GATINEAU – Some of the project evaluation and eligibility criteria proposed by the CRTC for its new broadband deployment fund must be altered or it risks repeating the deferral account fiasco, according to comments on a new broadband funding regime.
Introduced as part of the Basic Service Objective decision last year, the proposed funding model would provide much needed capital to broadband deployment projects in unserved and underserved communities across the country. It also set a new standard called the Universal Service Objective (USO) with a minimum requirement of 50/10 Mbps.
In comments to Telecom Notice of Consultation CRTC 2017-112, interveners told the Commission that some of its criteria will lead to problems down the road.
For example, Rogers Communications said funding should be restricted to the communities in most need – those in the most rural and remote areas of Canada. Areas adjacent to ones already with fibre points of presence, points of interconnection or existing broadband services should be excluded from receiving money, said the company’s submission.
By allowing adjacent communities to apply for funding, the CRTC is encouraging parties to game the system to secure funds to serve areas that are already in their deployment plans, noted Rogers. This was a big problem with the deferral account process, but could be avoided by focusing on areas in most need.
“The primary goal of the new funding mechanism should therefore be to finance projects that would not proceed in the next two years, absent additional public funding, and to give preference to areas that might never be served on an economical basis at the target level for basic broadband service,” reads Rogers’ June 28 intervention. “This would enable market forces to continue to drive expansion into the areas that are adjacent to areas already served, while applying scarce public funds to the areas that are unlikely to be served in the short to medium term.”
Xplornet Communications also highlighted the potential problem of seeing a repeat of the deferral account issue. It stressed that while the broadband fund could help to bridge the gap for communities without high speed services, providing money to companies in areas where competitive market forces operate would essentially lead to a waste of the subsidy. Xplornet’s service footprint, of course, is essentially country-wide.
The deferral account exercise was a case in point where some competitive network expansions were put on hold while it subsidized network overbuilds.
“This experience underlines the need to ensure that the Commission’s new funding mechanism applies only in areas where private capital is not being deployed or likely to be deployed.” – Xplornet
“This experience underlines the need to ensure that the Commission’s new funding mechanism applies only in areas where private capital is not being deployed or likely to be deployed over the next five years to create networks that meet the Commission’s level of basic service,” said Xplornet.
Smaller providers, including the Canadian Network Operators Consortium (CNOC) and the Canadian Cable Systems Alliance (CCSA), questioned the merit of not allowing adjacent communities or those near transport facilities to receive funding. The CCSA, in a joint submission with the Independent Telecommunications Providers Association (ITPA), disagreed with suggestions that communities which are close to major centres or network points of presence don’t need funding because the networks will eventually get built. If this was the case, then broadband networks would already be there.
It highlighted the "doughnut hole" concept of communities close to major centres with broadband that don’t get it because big incumbents just won’t build there. Without a subsidy, the economic case to build those networks to serve the 'holes' can’t be made.
“However, in the context of a subsidy program, such communities may represent the ‘low hanging fruit’ that will deliver the greatest results for each dollar of funding,” the two associations said. “CSSA/ITPA therefore recommends that great care be taken with regard to any assumption that a hexagon, any part of which has broadband service at 50 Mbps, is a ‘served’ hexagon and, therefore, ineligible for funding.” (The hexagon refers to the standard Innovation, Science and Economic Development, or ISED, broadband mapping shape.)
As can be expected there are differences of opinion on what types of networks this new CRTC fund should support. As an example, Telus argued in its submission that the Commission fund should be limited to last mile access. This, the company adds, would dovetail nicely with ISED’s Connect to Innovate program which is focused on backbone infrastructure.
Other interveners, such as Shaw Communications and SSi Micro, disagreed. They submitted that backbone facilities should get priority. Shaw added that by prioritizing transport networks, this would facilitate the connection of communities rather than focusing on households.
SSi stressed that transport networks have to include wholesale access.
“Remote communities will not benefit from choice or innovation, let alone proposals that help their residents to address the affordability, accessibility and digital literacy challenges they often face along with the availability gap, unless access providers have a right to connect to available backbone facilities on fair and reasonable terms. This of course applies with particular force to any backbone facilities that are funded with government support and the Commission’s approval,” the company stated.
Where most parties agree (of those submissions read by Cartt.ca) is that linking any CRTC funds to having already secured prior government funding is problematic. Bell Canada noted that while it’s not opposed to parties being able to use other government monies, making it a requirement is wrong.
“From a practical standpoint, making public funding an eligibility criterion would likely significantly curtail the number of eligible bids as well as delay the Commission's funding regime and its associated benefits for Canadians.” – Bell Canada
“From a practical standpoint, making public funding an eligibility criterion would likely significantly curtail the number of eligible bids as well as delay the Commission's funding regime and its associated benefits for Canadians,” said Bell.
The CCSA/ITPA described this as “the most troubling” element of the CRTC’s proposed regime. It implies that money from the CRTC’s new fund should be considered one of last resort when “funding available from all other sources is insufficient to render a project viable,” the two groups say. They add if a project meets the objective of extending the USO broadband requirement to a community, then it constitutes an appropriate use of the subsidy regardless of whether the applicant has received prior govt funding or not.
The Public Interest Advocacy Centre (PIAC) said the key missing element from the Commission’s proposed fund was affordability. In a joint submission with the National Pensioners Federation (NPF), the two groups argued that if there is a strict focus on the subsidy required in terms of weighting an application, the applicants will propose higher prices so as to require a lower subsidy.
Rather, “the National Broadband Fund should maximize the benefits it provides to the public. This means that significant weight must be given to the number of households being served, the price at which they are being served, and the increase in value of the service being provided.”
UPDATE: Replies to the interventions were originally due by July 26, however on July 24, the CRTC extended the deadline to August 25, 2017.
