Greene said attitudes may change in Canada in the years to come as those who were educated on computers and the Internet come of age.

“I think that then Canadians might be a little bit more accepting of subsidizing rural areas.”

Could it be that the Canadian federal government is ahead of its time?

the real cost

The $4.5 billion price tag tossed about is a little misleading since it represents the high end (low end is about $2.7 billion) and about half of it is to wire individual homes and businesses within communities once broadband access arrives. Community access only will cost just under $2 billion, St. Arnaud said.

In addition, since high speed access to many communities is commercially viable, not all of the funding will necessarily come out of the public coffer. It is, as Duncan said, more of a case getting corporations to invest sooner rather than later. There is also considerable debate who will be responsible for wiring individual buildings once rural communities have high speed access. Some undoubtedly will have a high enough population concentration to interest investors while others will need government funding.

“The business case will keep many of the telcos away until they have either got a subsidy or they have wired everything else,” Greene said. The latter may not come for years or, if the business case is extremely weak, never.

“[But] that is what this broadband initiative is all about,” he said. “It is subsidy, it is not total (payment).”

Linton said one possible way to pay for the network is a tax on some telecommunication services, hardly a novel idea in this country.

“This is public policy more than it is telecom policy, it is just like building highways and building air strips,” he said.

Tax incentives are another possibility, but not one St. Arnaud favours.

“The problem with tax incentives is that only companies who are making profits and paying taxes can take advantage of that,” he said. “Smaller innovative companies now have got some creative solutions [and] in today’s market are not making money and therefore tax incentives are not a good incentive,” he added.

What many also missed is that this proposition is not without possible return on investment.

“When it all came out in the press it all got focused on what the short term cost is,” Linton said.

Just a savings of one per cent on healthcare, by getting the right information to the right individual a the right time could save hundreds of millions of dollars.

With the debate still raging on and the government not entirely on board yet, will all of this get done by 2004?

“It will be tight…but I think it is probably doable, particularly in today’s market,” St. Arnaud predicted.

“Nah, I don’t think it is achievable by 2004,” Greene said.

Slightly more optimistic was Duncan. “If you believe in the 80/20 rule and we start right away, we can probably get 80 per cent of it done by 2004.”