The “Affordable Access Coalition” Phase 1 Intervention: Telecom Notice of Consultation CRTC 2015-134
Review of basic telecommunications services
E1. The following organizations are pleased to provide the Canadian Radio-television and Telecommunications Commission (the “Commission” or “CRTC”) with their first intervention in this important proceeding titled Review of basic telecommunications services:
• The Association of Community Organizations for Reform Now, Canada (“ACORN Canada”);
• The Consumers’ Association of Canada (“CAC”);
• The Council of Senior Citizens Organizations of British Columbia (“COSCO”);
• The National Pensioners Federation (“NPF”); and
• The Public Interest Advocacy Centre (“PIAC”)
— together the “Affordable Access Coalition” or “AAC”.
E2. The AAC wishes to be considered as an intervener in the proceeding, and requests to appear at the public hearing.
E3. Attached as Appendix “A” contains a summary of results from an Environics Research Group survey commissioned on behalf of the AAC. The telephone survey was conducted with 1,000 Canadians 18 years of age or over during the period of June 4-11, 2015 and covers a range of issues directly related to the questions posed in this proceeding.
E4. Attached as Appendix “B” is the report of Edgardo Sepulveda titled Funding Support for low-income Canadians and for broadband deployment (the “Sepulveda Report”). Mr. Sepulveda is an expert in universal service regimes.
E5. Attached as Appendix “C” is the report by PIAC, titled No Consumer Left Behind: A Canadian Affordability Framework for Communications Services in a Digital Age (January 2015).
E6. Attached as Appendix “D” is the AAC’s summary of recent and current federal and provincial funding for broadband access.
E7. Attached as Appendix “E” are the detailed results from the Environics survey.
E8. In TNC 2015-134, the Commission is examining “which telecommunications services Canadians require to participate meaningfully in the digital economy and the Commission’s role in ensuring the availability of affordable basic telecommunications services to all Canadians.”
E9. This proceeding is about the “basic” level of telecommunications service all Canadians can expect to have access to. But this proceeding is not about today, nor is it about the past. This proceeding really is about tomorrow.
E10. This proceeding is also about inclusiveness – including all Canadians in the digital economy through universal service. By definition “all Canadians” must include Canadians living in the North and outside of urban areas, and Canadians of all origins, ages and incomes.
E11. Given the complexity of the issues raised in this proceeding, the AAC has reduced its position to the following nine key positions.
Key Position 1. Broadband has become an essential telecommunications service. It is essential to individuals (of all ages), to households, to businesses, and to Canada’s competitive advantage. Yet, not all Canadians are able to connect: access and socio-economic barriers persist.
E12. The AAC does not believe there will be much debate over the proposition that broadband has become an essential service, if not the essential telecommunications service, from the perspective of all Canadians.
E13. Indeed, access to the Internet is gaining recognition as a human right.
E14. To underscore the point that broadband Internet service has become an essential telecommunications service, if not the essential telecommunications service, the AAC presents primary and secondary evidence to demonstrate how essential – how vital – broadband Internet is to all Canadians. From a human rights perspective to a national economic competitiveness standpoint, Canada must make universal broadband access a priority.
E15. The importance of Internet access to Canadians is borne out by the results of the Environics survey.
E16. It follows that if broadband has become an essential telecommunications service, if not the essential telecommunications service, then all Canadians should have access to at least a “basic” level of service. This is currently what Canadians expect of their telephone service.
Key Position 2. Not all Canadians are able to connect: access and socio-economic barriers persist.
E17. Access to broadband has two components: availability and affordability. If one cannot make the connection to the network, physically, no amount of money will solve that problem, whereas connection may be possible, but at an unaffordable level.
E18. The AAC’s research from consultation with coalition members, from the Environics survey, and from secondary sources, including Statistics Canada research, supports the finding that availability and affordability are ongoing barriers to Canadians.
E19. While the AAC expects the exact numbers to be a factual issue for determination as part of this proceeding, including the planned Let’s Talk Broadband phase, the AAC’s initial research suggests that there are persistent broadband Internet availability gaps in Canada.
E20. Furthermore, of the over 170 submissions by individuals filed to date in this proceeding, it is clear that many Canadians are unhappy with the status quo.
E21. Several themes emerge from the interventions of individuals.
(i) Canadians not being able to access the Internet at speeds they need;
(ii) Actual performance (speed) being much lower than advertised;
(iii) Large differences between speed in urban and rural areas; and
(iv) Large differences between price in urban and rural areas.
E22. There are problems with both availability and affordability, and broadband Internet access service gaps are correlated to income, as data from Statistics Canada suggests, with those in the lowest income deciles having the least access to telecommunications at home relative to other households. For example, whereas 82.5% of all households as access to the Internet at home, for example, only 50.3% of household in the lowest decile have access
Key Position 3. Market forces and targeted government funding are not solving the problem.
E23. The last time the Commission considered the BSO, in 2010, the Commission concluded that “market forces and targeted government funding will continue to drive the rollout and improvement of broadband Internet access services in rural and remote areas.”
E24. At the same time, the Commission indicated it would monitor the availability of broadband to all Canadians, and “review in the future the matter of funding mechanisms should market gaps persists.”
E25. The AAC’s primary and secondary research suggests that market forces and targeted government funding have not worked.
E26. First of all, the 5 Mbps target, may have been appropriate for 2013 but is likely is too low for 2015 and beyond. The AAC comes to this conclusion based on the legal test for “basic telecommunication service”, and the “50-80 rule” which considers a telecommunications service as “basic” for the purposes of determining required universal service if 50% of the population subscribes to a service, and 80% of those subscribers do so at given speed.
E27. Second, the AAC’s research and analysis indicates that the speeds required today by typical households range from 9 Mbps to 26 Mbps.
E28. Third, focusing on speed alone ignores the problem of affordability facing low-income Canadians.
E29. Fourth, other research shows that broadband availability issues persist across Canada, and in particular in northern and rural communities, even at the 5 Mbps level, let alone higher levels.
Key Position 4. Meanwhile, other jurisdictions have taken bold steps to connect their citizens and to address affordability barriers.
E30. Meanwhile, other jurisdictions have taken bold steps to connect all of their citizens, including setting ambitious broadband access goals. These countries recognize the importance of broadband for all citizens, and for their national competitiveness.
E31. The Canadian government, and the Commission, have recognised the importance of broadband to building up Canada’s competitive advantage. Yet there are signs at the macro level that Canada is falling behind.
E32. At the same time, some countries have also implemented measures to make telecommunication services more affordable, including the U.S., France and Spain.
E33. In the AAC’s view, bold action is necessary to ensure that all Canadian households have access to broadband Internet service at a speed that allows them to participate in the digital economy, and so that low-income Canadians can afford access to basic telecommunications service of a high quality.
Key Position 5. The Commission now has the opportunity and the duty to do the same.
E34. The Commission is required to exercise and perform its duties under the Telecommunications Act with a view to implementing these policy objectives. The objectives include facilitating the development of a telecommunications system that “serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions”; the rendering of “reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada”; “responding to the economic and social requirements of users of telecommunications services”; and contributing to protecting privacy. The objectives also include certain systemic goals for the telecommunications system, including enhancing the national and international competitiveness of the industry; promoting the primacy of Canadian ownership and control and the use of Canadian facilities; and promoting research and development and innovation.
E35. The Commission now has before it not just an important opportunity to ensure all Canadians have access to broadband Internet service and affordable telecommunications service, but a duty to do so under the mandate entrusted to in the Telecommunications Act.
Key Position 6. Typical Canadian households currently use and require anywhere from a 9 Mbps to a 26 Mbps connection, and demand and speeds are expected to continue to rise. According to the 50-80 rule, the “basic” level of broadband access today is at minimum 5 Mbps download speed, which the AAC expects will increase to 25 Mbps by 2010. The Commission should therefore set a goal of all Canadian households being able to access 25 Mbps broadband home Internet service by 2020 (the “25 Mbps by 2020” goal), subject to annual updates to the definition of “basic” broadband.
E36. The Affordable Access Coalition’s analysis of current household needs indicates that Canadian households currently use and require anywhere from 9 Mbps to 26 Mbps.
E37. The minimum “basic” requirement for Internet access speeds today (based on likely out of date 2013 data) is at least 5 Mbps per household, but the updated number is expected to be approximately 10 Mbps – double the 5 Mbps target set in the 2011 BSO. The AAC expects the “basic” level of broadband available and used by most Canadians to be at least 25 Mbps by 2020, and therefore the Commission should set that as the universal service objective for broadband, subject to yearly updates.
Key Position 7. To support the “25 Mbps by 2020” goal, the Commission should establish a new funding mechanism, financed through the existing but modified National Contribution Fund, to supplement the current residential local wireline subsidy regime, which would continue to operate as is. The new Broadband Deployment Funding Mechanism would be to support broadband deployment. Funding, which would be capped annually, could be achieved through broadening the contribution-eligible “tax base” by including retail Internet and paging service revenues, and by returning the contribution rate to historic (2001-14) levels. The Broadband Deployment Funding Mechanism could be implemented beginning 2017.
E38. To support the goal of ensuring that all Canadians are able to have access to “basic” telecommunications services, and particularly broadband home Internet service, the AAC is proposing a new funding mechanism – the “Broadband Deployment Funding Mechanism”, as developed by Edgardo Sepulveda, an expert in universal service regimes.
E39. The new Broadband Deployment Funding Mechanism could be funded through an increase to contributions to the National Contribution Fund (“NCF”), which is reasonable given that the current NCF is small and has decreased significantly in recent years, even as telecommunications service revenues have increased.
E40. The NCF contribution regime could be expanded to include revenues from certain currently exempted services (retail Internet and paging), and by returning the contribution rate to historic levels.
E41. The total annual cost of implementing the current subsidy regime, the base Affordability Funding Mechanism plus the Broadband Deployment Funding Mechanism would return the NCF to the historical average for the 2001-2014 period, 0.74% of telecommunications services revenues. The total annual cost with the ambitious Affordability Funding Mechanism would increase the NCF to 1.42% of telecommunications services revenues, approximately equal to the size of the USA Universal Service Fund over the 2001-14 period.
E42. Doing so will enable to the Commission to direct funding to priority areas that are not provided the 25 Mbps by 2020 goal via market forces or targeted government funding.
Key Position 8. To support affordability, the Commission should implement an affordability subsidy to support access by low-income households to the telecommunications services of their choosing from the service provider of their choosing. The AAC proposes, based on approaches taken elsewhere, an “Affordability Funding Mechanism”, financed through the existing but modified NCF, and capped annually. The AAC models a “baseline” approach ($11 per month for up to 1.34 million households) and an “ambitious” approach ($22 per month for up to 2.65 million households) based on comparisons to other jurisdictions. Like the Broadband Deployment Funding Mechanism, the Affordability Funding Mechanism could be implemented beginning 2017.
E43. To support affordability, which the AAC’s evidence indicates is a major barrier to accessing telecommunications services, the AAC recommends that the Commission adopt a low-income affordability subsidy presented in the Sepulveda Report – the “Affordability Funding Mechanism”.
E44. The Affordability Funding Mechanism would provide a monthly subsidy to low-income households which could be applied to any telecommunications service of their choosing, from any service provider of their choosing, thus reducing a major barrier and enhancing consumer control and choice.
E45. Like the new Broadband Deployment Funding Mechanism, the Affordability Funding Mechanism could be funded through an increase to contributions to the NCF, which is reasonable given that the current NCF is small and has decreased significantly in recent years, even as telecommunications service revenues have increased. This is depicted by the following chart from the Sepulveda Report.
E46. The AAC presents a “baseline” version of the Affordability Funding Mechanism, based on the comparative “average” of programs in other jurisdictions, and an “ambitious” version based on Mr. Sepulveda’s “best in class” assessment. The “baseline” and “ambitious” Affordability Funding Mechanisms differ by monthly subsidy amount, number of eligible households, and annual cost, with the “base” Affordability Funding Mechanism having a monthly subsidy of $11 available to about 1.34 million eligible households, for an annual capped cost of $70 million, and the “ambitious” version having a $22 subsidy to 2.65 million households and an annual capped cost of $410 million.
E47. The total annual cost of implementing the current subsidy regime, the “baseline” Affordability Funding Mechanism plus the Broadband Deployment Funding Mechanism would return the NCF to the historical average for the 2001-2014 period, 0.74% of telecommunications services revenues. The total annual cost with the “ambitious” Affordability Funding Mechanism would increase the NCF to 1.42% of telecommunications services revenues, approximately equal to the size of the USA Universal Service Fund over the 2001-2014 period.
E48. The total annual capped costs of the Affordability Funding Mechanism and Broadband Deployment Funding Mechanism are depicted below.
E49. The chart below compares the funding levels for the two new funding mechanisms (with both the “baseline” and “ambitious” proposals), relative to historical contribution rates, and relative to industry spending on universal service in the United States.
E50. The AAC believes that the Commission should, in fulfilment of its mandate under the Telecommunications Act, adopt the “ambitious” Affordability Funding Mechanism.
E51. Like the Broadband Deployment Funding Mechanism, the Affordability Funding Mechanism could be implemented beginning 2017.
Key Position 9. The Commission should monitor its decision by performing yearly progress checks, and initiating a proceeding if and when timely progress toward availability and affordability goals fails.
E52. To ensure that the Commission keeps up with the rapid pace of change, and to ensure Canadians are well-served by their telecommunications system, the AAC recommends that the Commission implement mechanisms to monitor the decisions which flow from TNC 2015-134, rather than rely solely on periodic reviews every five years.
E53. These key positions are expanded upon in response to the Commission’s consultation questions