GATINEAU – The CRTC’s proposal to include broadband as part of the basic service objective (BSO) for telcos is getting lukewarm support, at best. The Commission proposed the idea in a broad consultation on a variety of telecom matters, referred to as the “Obligation to Serve” proceeding.
MTS Allstream Inc. and the Public Interest Advocacy Centre (PIAC) are two that have said making broadband part of basic service would represent a logical extension of the current regime. Presently the BSO only applies to local voice services.
“Including broadband access in the Commission’s universal service objective would also recognize the fundamental role that widespread deployment of broadband infrastructure plays in the economic and social development of the nation,” MTS tells the CRTC in its submission on the proceeding that will get under way October in Timmins, Ont.
But the Manitoba incumbent telco says a broadband basic service objective (BBSO) shouldn’t be imposed in forborne (competitive) regions as this would hurt the ILECs. “It would be unnecessary and indeed could ultimately be detrimental to continue to mandate such a service standard on only the incumbent telephone company,” notes the company.
PIAC, writing on behalf of the consumer groups, writes that Canada lacks a clear path to broadband for all Canadians and the BSO needs to be modernized to include broadband. “Broadband is available to and used by a majority of consumers but the lack of availability to a minority of consumers can result in social exclusion and public intervention is warranted,” the centre tells the Commission.
The consumer groups suggest that the CRTC look south of the border for advice on the parameters of a BBSO.
“To match universal broadband plans being rolled out in other countries and in particular the U.S., the Commission should mandate an actual speed target of 4 Mbps download/1 Mbps [upload] achievable by 2020 to all Canadians with an interim requirement of 2 Mbps/800 Kbps by 2015,” PIAC states in its comments.
The two have even proposed subsidy mechanisms for a BBSO.
MTS acknowledges that the costs to subsidize the rollout of broadband as part of a BSO would be enormous, noting the subsidy could range between $9 billion and $15 billion over an eight-to-10 year period or $900 million to $1.5 billion on an annual basis. The company suggests that a parallel subsidy similar to the current revenue-based contribution regime for local voice in high-cost serving areas (HCSAs) could get the job done.
To achieve the level of subsidy required for a BBSO, MTS says that a contribution rate of between 3.3% and 5.1% would be necessary, a significant increase over the 0.81% used in 2009. As well, revenues from retail Internet and wireless services would have to become contribution-eligible.
PIAC contracted John Todd of Elenchus Research Associates Inc. to design a subsidy for the BBSO. It would have two components: an access subsidy and a connection subsidy.
It would be a portable subsidy that is paid to all telecom service providers offering high speed Internet in high-cost, high-speed Internet serving areas (HCHSISAs) based on the number of customers they serve across all those areas. “
The goal would be to set the level of the connection subsidy at a level that is high enough to attract some degree of competition in the most attractive HCHSISAs over time,” Todd writes in its paper.
The cable companies argues in their submission that adopting a BBSO subsidy regime in a competitively neutral manner would be challenging because it runs the risk of duplicating private and public sector initiatives. They add that such a subsidy would be detrimental to competitive market forces that are already providing broadband.
“The role of the Commission in this ongoing process should be to support the public and private sector initiatives. This can best be achieved by streamlining regulations and promoting greater reliance on market forces,” state Cogeco Cable, Quebecor Media, Rogers Communications and Shaw Communications in a joint submission.
Bell Canada told the CRTC that if broadband available everywhere is determined to be a “desirable national policy”, then the government should use tax revenues to fund targeted subsidy programs.
“The rapid expansion of broadband availability to date, assisted by voluntary incentives such as government funding, demonstrates that market forces are getting the job done. This approach is clearly successful and should be continued. It is simply too early to conclude that any change in this approach is required,” Bell writes.
With respect to the obligation to serve, the large telcos and cable companies agree that it’s time for change. Where competition exists and markets have been forborne, the obligation to serve should be eliminated, they say.
As for Telus, it says the rationale for the obligation to serve in forborne markets, as elicited in Decision 99-16 “no longer reflects reality.
“In these exchanges, there are multiple providers and local exchange service has been declared to be subject to competition sufficient to protect the interests of users,” the company writes.
Telus acknowledges that maintaining the obligation to serve in non-forborne markets may have to remain, but notes that all providers must be treated in the same way. “The obligation can no longer be uniquely imposed on the incumbent telephone companies, given that even in non-forborne exchanges there are other providers and other serving technologies.”
