OTTAWA-GATINEAU – The CRTC has set a speed target for broadband Internet and has maintained the obligation for telephone companies to provide basic home telephone service in what’s widely known as its ‘obligation to serve’ decision released late Tuesday.
In what will surely be a surprise to the country’s telephone companies, the Commission mandated that all Canadians have access to broadband speeds of at least 5 Mbps for downloads and 1 Mbps for uploads by the end of 2015.
“A well-developed broadband infrastructure will serve as a gateway for Canadians to participate in the digital economy,” said CRTC chairman Konrad von Finckenstein, in a statement. “The target we have established is the minimum speed we believe consumers in rural and remote areas should be able to receive. The industry is actively responding to market demands and we have every confidence in its ability to meet the target.”
The CRTC said that it anticipates that this target will be reached “through a combination of private investments, targeted government funding and public-private partnerships”, and promised to “closely monitor the industry’s progress”.
With regards to local telephone service, large telcos in deregulated areas must continue to offer residential subscribers a basic telephone line at “a reasonable rate”, though the Commission granted them the flexibility to gradually increase rates for this service over the next three years to a maximum of $30 per month. Starting on June 1, 2014, the price ceiling will be increased annually by the rate of inflation.
In regulated areas, the CRTC maintained the obligation to provide basic residential telephone service and to meet the basic service objective, meaning most incumbent telephone companies will continue to receive a subsidy to ensure basic telephone service is offered to all consumers in rural and remote areas and to help offset costs.
The CRTC also announced plans to phase-in a new formula over the next three years designed to reduce subsidies available to telcos in regulated areas. To offset lost subsidies, companies will have the option of gradually raising rates to a maximum of $30 per month by 2013, the decision continued.
“Some companies in rural and remote areas charge their customers much less than what it actually costs them to provide this service and, as a result, their rates are lower than in urban areas”, von Finckenstein continued. “The new price ceiling will make for a more consistent and reasonable rate across Canada and reduce the reliance on subsidies.”
In order to encourage competition and consumer choice for Canadians in rural and remote areas, the CRTC said that it will maintain its existing framework for competitors wishing to enter territories served exclusively by smaller telephone companies.
To ensure that the smaller companies are able to provide "reasonable access" to residential telephone service, the CRTC ruled that:
– smaller telephone companies will continue to receive subsidies for their subscribers until competitors can offer service to 75% of the market;
– smaller telephone companies will be able to claim half of the subsidy they would normally receive for subscribers that switch to a competitor during the first three years of competition; and
– new entrants will be required to pay the start-up costs in markets where the smaller telephone company has fewer than 3,000 subscribers.
Start-up costs can include those associated with ensuring that consumers are able to keep the same telephone number when changing providers (number portability) or connecting the competitor’s network with that of the smaller telephone company.
Commissioner Suzanne Lamarre disagreed with one aspect of the proposed regulatory regime for small independent local exchange carriers (ILECs).
“I believe that the obligation for competitors to reimburse small ILECs for local competition start-up costs should apply regardless of how many subscribers the small ILEC has”, she wrote in a dissenting opinion. “The distinction established by the majority … between small ILECs serving 3,000 or fewer NAS subscribers and those serving more than 3,000 is arbitrary and unjustified, in my opinion, because it is not based on relevant factors that could possibly distinguish the former from the latter.”
While supporting the idea that small companies serving 3,000 or fewer subscribers should recover local competition start-up costs within their respective territories, Commissioner Lamarre said that creating “a false distinction” between two classes of small ILECs to avoid extending the competitors’ obligation to include all small ILECs will discourage them from expanding their territories and their client bases. This, in turn, will contribute to the creation of two types of citizens, she continued – one, located in the more densely populated areas that will benefit from competition, and the second, located in the outlying areas, that will be forced to “finance competition for the first”.
