On December 21, 2016, the Canadian Radio-television and Telecommunications Commission ("CRTC") issued its highly-anticipated regulatory policy regarding basic telecommunications services entitled "Telecom Regulatory Policy CRTC 2016-496 - Modern telecommunications services – The path forward for Canada's digital economy" (the "Policy"). In it, the CRTC sets out a new definition of "basic telecommunications services" focussing on broadband internet and establishes principles to govern a new funding mechanism for its deployment by telecommunications service providers across Canada over the next fifteen years or so.

Background

The Telecommunications Act makes provision for, but leaves undefined, the concept of "basic telecommunications services" to Canadians. The authority to define and oversee its implementation is granted to the CRTC in its discretion. The CRTC has three regulatory measures by which it intervenes to ensure that basic telecommunications services are accessible to Canadians across the country:

  1. the obligation on incumbent service providers to provide Canadians with these basic services (called "the obligation to serve");
  2. the "basic service objective", meaning the rates, terms and conditions of these basic services in certain areas; and,
  3. the local service subsidy requirement imposed on telecommunications service providers of a certain size to ensure deployment of basic services in high-cost serving areas, which are rural and remote locations in Canada.

Until the Policy, the CRTC's basic telecommunications services policies have focussed on providing wireline voice telephony and dial-up low speed internet services to Canadians in rural and remote areas where market forces alone do not ensure these investments. In the last basic service proceeding held in 2011, the CRTC declined to establish a subsidy for the deployment of broadband internet access service. It merely adopted a target of access to broadband speeds of 5 Mbps download/1 Mbps upload while maintaining the focus on the provision of voice and dial-up low speed internet.

This 2016 Policy follows a consultation initiated in 2015 often referred to by the CRTC as "Let's Talk Broadband." The Policy entirely shifts the focus of the basic telecommunications service objective from wireline voice connectivity to internet (fixed and wireless) access for Canadians in rural and remote areas. This policy shift closes the perceived gap between the regulatory regime for basic telecommunications services and the reality that the public need for and benefits from telecommunications services centre on high-speed internet connectivity, whether wireline or wireless. It is intended to close the other perceived gap between the lived realities of rural, remote and urban residents in Canada when it comes to access to quality internet services. The competitive market, the Commission found, has not closed that gap on its own while voice telephony is ubiquitous now, and broadband internet access can also provide voice connectivity.

Highlights of the Policy

Among the significant aspects of the Policy are the following highlights relating to the new broadband basic service:

New "universal service objective"

The CRTC articulated a new basic service objective, to be called the "universal service objective" as follows: "Canadians, in urban areas as well as in rural and remote areas, have access to voice services and broadband internet access services, on both fixed and mobile wireless networks."

New definition of "basic telecommunications service"

"Basic telecommunications service" will now be defined to encompass:

  • fixed and mobile wireless broadband internet access services, and
  • fixed and mobile wireless voice services.

The CRTC introduced new levels of speed, data allowance and quality of service for basic internet services. Whether the broadband portion of the universal service objective is being provided to Canadians will now be determined by the following criteria:

  • Canadian residential and business fixed broadband internet access service subscribers can access speeds of at least 50 Mbps download and 10 Mbps upload (speeds delivered, not advertised);
  • Canadian residential and business customers can subscribe to fixed broadband internet access service that includes the option of unlimited data allowance; and,
  • the latest generally deployed mobile wireless technology (currently being LTE) should be available in Canada not only in premises (homes and business) but on as many major transportation roads as possible.

Tenfold increase in regulated basic fixed internet speeds

The target minimum speeds of 50 Mbps download and 10 Mbps upload speeds for fixed broadband internet access service is a far cry from that set by the CRTC in 2011. The tenfold increase may not seem so drastic when considered in light of the CRTC's finding that 82 per cent of Canadians had access to these higher speeds last year.

While finding that mobile wireless services should also be a part of the universal service objective, the CRTC declined to apply these speed targets to mobile wireless broadband internet access. Instead, it set out the mobile wireless technology (LTE) which would be included as a basic telecommunications service.

Quality of service

The CRTC requested that the CRTC Interconnection Steering Committee ("CISC") review and make recommendations on appropriate metrics for latency, jitter, and packet loss to define high-quality fixed broadband internet access service for the assessment of whether the broadband portion of the universal service objective is being achieved. The quality of service proposed by the CISC metrics is to reflect, among other things, the CRTC's stated policy objective that broadband internet access services in rural and remote areas be of similar high-quality as those in urban areas.

New broadband funding mechanism to connect underserved communities

The CRTC is authorized by the Telecommunications Act to require telecommunications service providers to contribute to a fund to support access by Canadians to basic telecommunications services.

The CRTC will change the uses and contribution base of the existing local service subsidy fund for local telephone service (called the National Contribution Fund, or "NCF") to create a new fund to improve wireless and wireline service in underserved communities. The NCF is currently used to subsidize only the provision of telephone service in high-cost serving areas and video relay services.

The CRTC's guiding principles for the development of the new funding mechanism are:

  • It will focus on underserved areas in Canada, and up to 10% of the total annual limit of the broadband funding mechanism will be allocated to satellite-dependent communities for the first five years of the fund's operation;
  • The CRTC will attempt to align its funding mechanism with the broader ecosystem of current and future funding and investments (including government and private investment sources);
  • Funds will be distributed through a competitive application process; and,
  • The fund will be managed at arm's length, based on objective criteria, and will be administered by a third party in a manner that is transparent, fair, and efficient.

The new fund will increase from the current level of the NCF of approximately $100 million by $25 million per year until it is capped at $200 million per year.

Telecommunications service providers that have $10 million or more in annual Canadian telecommunications revenues are required to contribute a percentage of their contribution-eligible revenues to the fund. Revenues from retail internet and mobile texting services were previously excluded from the contribution-eligible revenues. By adding broadband revenues, the size of the fund will increase without requiring an increase in the current revenue-percent charge.

Eligibility to receive monies from the new fund will be determined as follows:

  • service providers with experience deploying broadband infrastructure must submit a funding proposal to the fund administrator to either build or upgrade access and transport infrastructure for fixed and mobile wireless broadband internet access service to achieve the universal service objective in underserved areas;
  • it must demonstrate that the proposal could not be viable without investment from the fund; and,
  • applicants "will be required to secure" a minimum (more than nominal, and at a level commensurate with the nature of the project) investment for the project from a government entity and invest in it as well.

Eligible applicants will be assessed against each other using a weighting system. While it is not clear whether the applicant must have already secured the government funding at the time the application to the fund is made, the CRTC stated that applications with greater levels of government funding and private investment will be given more weight in the competitive process.

The CRTC will initiate a follow-up proceeding in early 2017 to establish the new fund on these principles and will review it after its third year in operation.

The CRTC also determined that the current local voice service subsidy will be phased out, band by band. It expects that the HCSA Bands E and F exchanges to be phased out first, followed by Bands G and H1 exchanges which may take longer. The CRTC will hold a proceeding in 2017 to examine the phase out of this local voice subsidy regime.

Cost and affordability of broadband basic service

The CRTC declined to regulate the retail rates associated with the implementation of the new universal service objective. It also declined to create a regulated "skinny broadband internet" package which would have mirrored its "skinny basic television" package of $25/month introduced in 2015 through the CRTC's similarly named "Let's Talk TV" proceeding.

Timeline for implementing the broadband universal service objective

Combining regulatory incentives and regulations, as well as funding from a variety of sources, the CRTC stated that it anticipates that the fixed broadband internet access services set out in the universal service objective will be available in 90% of Canadian premises by the end of 2021, and in the remaining 10% of Canadian premises within 10 to 15 years.

Service to Persons with Disabilities

The CRTC's focus in the Policy was not only on connecting rural and remote Canadians with internet service. The Policy includes determinations on ensuring that the telecommunications needs of Canadians with disabilities are being met by wireless service providers, including with respect to accessibility of 9-1-1 service. The CRTC directed wireless service providers to offer and publicize packages tailored to meet these specific needs within six months of the issuance of the Policy.

Follow-up Proceedings

In order to implement the various determinations in the Policy, the CRTC will hold additional proceedings in the coming year. These include:

  • A public proceeding to establish the new fund administrator, its guiding principles and structure to ensure it operates fairly and efficiently and focusses on underserved areas in Canada, and the criteria by which it assesses the distribution of funds;
  • With participation from stakeholders, within six months from the Policy, the CISC will establish technical specifications or other metrics for latency, jitter, and packet loss and identify points of interconnection in networks where these metrics apply, and the reporting methods for these metrics in order to ensure that the fixed broadband internet access service portion of the universal service objective is of a high-quality; and,
  • A public proceeding to examine the phase-out of the local voice subsidy regime.