Shaw says government should invest in satellite broadband to narrow the digital divide

OTTAWA—The government should invest more heavily in next-generation satellite technology to provide broadband Internet access to remote areas, Ken Stein, senior vice-president of corporate and regulatory affairs with Shaw Communications Inc., told the House of Commons Standing Committee on Industry, Science and Technology, Thursday. “If the government really wanted to do something in this area, one of the things they could do is to invest in a Ka band satellite capability to develop high-speed Internet services in remote areas,” Stein told the committee. Stein said the investment could reach hundreds of millions of dollars, or even billions, but that it would go a long way to closing the rural and urban broadband divide. By the end of 2012, wireless broadband provider Barrett Xplore Inc. is expected to have capacity on five satellites operating on the Ka band, a common band for Internet service. The satellites will offer 10 Mbps broadband Internet to residential customers and up to 25 Mbps for businesses. “When you’re looking at satellite you’re talking about incredibly large amounts of investment upfront,” Mark Goldberg, a telecommunications consultant at Mark H. Goldberg & Associates, told The Wire Report. “That’s the kind of thing that is almost calling out for government assistance, because otherwise you have the private sector completely taking on the risk, and you have to make sure there isn’t future potential for distortion in the marketplace." John Maduri, the CEO of Barrett Xplore, told The Wire Report he was happy to hear support for alternative forms of broadband Internet for rural Canadians. “Every country has a digital divide issue, and satellite is quickly being viewed as the go-to solution,” Maduri said. “This is really an historic juncture for rural Canada in that we will be able to bring a lot of capacity into the country, bring it in at a lower cost, and offer better quality solutions than currently exist in the market.” On July 30, 2009, the Conservative government announced an investment of $225 million over three years to extend and improve broadband coverage. The federal government closed a call for applications to the program on Oct. 23, 2009, after receiving 570 proposals. Industry Canada expects to announce successful applicants sometime this year, according to the Conservative government’s 2010 budget. Barrett Xplore was one of the applicants. Ken Engelhart, senior vice-president of regulatory affairs at Rogers Communications Inc., told the committee that the digital divide cannot be solved by new players in the wireless market, such as Wind Mobile and Mobilicity. The new entrants cannot be expected to provide service outside of large urban centres dues to significant costs, he said. “Globalive isn’t going to do anything for the rural areas,” Engelhart said. “They are honest about the fact that they are only going to provide service in the major urban areas. None of the new entrants will go to the rural areas.” Engelhart and Stein said the “revolution” in wireless broadband can help close the gap between rural and urban areas for speed, access and consumer pricing. The federal government has also proposed amendments in its budget implementation legislation, Bill C-9, so that satellite companies are no longer subject to foreign ownership restrictions. The bill also proposes to open the foreign ownership restrictions for carriers that own or operate only international submarine cable or satellite earth station transmission facilities. Right now, non-Canadian companies can offer satellite services to Canadian companies seeking to provide television, radio, telephone or broadband satellite products. But foreign companies cannot obtain spectrum licenses to launch and operate satellites in Canadian orbital slots, or provide satellite-based services, such as broadband, to Canadians through direct-to-home technology. At Thursday’s committee hearing, Canada’s telecommunications and cable incumbents also said they do not want to be left behind in the government’s pledge to open up the telecommunications market to more foreign capital and competition. “If you are going to change the foreign ownership rules for telecommunications, we think it only makes sense to change rules for cable television at the same time,” Engelhart said. “Telecommunications carriers and cable television companies are increasingly offering the same services. It makes no sense to allow foreign ownership for telecommunications and not allow it for cable.” In 2008, the Competition Policy Review Panel recommended opening the door to foreign investment for Canadian telecom companies with a market share of 10 per cent or less—but the more established players in telecom and broadcasting would have to wait five years before they were allowed to chase more foreign capital. Engelhart said the rules should apply equally across the board. “If liberalization of foreign ownership rules make sense, it makes sense for all players,” he said. Michael Hennessy, senior vice-president of regulatory and government affairs with Telus Corp., agreed with Engelhart, telling the committee that all carriers must be “able to benefit from liberalization.” Stein said convergence has made distinctions between telecommunications and cable meaningless. “In this converged environment, it is unacceptable to lift ownership restrictions in only one sector, or for the benefit of only one group of competitors,” he said. “Such an approach will inappropriately distort the market and provide certain competitors with a significant and unfair advantage.” Engelhart said only programming services like television and radio broadcasters require foreign investment limitations to protect Canadian culture. He suggested that the Broadcasting Act could be amended to say that the cable carriers can be foreign owned but not broadcasters or content providers. On Tuesday, Konrad von Finckenstein, chairman of the CRTC, told the committee that Canada should have a single statute to cover telecom, broadcasting and radiocommunications. Marc Garneau, the Liberal industry critic, asked Thursday’s witnesses about the suggestion. “I’m not a fan of amalgamating the three acts,” Engelhart said. “The purpose of telecommunications legislation is really to regulate until such time as market forces can take over. The purpose of broadcasting or Canadian content regulation is to make sure that market forces never take over.” Engelhart said the statutes serve different purposes, and he does not see the value of combining them. Mirko Bibic, Bell Canada’s senior vice-president of regulatory and government affairs, told the committee Thursday that he supports von Finckenstein’s suggestion Tuesday to increase the limit on direct foreign investment from 20 per cent to 49 per cent. But Bibic said it is important maintain Canadian “control in fact” of companies. Chris Peirce, chief regulatory officer with MTS Allstream Inc., told the committee that the current restrictions on foreign investment in the telecommunications sector are “counterproductive.” He said foreign investment restrictions should be lifted for carriage infrastructure. “The government can and should lift the foreign investment restrictions related to this carriage while retaining the ability to regulate content, and indeed continue, if necessary, to restrict investment in broadcasters and programming licensees,” Peirce said. jmigneault@thewirereport.ca

Shaw says government should invest in satellite broadband to narrow the digital divide

Broadcast | April 15, 2010

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