Federal Government must direct the CRTC to mandate universal FTTP and LTE by 2030

The CRTC mandate, coordinate and subsidize all wireline facilities-based providers to deliver universal Fibre-to-the-Premises (FTTP) and mobile facilities-based providers to deliver Long-Term Evolution (LTE) connectivity by 2030, including: Incumbent Local Exchange Carriers (ILECs), Small Incumbent Local Exchange Carriers (SILECs), cable companies, non-dominant carriers and other facilities-based Telecom Service Providers (TSPs).

We don’t need to reinvent the wheel

Broadband Internet infrastructure is a natural monopoly like telephone, water and electricity so it must be operated as a public utility. In 1916 telephone service in Canada developed as a natural monopoly. By 1920, coast-to-coast telephone service was possible, and thereafter most local telephone systems were upgraded to long-distance standards.[i]

The universal service mandate

Historically, the policy of universal service has governed the telephone network and essential services such as electricity and water; as well as communications services such as television and radio.  The universal service mandate contributed to their widespread availability and affordability.[ii] The fact that 99+% of Canadians have access to these services attests to the success of the mandated universal service approach given the geographic and demographic challenges of serving the entire population of our vast country.  So, these challenges are not unique to broadband infrastructure and we have proven these challenges can be overcome.

Conversely, one could argue that without the universal service mandate people living in rural and remote locations and low-income urban areas would likely not have telephone service today based on the urban-centric, predatory and anti-competitive practices of “The Bell Telephone Company of Canada,” as it was known prior to regulation, as documented by Robert E. Babe, “Control of Telephones: The Canadian Experience”[iii]

“Prior to regulation and a universal service mandate, “between 1892 and 1905 in Ontario alone some 83 independent [telephone companies] came into existence (Grindlay. 1974: 254-305). They generally relied on U.S. manufacturers for equipment since Bell and its manufacturing subsidiary, The Northern Electric and Manufacturing Company, were less than enthusiastic purveyors of telecommunications equipment to these interlopers. Indeed, entry by independents gave rise to a flurry of anticompetitive activity on the part of Bell, carefully designed to stall and, if possible, reverse growth of the insurgents. In the case of multiparty rural lines, for example, Bell often granted urban interconnections but only on condition that Bell be afforded control over all further connections; sometimes Bell interconnected with one company to eliminate connections for others, a ploy to put the latter out of business (House of Commons, 1905: 238-241). Predatory pricing was well-honed as an anticompetitive tactic also. In communities like Sherbrooke, Peterborough, Port Arthur and Fort William free service served admirably to harass competitors (House of Commons 1905: 77-98, 680); in Montreal too, prices were shaved to rock bottom as a competitive response.”[iv]  This of course sounds eerily familiar to the present situation with broadband, where non-dominant telecoms and resellers have provided countless examples of ILEC anti-competitive price and non-price behaviours to the CRTC.

“Between 1906 and 1915 some 676 independent telephone companies were established in Ontario [largely in rural areas where Bell refused to provide service]. Growth was so dramatic that by 1915 independents accounted for nearly one third of Ontario's telephones, a level never since equaled, (Rural Telephone Committee, 1953: Exhibit 2). Despite regulation, Bell succeeded in halting, then reversing, the growth of independents, first through long distance interconnection and pricing policies and then subsequently through local exchange pricing policies, ultimately absorbing most of them. Indeed, Bell bought up 160 Ontario independents between 1950 and 1959 and an additional 218 between 1960 and 1975 (Ontario Telephone Service Commission, 1977: 186). These takeovers are explained by noting pricing tactics employed by the carrier [to undermine the viability of independents] and the sequence of rulings handed down by Bell's federal regulator.”[v]

These behaviours are similar to the anti-competitive price[vi] and non-price behaviours[vii] exhibited routinely, by ILECs, since 1993 through to today, with regard to the deployment and operation of broadband infrastructure.[viii] Very recent evidence of this behaviour is the letter written by Chris Seidl, Executive Director, CRTC, Telecommunications Sector to TSPs regarding, “High speed access process changes as a result of the COVID-19 pandemic.”[ix]  In the letter, Seidl states that, “…wholesale HSA service providers are unilaterally changing regulated processes or processes that are necessary to deliver regulated services. [HSA retail providers] noticed a significant increase in failed orders where end-users are not able to get services from competitors, but they may be able to get Internet services from the underlying wholesale service provider, and increases in the time it takes the latter to process their orders. TekSavvy and CNOC are further concerned that the wholesale service providers may not be applying the same process changes to their retail Internet services compared to changes imposed on wholesale customers.”  These anti-competitive behaviours are right out of the playbook of Bell and other ILECs developed in the 20th century as described earlier in this section. So, the fact of the matter is, these anti-competitive behaviours have been employed for over 100 years. The question is, what are regulators and legislators going to do about it? If the dire consequences of these behaviours employed during the most serious threat to our citizens’ health and our nation’s economy isn’t enough to motivate regulators and legislators to take meaningful action, what is it going to take?  

As well, like the history of the independent telephone companies, Bell and other ILECs have been very successful at buying up insurgent facilities-based broadband operators and competitive local exchange carriers to stifle competition since 1993. So, history continues repeated itself.  The BTLR Panel concluded, “In this context, a new framework must safeguard against anti-competitive behaviour that erects barriers to innovation or compromises affordability to Canadians, while ensuring the safety and security of telecommunications infrastructure.”[x] As a first priority, it recommend that a universal service mandate be enshrined in the Telecommunications Act. The BTLR Panel said, “affordable universal access to broadband is a must. It enables all Canadians to participate equally in society and to access Canadian choices and the best of content from around the world.”[xi]

Middleton said, “There is no requirement that incumbent broadband providers in Canada functionally separate their wholesale and retail operations. Evidence presented to the CRTC in a variety of proceedings over many years suggests that incumbents do discriminate against the retail providers to whom they sell network access, indicating that a functional separation regime could benefit the competitive retail providers and their customers. Documented forms of discrimination include price discrimination (e.g. where the incumbent telco or cableco sets their wholesale price for a service higher than the price they charge their own customers for the same service) and non-price discrimination (where retail providers cannot provide the same services to their customers as offered by the incumbent provider).”[xii]

The dig-once policy mandate

The CRTC, coordinating with federal, provincial and municipal governments, mandate a dig-once policy which includes a set of standards for the construction of duct infrastructure necessary for the installation of fibre optic cable and the requirement to install the conduit infrastructure based on the dig-once standards.  The conduit may be accessed by municipalities, land developers, telecom service providers and other entities to construct FTTP connectivity.  The policy would apply for all new roads construction projects, or where existing roads are being remediated and other municipal rights-of-way as required.  The objectives are to make it easier, faster, and less expensive to deploy fibre optic connectivity throughout the nation.  Canada does not need to reinvent the wheel, as there are many examples around the world of the dig-once policy being an effective tool to accelerate the efficient deployment of FTTP.[xiii]

Combined with a universal service mandate and taxpayer and ratepayer subsidies, it is expected that this dig-once strategy will yield the benefits of fibre optic connectivity to all rural and low-income residents and rural small businesses sooner than it would otherwise occur through the facilities-based competition regime.

Installing FTTP infrastructure is expensive. The primary reason for not building FTTP networks in Canada's big provinces is cost. FTTP installation costs per subscriber are typically in the $1,000 to $1,500 range.[xiv] A US Federal Highway Administration report detailed that up to 90 percent of this cost was tied up in the process of actually digging up roadways, not the fibre lines themselves.[xv]

ISED estimated the cost to achieve ubiquitous FTTP would be $40 - $50 billion.[xvi]  If dig once is implemented nationally, it could provide between $36 - $45 billion in savings, bringing the estimated total cost to deploy last-mile FTTP down to $4 - $5 billion.

Conclusion on the universal service mandate and dig-once policy mandate

Therefore, the universal service mandate and subsidy regime was very successful at achieving universal telephone service.  Following this proven model in a similar fashion, with a universal service mandate for FTTP and LTE to support basic service mandate of 1/1 Gbps, would guarantee every Canadian household and business equal access to the Internet. Coupled with funding subsidies, the universal FTTP and LTE mandate would ensure ubiquitous and equitable access to world-leading Internet services for every rural, remote and low income urban Canadian household and businesses in these areas. 

The universal service mandate must be backed up with strict regulation and enforcement to eliminate price and non-price anti-competitive behaviours from end-to-end on facilities-based networks of ILECs.  As reported in the Financial Post on January 31, 2020, the BTLR Report, “suggested that the regulator should be much more active in regulating all sectors of telecommunications. The authors noted that the CRTC has relied heavily on its “forbearance” option to essentially opt to not use regulatory powers it has been given by the law.  The Financial Post, citing the report “Today, as a result of CRTC forbearance orders, no widely used retail telecommunications services remain subject to rate regulation outside remote regions,” the BTLR said. “The CRTC has estimated that, since 2013, 96 per cent of telecommunications revenues were generated from forborne services.”  The BTLR recommended a different approach, where the CRTC would be encouraged to regulate some part of every consumer telecom service, either at the retail level, or further upstream. It called for the Telecommunications Act be revised such that “the CRTC must either mandate supply of related wholesale inputs or explain why it is unnecessary or inappropriate to do so” as a condition of forbearance from rate regulation.

To reduce the regulatory and enforcement burden on the CRTC and TCT, structural separation between wholesale and retail providers, from transport through premises, is recommended, as structural separation eliminates the inherent conflict of interest between wholesale and retail services of vertically integrated TSPs.   Wholesale access regulation would be based on the principles of open-access[xvii] and carrier-neutrality,[xviii] which would lead to more competition, greater consumer choices and lower rates for subscribers. 

The universal service mandate and subsidy regime combined with a national dig-once policy mandate would accelerate the deployment of FTTP dramatically.

[i] https://www.thecanadianencyclopedia.ca/en/article/telecommunications

[ii] Control of Telephones: The Canadian Experience, Robert E. Babe, University of Ottawa, page 17

[iii] Control of Telephones: The Canadian Experience, Robert E. Babe, University of Ottawa, page 17

[iv] Control of Telephones: The Canadian Experience, Robert E. Babe, University of Ottawa, page 18

[v] Control of Telephones: The Canadian Experience, Robert E. Babe, University of Ottawa, page 18

[vi] https://crtc.gc.ca/eng/archive/2019/2019-232.htm

[vii] https://openmedia.org/en/press/concerned-canadian-reveals-bell%E2%80%99s-anti-competitive-practices-1

[viii] https://business.financialpost.com/telecom/teksavvy-complains-about-data-omitted-from-annual-crtc-report-on-industry-trends-2

[ix] https://crtc.gc.ca/eng/archive/2020/lt200422.htm

[x] https://www.ic.gc.ca/eic/site/110.nsf/vwapj/BTLR_Eng-V3.pdf/$file/BTLR_Eng-V3.pdf, page 10.

[xi] https://www.ic.gc.ca/eic/site/110.nsf/vwapj/BTLR_Eng-V3.pdf/$file/BTLR_Eng-V3.pdf, page 14.

[xii] http://www.broadbandresearch.ca/ourresearch/Middleton_separation.pdf, page 3.

[xiii] https://broadbandnow.com/report/dig-once-digital-divide/

[xiv] https://www.theglobeandmail.com/technology/gadgets-and-gear/with-fibre-internet-the-future-is-here-but-not-for-most-canadians/article4255358/

[xv] https://www.fhwa.dot.gov/policy/otps/policy_brief_dig_once.pdf/

[xvi] https://www.ic.gc.ca/eic/site/110.nsf/vwapj/BTLR_Eng-V3.pdf/$file/BTLR_Eng-V3.pdf, page 15.

[xvii] https://muninetworks.org/content/open-access

[xviii] http://www.icf-canada.com/wp-content/uploads/2011/09/Broadband-the-Essential-Utility.pdf, page 5