ISPs as Providers of Equitable Connectivity

Recently in the news — Canadians love connectivity and they want it cheaper. We can see this either as an indicator of increasing competition in the sector (thanks to Freedom Mobile), or a sign of how high rates and data caps make Canadians scramble for a deal when it’s offered.

The focus now is on mobile plans, but we’re not having the discussion about an affordable option for residential broadband. As announced in last year’s federal budget, affordable government-approved broadband for low-income Canadians may eventually become available. While there are strong parallels between this approach and 20th century efforts to achieve universal service through cross-subsidization, this will likely not be a universal program. Rather than imposing some sort of “skinny basic” for the internet, the federal Cabinet has made affordable internet a priority, allocated money, and left us waiting on the details.

In a previous post, I wrote about the CRTC’s universal service objective, and how the Commission likes to stay out of setting retail prices for broadband (unless we’re talking about an IPTV service). The CRTC does regulate wholesale internet rates to promote competition, and this is supposed to control prices, but part of the rationale for not intervening directly on retail pricing was to avoid doing something that would “inadvertently hinder the development of further private and public sector initiatives” on affordability. Well, the federal government’s $2.6 million annual program announced last March, can be seen as a public program to nudge private sector initiatives along. The money is meant to help support ISPs that offer low-priced connectivity to low-income families, who will also receive refurbished computers.

This is similar to what Rogers and TELUS have been doing already in select markets, and these companies may end up being able to roll their existing programs into whatever is finalized as the government’s plan with little effort. But if other providers do join (or are compelled to participate in a mandatory program), then this becomes more of an industry norm than a distinguishing virtue. Rogers and TELUS have been trying to behave and stand out as good corporate citizens (Bell’s distinctive efforts in this regard have been championing the issue of mental health).

The discussion is understandably focused on the incumbents here, but let’s not forget there are a host of organizations and ISPs that have long been devoted to a more equitable distribution of connectivity in society: FreeNets & community networks (NCF, VCN, ViFA, Chebucto), publicly-funded rural broadband (like SuperNet, or one-time funding programs like Connecting Canadians and Connect to Innovate), First Nations initiatives, as well as public internet access sites. The federal government’s affordable access program for low-income households was criticized for being developed independent of groups that have been advocating for affordable connectivity in recent years, and following this criticism the proposal was sent back to the design stage to gestate further.

Personally, I love to see programs targeted for low-income Canadians that need them most, but the shelved affordable access proposal was a feather-light welfare policy. This was not the state using the market to achieve a public good — this was the state trying to achieve a public good without imposing any undue burdens on the market, with the private sector invited to participate. It would have encouraged a form of cross-subsidization, where ISPs use wealthier subscribers to subsidize poorer ones. In the monopoly era, cross-subsidization is how universal service (a phone in every home) was achieved. The telco companies had their regional monopolies, and one justification for this monopoly power was that you could take profits from urban areas to subsidize connectivity for more expensive (or less profitable) rural areas. After the monopoly era ended, we shifted to the cultivation of competition and deference to market forces. The societal benefits of internet access for everyone are clear, but the distribution of connectivity is still treated as a corporate responsibility.

This Liberal government is taking its time on this issue — perhaps they see flaws in the previous approach but are reluctant to push a more robust policy.  In the meantime, telecom companies may be less willing to develop their own affordable access programs knowing they may have to adjust to whatever shape government policy takes.