The CRTC doesn’t need to meddle in Canada’s broadband market

The CRTC chose to release its much-awaited decision on basic telecommunications services a few days before Christmas. And for good reason: The decision came with a $750-million industry-sponsored “gift” to Canadians.

Recognizing that access to broadband services was “vital to Canada’s economic, social, democratic and cultural fabric,” the Canadian Radio-television and Telecommunications Commission set a goal of giving all Canadians access to download speeds of at least 50 megabits per second (Mbps) and upload speeds of at least 10 Mbps.

In an unusual show of restraint, the regulator steered clear of imposing retail-rate regulations on Internet service providers – as it had done with TV providers in 2015 with the imposition of a mandatory $25 a month “skinny basic” package. Although it did mandate that Internet service providers offer unlimited data options to their customers, it did not impose any pricing restrictions on such packages.

This led some observers to argue the targets were not ambitious enough, including Michael Geist in this newspaper in December.

We think on the contrary that Canada’s broadband market is already very healthy and competitive, and does not require additional interventions on the part of the CRTC. Its decision to create a new funding mechanism for the development of broadband in rural and remote areas is yet another example of its central-planning mindset.

The commission itself admits that Canada has a robust broadband market. About 96 per cent of Canadian households have access to download speeds of 5 Mbps, which the CRTC has long considered sufficient to participate in the digital economy. Furthermore, 82 per cent of Canadians already have access to the CRTC’s new aspirational target speed of 50 Mbps.

In terms of average broadband download speed, a survey recently carried out by Akamai ranked Canada 13th among 29 Organization for Economic Co-operation and Development countries in 2015. These results are impressive – particularly for a country where the costs of network deployment are so high due to low population density.

It is true that certain regions of the country remain underserved or do not have the same network speeds as those of big urban centres. It is also true that broadband costs in remote areas tend to be higher than those in urban areas. But does this mean that the creation of a new CRTC funding mechanism is necessary to bridge the digital divide?

Thanks to the competitive efforts of Canada’s Internet providers, billions of dollars are being invested in next-generation broadband networks, including in satellite technologies able to cover every underserved region of the country. One market player, Xplornet, launched a new satellite a few weeks ago and anticipates that it will offer 25 Mbps broadband service everywhere in Canada by the end of 2017.

Furthermore, there already exists a plethora of government programs aimed at funding the deployment of high-speed infrastructure in underserved areas. The federal government recently announced its Connect to Innovate program, a $500-million rural-broadband program that will run until 2021. This follows two earlier programs launched by the previous government, which represented $530-million in broadband investments. The Quebec government also announced a similar $100-million program in December.

Why would the CRTC enter the broadband financing business when market players are already investing billions in new networks, and targeted government programs are helping out at the margins? Canadians should not fool themselves by thinking that the CRTC’s decision is about boosting broadband adoption and helping consumers. Rather, it is about protecting the CRTC’s existence at a time where it is becoming increasingly obsolete.

In a world where new technologies are emerging at lightning speed and competition among various market players and market platforms has never been stronger, one should ask whether the existence of a regulator created during the era of natural monopolies is still warranted.

At a time where Canadians are returning unwanted holiday gifts to retailers across the country, they should do the same with the CRTC’s holiday gift: ask for the gift receipt and get their money back.

Paul Beaudry and Martin Masse are co-authors of The State of Competition in Canada’s Telecommunications Industry, published annually by the Montreal Economic Institute. The views reflected in this op-ed are their own.

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