The Affordable Access Coalition

The “Affordable Access Coalition”

FINAL REPLY COMMENTS

Telecom Notice of Consultation CRTC 2015-134

(as amended)

Review of basic telecommunications services

13 JUNE2016

Telecom Notice of Consultation CRTC 2015-134

Affordable Access Coalition’s Final ReplyComments

13 June 2016

Contents

Point #1. What this proceeding is about: access, and action versus inaction

Point #2. Broadband is “basic”, and “basic” broadband is at least 10/1 Mbps

Point #3. Market forces, government funding, and satellite are not the full solution

Point #4. Telecommunications affordability is most certainly a Commission issue

Point #5. The AAC’s Proposals: Reasonable, Realistic, and Realizable

Point #6. Commission legitimacy requires Commission action

Telecom Notice of Consultation CRTC 2015-134

Affordable Access Coalition’s Final ReplyComments

13 June 2016

Point #1.What this proceeding is about: access, and action versus inaction

The Affordable Access Coalition (the “AAC”)[1]files these final reply comments, containing six key points.

The purpose of Review of basic telecommunications services, Telecom Notice of Consultation 2015-134 (as amended)—initiated more than one year ago—is worth recalling:

The Commission hereby initiates a proceeding to conduct a comprehensive review of its policies regarding basic telecommunications services in Canada and of the telecommunications services that Canadians require to participate meaningfully in the digital economy. In this regard, the Commission will examine how these telecommunications services are used by Canadians, and what prices Canadians should be expected to pay for these services.

The Commission will also examine the availability of telecommunications services to determine which areas in Canada are underserved or unserved. The Commission will consider what its role should be in ensuring the availability of basic telecommunications services, particularly in rural and remote regions of Canada.[2]

This proceeding is fundamentally about ensuring Canadians have access to “basic telecommunications services”. The proceeding is not about ensuring all Canadians can access high-end telecommunications services, or “wants”, but about facilitating “the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions”; rendering “reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada”; and responding to the “economic and social requirements of users of telecommunications services”.[3]

While there are many complex issues to be resolved, basically the parties and interveners can be divided into two groups when it comes to perspectives about the Commission’s role in respect of Canadians’ access to basic telecommunications services:

(1)The “do nothing” grouping: Parties/interveners who generally believe everything is fine as is, and that no Commission intervention is necessary. These are generally large telecommunications service providers (“TSPs”),[4] which consistently earn handsome returns by offering faster and faster speeds to their urban customers, often marketed using the language of needs, while generally ignoring less densely populated areas and the needs of low-income Canadians.The “do nothing” group appeals to insecurity that the Commission cannot rise to the challenge and administer relatively straightforward funds to improve access to basic telecommunications services, and fear that Commission intervention will result in inefficiencies and market distortions. These boil down to fears that businesses will have to slightly divert their focus, and resources, to also account for less profitable or desirable customers.

(2)The “do something” grouping: Parties/interveners who argue that the Commission needs to take steps. This is a diverse group, including academics, accessibility advocates, consumer advocates, smaller service providers including those based in first nations communities, municipalities and also the Federation of Canadian Municipalities, and the AAC—the largest coalition of public interest and consumer organizations—who have generally argued in favour of:

(i)including broadband in the definition of “basic telecommunication service”;

(ii)setting the minimum download speed above the 2011 standard of 5 Mbps;

(iii)supporting deployment to unserved and underserved areas being left behind because a business case still does not exist; and

(iv)supporting access to basic telecommunications service by those who the Chairman rightly pointed out “did not choose to face life in poverty or challenged by physical or mental disabilities.”[5]

The “do something” proponentshaveappealed to the Commission’s mandate under the Telecommunications Act, to the Commission’s sense of serving all Canadians, and to the Commission’s capacity to recognize what Canadians need in terms of telecommunications services, and want in terms of Commission action to facilitate Canadians supporting one another.

Some of the “do nothing” proposalsinclude calls for further study or facilitation of other parties. While potentially necessary, to the extent that further study and facilitation delay immediate, effective action towards improving accessibility to basic telecommunications services, further study and facilitation amount to “do nothing” proposals.

The AAC believes the matter comes down to which grouping has presented more compelling evidence, and which grouping’s proposals involve more risk.

The AAC believes that the “do something” grouping has risen to the challenge laid down by the Chairman at the public hearing to justify why CRTC action is necessary because market forces are currently insufficient to respond to the public’s needs.[6]

Furthermore, there is far greater risk in accepting the “do nothing” perspective.The “do nothing” proposals are undaring and out of touch with the reality that 5 Mbps download is insufficient to be considered “basic”, and the reality that many Canadians struggle to access or afford basic telecommunication services. The “do nothing’ grouping’s proposals involve more risk for the Commission, and more risk to the Canadian public it serves.

The Chairperson, on behalf of entire Commission panel, appeared to recognize this: “Clearly, the CRTC has work to do under its jurisdiction.”[7]

The AAC detailed what it believes the Commission must do to improve access to basic telecommunications services by supporting deployment via the Broadband Deployment Funding Mechanism (“BDFM”) and supporting access by low-income households with the Affordability Funding Mechanism (“AFM"). This was detailed at length in the AAC’s initial intervention, further intervention, interrogatory responses, and in the “Action Plan” synopsis in the AAC’s final submission. The AAC believes that the most obvious immediate action the Commission should initiate, based on the record, is to declare broadband of at least 10 Mbps download and 1 Mbps upload ("10/1"), if not 10/3, to be a basic telecommunications service, and to implement an affordability subsidy.

Doing nothing cannot be an option, and it would be a mistake to say that the targets from 2011-291 remain appropriate.

Point #2.Broadband is “basic”, and “basic” broadband is at least 10/1 Mbps

The AAC believes the Commission will recognize broadband is a basic telecommunications service.[8]As to what speed is “basic”, the AAC presented and detailed its “50-80 rule”[9], and also presented a detailed user needs analysis.

The 50-80 rule, which gives form to Canada’s long-voiced universal telecommunications service objective, based on previous articulations by the Commission and other leading jurisdictions, serves as an objective standard for determining basic broadband without second-guessing the use to which most Canadians put their broadband service. It provides a clear, objective benchmarking tool the Commission may use to give to the minority who lack access what the majority already has, rather than a more subjective assessment implicated by a “needs and wants” analysis. The 50-80 rule likely gives rise to 10/1 as the minimum basic speed today, and possibly 10/3.

Most parties took no issue with this formulation, and at the hearing the focus was more on trying to define “basic” in relation to common applications and services that broadband functionality is used for.

Many parties in the “do something” grouping proposed similar or higher basic speed targets, with a notable number proposing 25/1 or 25/3.[10] A number of TSPs also gave support of various sorts to a 10/1 Mbps target.[11]

The AAC does not object to the Commission setting an even highergoal than 10/1, but believes 10/1 will pass muster under the Telecommunications Act, and is the standard at which regulatory measures should be aimed. All Canadians should expect to be able to access basic telecommunications services, which should include 10/1 broadband. Aspirational targets may give Canadians hope, but to the extent that they are not mandated and not supported with regulatory measures, become window dressing.

The claims by TSPs in the “do nothing” grouping that that 5/1 Mbps suffices as “basic” do not stand up to the evidence and testimony on the record in this proceeding. A number of TSPs relied on the Commission’s Exhibit 1 as proof that 5/1 is in fact sufficient.[12] Videotron claims that none of the parties advocating for higher speeds have been able to file concrete evidence that 5/1 is not suitable for most common broadband needs of Canadians—that is false.[13]Numerous interveners, including the AAC,[14]explained why 5/1 (where it is available[15]) is insufficient for basic daily needs when those needs and household realities are factored in. Many parties also articulated important policy reasons, on top of the user needs analysis, as to why the Commission should set 10/1 as the current level of basic broadband.

As a final point about the ongoing sufficiency of 5/1, the AAC posits that if the communications industry is in fact in such a period of rapid technological change and technological advancement, change and advancement which virtually every party to virtually every Commission proceeding constantly acknowledges, it simply cannot be that 5 Mbps, a goal set in 2011, is sufficient going forward from 2016.

Point #3.Market forces, government funding, and satellite are not the full solution

It is a fact that many Canadians are unserved by 5/1, let alone the 10/1(or higher) standard that is today “basic”. The Commission’s determination in respect of “basic” broadband will determine the size of the broadband access gap.In any case, this is evidence that market forces and targeted government funding are not fully responding to the needs of users.

It is also a fact, based on considerable evidence on the record, that satellite, while promising, continues to suffer from cost and reliability issues.[16]

The AAC therefore continues to believe that complementary funding support is necessary, and that its BDFM will provide a yearly capped amount of sustainable funding to address gaps. If the AAC is wrong about market forces and government funding, then the BDFM can easily be withdrawn at such time as all Canadians have access to 10/1.

Point #4.Telecommunications affordability is most certainly a Commission issue

The Commission has heard compelling evidence that telecommunication service affordability is a problem for low-income Canadians. Some service providershave tried to minimize, if not outright deny[17] the problem. Others, like Cogeco and Bell, have tried to maximize the problem in the sense of saying telecommunications affordability is part of a bigger poverty problem that other actors (federal and provincial governments) should address. Both of these approaches completely ignore the Telecommunications Act and its policy objectives.
The problem is not minimal. Even if only small numbers of Canadians, relatively, are making sacrifices to afford telecommunications services, this is enough to justify Commission intervention given its mandate. The fact that some low-income Canadians continue to subscribe to telecommunications services, or that only small numbers report not adopting service because of expense, is not evidence that there is no affordability problem, as some in the “do nothing” group have suggested. The record contains numerous examples of the harmlow-income Canadians are experiencing due to real-life suffering and sacrifice to access essential telecommunications service.

Yet the problem, even if it is conceived of as a broader poverty issue, is not so big as to render Commission intervention pointless.

The vital role of telecommunications—especially broadband—is a given. While the Commission cannot “solve” poverty—nor is that its mandate—the Commission can address telecommunications affordability and that is squarely within its mandate. Givenkey telecommunications expenses continue to increase at rates often faster than inflation[18] and take a bigger bite out of household spending, it stands to reason that focused measures to improve telecommunications affordability—again, squarely within the Commission’s mandate—is actually a targeted measure to begin taking on the seemingly overwhelming issue of poverty.

“Addressing the broader issue of poverty” is not something the Commission can do. It may not be something any one actor can do. But the Commission has the mandate, and the tools, the make a difference in one key pain point for low-income households: telecommunications affordability.

In terms of how to address affordability, the AAC believes the Commission should allow market forces to work to respond to users’ needs in terms of various packages, but should support access for low-income Canadians by implementing the AAC’s AFM low-income subsidy for low-income Canadians to put toward the telecommunications (not just broadband) services of their choosing. The AAC notes that in addition to the obvious and compelling support from individual Canadians, EOWC/EORN, Cree Nation, MKO, Government of NWT, Nunavut Broadband Development Corporation, and Union des consommateurs appear supportive of the concept of the AAC’s AFM. The AAC also notes that the FCM has advocated for all Canadians having “equitable access to broadband at affordable prices.”[19]

The AAC believes that its AFM approach will result in much greater success than a mandated basic broadband service package with a price ceiling, which most parties[20] oppose.

The AAC believes that a mandated basic broadband package with a price ceiling would not be successful because it would not empower Canadians to make telecommunications choices to suit their individual needs, nor address affordability concerns for other telecommunications services (notably wireless service). A mandated basic broadband service package with a price ceiling would also be vulnerable to jurisdictional attack, delays, and gaming by reluctant service providers. It would also neither empower Canadians to make telecommunications choices that suit their individual needs, nor would it address affordability concerns for other telecommunications services (notably wireless service).

The AAC does not disagree with the reasons for wanting the Commission to mandate a “skinny” broadband package, however the AAC does not believe it would be legally workable (at this juncture) or practically effective. The AAC believes its AFM proposal is demonstrably workable, legally, and will be effective in offsetting the expense of low-income Canadians’ telecommunications bills, not only broadband.

Point #5.The AAC’s Proposals: Reasonable, Realistic, and Realizable

The AAC has proposed a definition of “basic telecommunications service”, and two funding models to support access to basic telecommunications service, that are each (i) reasonable, (ii) realistic, and (iii) realizable. By “reasonable” the AAC means that its proposals are in line with the Commission’s mandate, in line with industry contribution levels in other key jurisdictions, and in line with Canadians’ willingness to support one another. By “realistic” the AAC means that its proposals are not based on targets that are overly high and not grounded in the economic and business reality facing TSPs.By “realizable” the AAC means that the Commission has the jurisdiction to actually implement the AAC’s proposals.

The AAC’s proposed 10/1 basic standard is supported by an objective universal service test, and supported by the real needs of users. As a “basic” standard it is within the Commission’s jurisdiction to support. The AAC has not proposed a standard beyond “basic” that is either so high as to be unrealistic (as are proposals for a symmetric download/upload standard) and not basic.

The AAC’s proposed funding mechanisms—the BDFM for deployment and the AFM for low-income Canadians—are designed to complement, not replace, market forces and targeted government funding. They are flexible, predictable, capped programs that can provide an annual amount of funding to support fulfillment of the telecommunications policy objectives.

The AAC believes Canadians arewilling to pay to support universal broadband access and affordable telecommunications for low-income Canadians, based on the AAC’s survey evidence.Also, many parties support these proposals explicitly and implicitly,[21] at the hearing and in their final submissions.

The AAC’s proposals have come under criticism from some TSPs in the “do nothing” grouping as being too costly, or too complicated and difficult to execute, or too lacking in detail.

In reply, the AAC notes that the test of evidence in this proceeding was not to produce, in one very broad proceeding, a comprehensive regulatory model to support access to basic telecommunications services by all Canadians. The challenge put to parties was to convince the Commission to intervene, not “how, in full detail” to intervene. Nevertheless, the AAC did put forward the key concepts, principles and considerations for an effective regulatory intervention to improve access to basic telecommunications services, designed by a leading expert on universal service regimes, and based on learnings from other jurisdictions.

In terms of the cost of these programs, not only does the evidence indicate Canadians are willing to support one another, but the total amounts are relatively small. When compared to the opportunity costs of not intervening in favour of affordable access to basic telecommunications services, which includes a functional level of broadband access, the AAC believes that the case for Commission intervention is strong.

Some of the opponents to Commission intervention, particularly opponents to affordability measures, state plainly[22]or imply[23]that the Commission does not have the competence to administer an affordability program. In terms of expertise to administer an affordability program, the AAC notes that these programs have been designed and administered by other regulators with relative ease.
Other opponents to Commission intervention in respect of affordability (despite the Commission’s clear mandate) claim that privacy issues will be an obstacle. The AAC disagrees and believes “do nothing” proponents are overstating the privacy challenges. Under the “baseline” AFM proposal, no income verification or other relatively more complex administrative processes are required to verify eligibility. Under the “ambitious” AFM proposal, eligibility verification would be required. In neither case will TSPs be aware of anything other than the fact of the eligible subscribers eligibility (and hence “low income” status, according to either other programs, or Commission determined eligibility criteria).

This is not to say that implementing the AAC’s proposals will require no hard work. There will obviously need to be Commission follow-up proceedings to settle finer details about the BDFM and AFM, but the potential for complications should not be used to cast doubt of the Commission’s competence to carry out its mandate.

Point #6.Commission legitimacy requires Commission action

The “do something” proponents have asked the Commission to take a leading role in respect of access to basic telecommunications services, in accordance with the Commission’s mandate under the Telecommunications Act.

The “do nothing”proponents would prefer the Commission to “get out of the way”.

Doing nothing should be a non-starter in the face of compelling evidence that market forces and targeted government funding are not delivering affordable basic telecommunications services to all Canadians who need access to broadband at a functional speed that reflects the current needs and uses of households.In the face of all of the evidence submitted in favour of Commission action to support access to basic telecommunications service, doing nothing would impair the Commission’s legitimacy as an institution looking out for the Canadian public.

The Commission must take steps to address the market’s inability to provide universal broadband of a meaningful speed to all Canadians and to provide affordable telecommunications service.For convenience the AAC provides again its Action Plan to achieve this.

AAC’s Action Plan