MTS Allstream puts $7-billion price tag on universal broadband

Achieving complete national broadband coverage would cost the country $7 billion over 10 years, MTS Allstream told the CRTC Wednesday, adding that costs would most likely be passed onto urban and rural consumers. Wednesday marked day two of a two-week CRTC hearing reviewing access to basic telecommunications services. Among the top issues is whether providers should be required to offer broadband as a basic service. Speaking at the hearing in Timmins, Ont., MTS president Kelvin Shepherd told the commission that regulations are necessary to ensure every Canadian has access to broadband. “The ‘hands-free’ approach that some parties are suggesting will bridge the access gap—that basically either market forces or government funding, or both, will do the job on their own—simply won’t,” he said. MTS told the commission that it estimates about 700,000 Canadian households don’t have access to broadband Internet service—according to the commission’s definition of services of 1.5 Mbps or faster. Shepherd added that MTS estimates the government has provided $1.4 billion in public subsidies for broadband deployment over the last 10 years, an average of $140 million per year. But he said those numbers need to be bumped up to $700 million per year for 10 years to meet a universal access objective, with average speeds meeting a new broadband speed standard of about 4 Mbps. MTS based its projections on costs associated with plans that the incumbent phone companies, or incumbent local exchange carriers (ILECs), had suggested using deferral accounts to deploy DSL. “We realize this amount may cause ‘sticker shock.’ However, it is actually lower than the contribution requirement for the BSO in 2000 and the burden borne solely by the inter-exchange carrier or long distance carriers prior to 2000,” Shepherd said. In order to reach that level of funding, MTS suggested incumbent phone companies create a subsidy called the “service improvement fund.” The fund would be supplied in part by industry revenues associated with retail phone paging revenues (largely drawn from text messaging), and retail Internet revenues. MTS said this would increase the revenues eligible for the fund by 30 per cent. “Not only would doing so be consistent with the reality that these services are basic in nature, adding these revenues, which have been growing by nearly 20 per cent each year, would also provide $60 million in additional contributions per year at the current contribution rate of 0.73 per cent,” Shepherd said. Telecom companies currently contribute 0.73 per cent of their revenues into a local subsidy fund to pay for access to basic telecommunications in rural and remote areas. MTS also suggested that the contribution rate to the fund be increased to about 2.7 per cent—and that the local subsidy fund be used for broadband. “Not only do we think this is workable, we think it’s the only way universal broadband can be achieved in a way that ensures that rural and remote Canada can get up to speed, and stay up to speed, with the rest of Canada,” Shepherd said. When pressed by the commission on whether the rate increase would be passed on to consumers, MTS vice-president of regulatory affairs Teresa Griffin-Muir acknowledged the possibility. “I do think eventually the customer will cover the cost,” she said. Griffin-Muir said the increase would be likely passed on to urban and rural customers, but not as a fee that would show up as a separate charge on monthly bills. Instead the increase in rates would be spread over several services, including text messaging, she said. Mark Goldberg, head of telecom consultancy Mark H. Goldberg & Associates Inc., said in an interview that MTS’ proposal failed to consider those living in urban areas who can’t afford to have their broadband rates increased. “People who are income-challenged in Toronto, Ottawa, Montreal and Winnipeg are going to have their broadband go up by as much as two and a half per cent, pay an extra dollar a month, so that those … in rural areas can have broadband without having to pay a higher installation fee. Does that sound like a fair system?” he said. “In my view it’s an extremely patronizing view that says that just because you live in a remote area you need for everybody in an urban area to send you money to subsidize your service.” Goldberg said MTS’ suggestion that only ILECs can access the $700-million could put small Internet service providers, already operating in remote areas, out of business. “Give the $700 million to the big phone companies compete against anybody who happens to be there? … How’s the little guy supposed to compete?” he said. But industry observers who spoke to The Wire Report Wednesday said the $700-million a year figure is in the right ballpark. The Australian government has committed $43 billion AU to a national broadband plan that would connect 93 per cent of the country to fibre-to-the-home broadband, delivering speeds up to 100 Mbps. The U.S. government has committed $15.5 billion over the next 10 years as part of its National Broadband Plan to connect every American citizen to 4 Mbps broadband. SaskTel told the commission Wednesday it shouldn’t mandate the provision of broadband service as a basic service, but should instead establish funding mechanisms to incentivize deployment. “The Government of Canada’s previous approach of providing one-time funding targeted to specific areas has not resulted in steady growth of broadband in rural areas,” SaskTel president and CEO Ron Styles told the commission. “SaskTel suggests that any program to support rural markets would build upon and extend existing telecommunications infrastructure.” SaskTel added that MTS’ suggestion to increase the contribution rate to 2.7 per cent is “on the high side.” Bell Aliant told the commission Tuesday it shouldn’t extend its basic service definition to cover broadband. The company argued that regulatory intervention would increase ILECs’ capital spending, ultimately disrupting market forces. Bell Canada and Telus Communications Co. have previously argued in written submissions to the commission there is a sufficient level of broadband access across the country. Barrett Xplore Inc. also told the commission Tuesday it doesn’t support a regulatory framework extending broadband coverage. The company argued its satellite network already covers 100 per cent of the country. EastLink also told the commission Wednesday it opposes a regulatory regime that would include broadband as a basic service, as well as a subsidization regime for its deployment. kfournier@thewirereport.ca

MTS Allstream puts $7-billion price tag on universal broadband

News | October 27, 2010

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