Federal budget announces $305 million for rural and northern broadband

Blog, Disruption, Roland Renner

The federal budget provides for $305 million for rural and northern broadband access.  There are no details yet on the structure of the program.  How this is structured and delivered will be key to its success.  There are a wide range of options of what to subsidize that include:

  • Local distribution infrastructure
  • Satellite space segment capacity
  • Satellite earth stations
  • Extending fibre transport routes

Who gets access to the funds will also be important.  Options include:

  • the consumer
  • Northwestel, the incumbent telco, and Telesat the incumbent satellite operator
  • Competitors to Northwestel like SSi Micro, Ice Wireless and Iristel
  • Community associations, aboriginal band councils and partnerships

All this is playing out in a rapidly changing technological environment.  Traditional landline based local telephone service provided by Northwestel will be replaced by fixed wireless technology in small remote communities.  The government of the Northwest Territories is funding the Mackenzie Valley Fibre Line.

Revenue will never cover the cost of providing service in most of the targeted communities.  But new technology and competition is driving the cost down and potential service levels up.  It is essential that the funds be distributed in a way that is competitively neutral so that competition can help deliver better service for northern consumers.

Satellite technology, as well as fibre, is also undergoing technical changes and cost reductions.  Hunter Communications Canada is bringing new Ku-band capacity to Canada with a hosted payload on Satmex 7.  Teleport operators like Juch-Tech have used AMC 9 for an eastern Arctic customer, challenging Telesat’s de facto monopoly of northern service. Xplornet has provided Ka-band satellite access to residential customers.

The CRTC has launched an inquiry to determine the state of satellite services in the country which is the only way to reach many of these customers.  The CRTC will determine a subsidy regime in its subsequent digital economy proceeding.  Since opening up the north for local competition in 2012, the Commission has wrestled with the need for subsidies.  How to fund extension of services without enabling the incumbents to crush the nascent competition and lapsing back into a monopoly situation.  Will the structure of the program incorporate the CRTC’s findings?  Stakeholders have been crying out for coordination of financial support programs for years.

$305 million over five years is not a great deal of money to bring rural and northern Canadians the opportunity to participate in the internet economy.  But the government should structure the program to harness the power of competition and consumer choice to get the best value for that money.

N.B.  The author consults for several of the companies mentioned above.