FTTH rollout crucial for affordability in long-term: report

The deployment of fibre-to-the-premises (FTTP) and fibre-to-the-home (FTTH) networks will be an important step for improving affordability of communications services in the long-term, according to a report commissioned by the CRTC. “In the longer term, technological and business process innovations that reduce costs and improve quality appear to be critical for enhancing affordability of access to products and services that are now considered necessities,” the report read. Entitled “Affordability of Communications Services,” the report, which was completed in March by three university researchers and made public this past weekend, outlines strategies for both the public and private sectors on how to enhance affordability for telecommunications and broadcasting services. It said that affordable access to “high-capacity and high-quality services…enables low-income users to reduce their spending on legacy voice and broadcast services,” which helps reduce expenditures. The report comes after another released earlier this month that found Canada was near the bottom of the Organization for Co-operation and Economic Development countries with fibre connections, despite making good progress. It also follows a report released last week by the CRTC, which found Canadians were paying some of the highest prices for wireless and broadband Internet services among the G7 countries and Australia. “You’re seeing that pricing pressure on affordability,” Reza Rajabiun, Ryerson University research fellow and co-author of the affordability report, said of Canada’s high broadband costs in a phone interview. Among the barriers to affordability highlighted in the report is the current lack of price discrimination at the lower segments of the market. “Given the decline in price variation of low-cost connectivity options available for low-income Canadians, as well as the rapid growth in expenditures on connectivity by this group over the past few years, we do not find it surprising that affordability has become an issue for many stakeholders and policymakers," it said, adding that demand for an increasingly essential service becomes “price-inelastic,” and the transition to fibre is important for both affordability and service quality in the long-term. “When you don’t have that fibre, people with high demand will stay on the legacy platform, so they reduce the service quality for everyone else,” Rajabiun said. He added that the result is speed tiering — also known as smart pricing — that causes segmentation in the market and “has a negative impact on affordability.” One reason for the lack of fibre in Canada is that the incumbents don’t have an incentive to do it, according to the report, which it says can be an obstacle to affordability. “Limited incentives to deploy FTTP networks in Canada are likely to pose a major barrier to making broadband usage more affordable on a quality-adjusted basis,” the report read. Rajabiun said that the big operators are also mobile operators and mobile is “much less capital intensive than fixed, so for them, if they want to keep their revenues at a specific level, it is better to put more capital into the mobile side.” The trade-off there, however, is that not entering the fixed market can cost the incumbents market share, he added. For there to be widespread adoption of fibre, there must be a change in the providers’ business model, Rajabiun said. “For incumbents, there is a term for it called ‘sweating the copper.’ So you get a free cash flow from the legacy platform and trying to change that will have an impact on your business model and strategy, so it’s an adjustment process,” he said. “Unless there are competitive pressures or policy pressures, there is little incentive for the incumbent operators to change their behaviour.” Over the past few of months, service providers have been rolling out FTTH and FTTP projects across the country. Last month, the federal and Ontario governments pledged $180 million for a new FTTH network; in that same month, Telus Corp. pumped $111 million into its FTTP network in Montreal; and Saskatchewan Telecommunications Holding Corp. also began connecting customers to its FTTH network in Weyburn and Estevan. But Rajabiun said the rate of fibre expansion outside of Atlantic Canada is “almost negligible. When you look at the statistics, the penetration rates and diffusion rates remain very low.” The public sector strategies for affordability highlighted in the report include many which were raised during the CRTC’s basic services hearing in April, including public access, tax credits, vouchers, infrastructure subsidies, competition policy and the easing of foreign ownership restrictions. Private sector strategies outlined include reducing prices, charging different prices for the same service and providing discounts on unbundled service packages. Rajabiun said the CRTC’s decision mandating wholesale access to FTTH networks — which was recently upheld by the federal cabinet — could provide some push toward affordability in the longer term, but only time will tell. “If, say, the new wholesale rules are effective in promoting fibre deployment incentives, then that will have a longer-term impact,” he said. “But in the shorter term, it’s very difficult to see what can be done with it.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

FTTH rollout crucial for affordability in long-term: report

News | August 16, 2016

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FTTH rollout crucial for affordability in long-term: report

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