50 Mbps speeds, LTE part of CRTC’s new basic service requirements
NEWS | THE WIRE REPORT
PUBLISHED: WEDNESDAY, 12/21/2016 4:15 PM EST
LAST UPDATED: TUESDAY, 01/03/2017 9:57 AM EST
GATINEAU, Que. — Advocates are calling the CRTC’s new basic service requirements — which include a minimum of 50 Mbps download and 10 Mbps upload speeds and LTE coverage — “transformative” and “game-changing” while financial analysts said the new rules won’t have an impact on companies’ bottom lines.
On Wednesday, the CRTC released details of its new universal service objective, with the commission establishing a $750 million fund to improve both wireless and wireline service in underserved communities.
In an interview following the decision, CRTC chairman JeanPierre Blais said the decision marks a shift in the perspective of the CRTC, from focusing on voice service to focusing on the Internet.
“What this does is a hard break from thinking of telephony as voice, and realizing telecommunications is about broadband and voice is an application that happens to be carried on these infrastructures,” he said. “To me, it’s been coming for a while, but it’s a fundamental shift.”
The CRTC’s previous basic service objective did not include speed minimums, though it did specify that Canadians should have access to dialup service. Instead of setting minimum speeds in that regime, the CRTC chose to set speed targets instead in 2011, of 5 Mbps download and 1 Mbps upload — 10 times slower than the CRTC’s new minimums.
Blais said the 10fold increase was necessary for Canada to keep pace with other countries.
“We’re setting a target for the next generation, so it’s a long term plan. But if you look at our trading partners, the people we will have to compete with in the digital economy, we’ve got the U.S. at 25 and 3 [Mbps], we’re got Australia at 25 [Mbps] as soon as possible, the European Union at 30 [Mbps],” he said, referring to targets set by other countries.
“These are our competitors and that’s what we should be striving for.”
The 50 Mbps standard is “a bold step by the CRTC,” said Tanveer Ahmed, director of economics and finance at Nordicity in a phone interview.
Acknowledging that there will still be challenges for fixed wireless and satellite connections, Ahmed said “from an economic point of view, 50 [Mbps] is an optimum threshold that a developed country should have and most of the developed countries are moving towards this direction.”
The CRTC’s preferred speed standard is “ambitious,” according to Geoff White, co-counsel to the Affordable Access Coalition. The group is made up of the Association of Community Organizations for Reform Now, Canada (ACORN Canada); the Consumers’ Association of Canada; the Council of Senior Citizens’ Organizations of British Columbia; the National Pensioners Federation; and the Public Interest Advocacy Centre (PIAC).
Setting the benchmark “on the basis that this is what most Canadians currently have access to and rejecting the notion that the standard of 5 [Mbps] is sufficient, that is a tremendous outcome for Canadians and I think as a result of this decision and the decision to set up a fund, which is what the coalition is asking for, that’s going to result in more Canadians having access to higher speed broadband in more places,” White said in a phone interview.
In a press release, advocacy group OpenMedia said the decision is “truly historic” and will be “a gamechanger for rural and underserved communities across Canada where Internet access is either unavailable or unaffordable.”
The new universal service objective (previously called the basic service objective) requires that “Canadians should have access to the latest generally deployed mobile wireless technology (currently LTE). This technology should be available in Canada not only in homes and businesses, but on major transportation roads,” the commission said in a press release Wednesday.
The new rules are part of the CRTC’s decision on a three week hearing it held on the issue in April.
The $750million fund to improve service will be funded by repurposing the existing local service subsidy, though the new fund will also require telecoms to make contributions based on broadband revenues, which weren’t previously included. Those contributions will bring the total to $750 million over five years, compared to what would have amounted to about $500 million over that time under the local subsidy, according to background information provided at a briefing for media in Gatineau on Wednesday afternoon.
The fund will cover projects to expand both wireline and wireless networks. “To the greatest extent possible, the funding mechanism will be managed at arm’s length from the CRTC, based on objective criteria, and administered in a manner that is transparent, fair and efficient,” the commission said in the release.
When asked about how the CRTC plans to ensure its new minimums are adopted, Blais said the CRTC is currently using “the carrot approach,” which in combination with similar programs from various levels of governments, “will bring companies to make private investments, leveraged by government funding and CRTC funding.”
He added: “we will be monitoring it quite closely and we have some targets of 90 per cent by 2021.” The CRTC aims to have the minimum speeds available to the final 10 per cent within 15 or 20 years.
Telecoms have six months to make changes regarding consumer notification and awareness, including providing account management tools so customers can monitor data usage. Large companies also have to submit a report within six months “concerning their respective plans to invest in the ongoing accessibility of telecommunications services.” The CRTC also directed all wireless service providers to “offer mobile wireless service packages that meet the needs of Canadians with disabilities” within six months.
The CRTC stipulated Wednesday that customers need to have the option of subscribing to an unlimited Internet plan.
“The average monthly amount of data downloaded and uploaded by residential broadband Internet access subscribers increased an average of 50.4% and 30.2%, respectively, annually over the last five years,” it noted in the decision, adding that it expects the upward trend to continue.
In its decision, the CRTC noted that in 2011 — the same year as the last time the CRTC looked at the basic service objective — only 0.3 per cent of subscriptions were to speeds of 50 Mbps and higher, a number that rose to 19.2 by 2015. Currently, 82 per cent of Canadians have access to speeds of 50 Mbps download and 10 Mbps upload or higher, the CRTC estimates.
One issue that the CRTC didn’t address is that of affordability, which came up repeatedly during the hearing.
However, in a report filed as part of Innovation, Science and Economic Development Canada’s innovation agenda consultation also released Wednesday, the CRTC indicated that the government should take responsibility for that.
“While the Telecommunications Act gives the CRTC broad powers to regulate the provision of telecommunications services, other services in some cases are better positioned to implement solutions to address some … gaps,” which includes affordability and digital literacy.
“The CRTC considers that, in light of its necessity to participation in so many aspects of life, broadband access should be considered more holistically as part of the social safety net for vulnerable Canadians,” that report said. “The development of initiatives related to the affordability of broadband Internet access service for Canadians is of considerable concern and will require concerted efforts from a variety of stakeholders.”
The CRTC chairman said in the interview the commission didn’t take steps to address affordability — despite earlier doing so for TV service by mandating a $25 basic TV package — because it’s watching what effect industry and federal government initiatives will have.
“I don’t think you can compare both of them. The maturity of the cable BDU business is different than the broadband business,” he said.
“Our approach on rate regulation on the telecom side has been very much let’s focus on the wholesale, let’s have competition, let’s make sure we equip consumers to be fully informed… and in fact, this week with TekSavvy, you saw that it works,” Blais said in reference to TekSavvy Solutions Inc. lowering prices.
He added that the Innovation minister is also looking at the issue, and that companies like Rogers Communications Inc. and Telus Corp. have launched $10Internet plans for some low income Canadians.
“We’re going to let that pan out and flow out and we’ll see how that goes. The reality is, it’s a multifaceted issue and frankly I’m not sure putting caps would have been the best approach.”
In response to a question about whether he was concerned about high prices for the faster services, such as in the North where currently even low speed Internet access is expensive, Blais said that “as we roll out scalable infrastructure, [we’re] quite confident there will competitors that will create downward pressure on the prices.”
He added: “The North is a special case… especially the satellite communities. That will require probably an even more targeted approach.” Some of the funding available as part of the $750 million will go to the North, while “technology will change,” he added, citing the possibility of lower orbit satellites.
Despite the regulator not addressing affordability in its decision, the coalition’s White said he “wouldn’t want to downplay the significance of what otherwise is a very important and transformative CRTC decision. There should be no question that this is an important decision, and one I think the coalition is largely pleased with.”
White noted that in its submission to ISED’s Innovation Agenda consultation, the CRTC highlighted affordability as being a problem, which was a silver lining to the “somewhat disappointing” outcome of not having the coalition’s affordability proposals adopted.
“So to say to the minister of innovation, science and economic development ‘there’s a problem here,’ and to make recommendations about broadband being factored into social assistance, that’s very positive, as is the fact that the CRTC’s paying attention to affordability and will be tracking it,” White said.
Clark Somerville, president of the Federation of Canadian Municipalities (FCM), said in a press release that even with the federal government’s new rural broadband program “market forces alone will not close the broadband gap for many remote and northern communities” and that “FCM will be examining the CRTC’s new funding mechanism to ensure it complements Connect to Innovate funding to best support the communities that need it most.“
Whatever the CRTC does should complement the government’s program, echoed White, though he said when looking at the two programs side-by-side, the “CRTC is already putting more on the table.” He added that government funding is not as predictable and transparent as a fund “administered by a party with the experts necessary.”
The eligibility criteria for the fund also requires applicants to “provide a minimum amount of investment in their project,” which Bram Abramson, TekSavvy’s chief regulatory officer, said in a phone interview is “pretty astute, to be honest.”
“I think it’s too heavy a lift for the CRTC to have all of telecom market participants fund it by themselves. You clearly need revenues coming in from elsewhere if you’re going to do universal service,” Abramson said, likening the move to being a “universal service accelerator.”
Timothy Denton, a former CRTC commissioner, said in a phone interview that Wednesday’s decision “seems correct in every respect” and that it’s “moving everything along in the right direction.”
He said that the shift away from voice telephony, which is only one application out of many communication services, to broadband is the way to get everyone on the same level instead of siloed in specialized services.
“The page has been turned and now we’re talking about the right issues,” Denton said. Analysts said Wednesday companies won’t feel much impact as a result of the decision.
In a research note, Barclays analyst Phillip Huang said the financial impact of the decision is “immaterial.”
“We are relieved that the CRTC’s decision did not include any regulated pricing or ‘skinny broadband service’, which we believe were the two most feared outcomes ahead of the decision,” Huang wrote.
The increase in contributions companies will have to pay as a result of changes to the fund mean industry contribution will grow by $25 million a year, which won’t be “financially material for any one player in the industry.” In addition, companies will be able to access the fund for projects.
“Any residual financial impact will likely be passed on to consumers through price increases,” he added.
RBC Capital Markets analyst Drew McReynolds also said that given “current Internet capabilities, minimum speed requirements, stipulated timelines and the funding mechanism,” the decision is “largely neutral” for telecoms.
In emails, Quebecor Inc.’s Videotron and Shaw Communications Inc. said they wouldn’t be making comments on the decision. An email from BCE Inc. spokesperson Jacqueline Michelis said the company is reviewing the decision.
“High speed Internet is a must for Canadians to connect with their friends, families and communities and participate in the digital economy. While there are still many details to be worked out, we are encouraged by this reasonable plan to help increase access to Canadians in hard to reach areas of our country,” David Watt, Rogers Communications Inc.‘s senior vice-president of regulatory, said in an email statement. “At Rogers, we already offer speeds 20 times faster than the new target and have unlimited plans everywhere we offer Internet.”
In a press release, the federal NDP finance critic Guy Caron called Wednesday’s ruling “great news for the far too many Canadians who have limited or no access to high speed internet,” and called on the Liberal government to “ensure access to this service across the country.”
Last week, Minister of Innovation, Science and Economic Development Navdeep Bains unveiled details about the federal government’s $500million rural broadband program, first announced in the spring budget. The program will focus on middle-mile backbone infrastructure with an aim of connecting 300 communities to high speed Internet.
Among the requirements for eligibility to the commission’s new broadband fund is that “applicants will be required to secure a minimum level of financial support from a government entity,” according to the decision.
— With reporting by Anja Karadeglija at firstname.lastname@example.org and reporting and editing by Charelle Evelyn at email@example.com