Bell reneging on commitment to rural Internet expansion. We’ve seen this movie before.

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The Canadian Radio-television and Telecommunications Commission (CRTC) announced Telecom Order CRTC 2019-288 recently which set wholesale broadband rates up to 77% lower than the interim rates established three years ago. This means that it will be more affordable for non-facilities-based smaller Telecom Service Providers (TSPs) to access broadband infrastructure owned by the Big Three (Bell, Telus, and Rogers and other Incumbent Local Exchange Carriers or ILECs).

The CRTC requires the ILECS to sell access to their infrastructure at more affordable rates in an effort to create more competition in the market, which should lead to lower prices for consumers.  This Order needs to be extended to cover Fibre-To-The-Premises (FTTP) networks of the ILECS on a disaggregated basis in order to stimulate competition over the only last-mile wireline access media that matters today and in the future.  

Obviously, the lower rates result in less money for the ILECs. So, in response, Bell said they are cutting back on their rural Internet expansion program. The plan originally called for 1.2 million rural households across Manitoba, Ontario, Quebec, and Atlantic Canada to be connected to wireless Internet, specifically in places where the business case to build fibre-optic plant is weak.

Bell claims the new, lower wholesale rates will cost them $100 million, so they decided to scale back the rural Internet expansion program by 200,000 households. Rogers is also reviewing their rural and remote programs. 

What is frustrating for Canadians is that rural expansion is already subsidized by the government. Bell wasn’t planning on charging smaller providers extra high prices in an effort to fund rural expansion. The government is already giving the ILECs money to connect rural and remote areas. This wholesale rate adjustment should have zero impact on rural connectivity, aside from maybe opening the doors to more providers in these areas and cut ILEC retail margins in favour of wholesale margins.  However, ILECs would earn wholesale revenue and also save on customer support and administration costs by providing wholesale access.

But since this wholesale price reduction does not yet apply to FTTP and the federal government is targeting TSPs to provide 50/10 Mbps by 2030, the combination of these two initiatives will be to make the digital divide between urban and rural and between wealthier urban neighbourhoods and poorer urban neighbourhoods wider. The federal government’s 50 Mbps download and 10 Mbps upload standard is tantamount to “the new dial-up,” as rural communities will struggle to get 50/10 Mbps by 2030 while many of their urban peers already have 1 Gbps connections, which are scalable to 10 Gbps in the near future as recently announced by Bell.

In many of these rural areas, Bell is the only wireline provider and in virtually all cases there are only two providers, so Bell is using their hegemony as a monopoly or duopoly to dictate terms to the government and to citizens who are funding them through rates and subsidies. This is another piece of evidence that the CRTC’s policy of “facilities-based” competition, enacted with deregulation of telecom in 1993, continues to be an abysmal failure.   

The truth is, telecom is a natural monopoly, like roads, water, electricity and gas, and as such should be strictly regulated to ensure carrier-neutral open-access for all third-party TSPs. The idea that competitors to ILECs are going to build wireline fibre-optic facilities down county roads to compete with ILECs was and is ludicrous on its face. If the business case is weak for ILECs it is non-existent for newcomers whose marginal costs to construct are hundreds of times higher than ILECs because they’re starting from scratch.  Because facilities-based competition has not worked, except in the most densely populated, wealthy urban areas such as downtown Toronto, ILECs enjoy 95%+ market share of wireline and wireless services today in Canada and nearly 100% in rural areas as described in ACORN’s recent report on, “Barriers to Digital Equality in Canada.” (Bell, Telus and Rogers alone account for 91% market share according to ACORN)

So, carrier-neutrality and open-access to ILEC fibre-optic and LTE/5G infrastructure must be mandated and enforced by the CRTC to ensure every Canadian has equitable access to the Internet. By equitable I mean the same price and performance regardless of one’s geographic location or demographic characteristics, as equitable access to the Internet is a determinant of one’s equal access to healthcare, education, government and marketplaces. This translates into every Canadian household and business having access to FTTP and every person to have access to LTE/5G.

I remain hopeful that when the CRTC adjusted the wholesale broadband rates that it marked the beginning of a more comprehensive restructuring of the regulatory regime recognizing the impossibility of facilities-based competition as a solution to the digital divide. But Bell’s response shows that unless the CRTC’s posture, regulations and enforcement are strongly consumer focused and paired up with taxpayer funding of ILECs and other TSPs, in a “carrot and stick” approach, the ILECS will continue to engage in price and non-price anti-competitive behaviour and will ultimately prevail as they have been since 1993. 

It’s time for Navdeep Bains, Minister of ISED, and Bernadette Jordan, Minister of Rural Economic Development, and Ian Scott, Chair of the CRTC to take a stand. It is great to see that Laura Tribe, Open Media and CIRA are doing their best to hold these ministers’ feet to the flame.

Campbell Patterson