Policy Approaches to Internet Access in Northern and Rural Canada

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Graduate Studies Master of Public Policy Capstone Projects

2018-09-04 Policy Approaches to Internet Access in Northern and Rural Canada

Jevne, Hanna

Jevne, H. (2018). Policy Approaches to Internet Access in Northern and Rural Canada (Unpublished master's project). University of Calgary, Calgary, AB. http://hdl.handle.net/1880/109332 master thesis

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MASTER OF PUBLIC POLICY

CAPSTONE PROJECT

Policy Approaches to Internet Access in Northern and Rural Canada

Submitted by:

Hanna Jevne

Approved by Supervisor:

Dr. R. Kneebone, September 4, 2018

Submitted in fulfillment of the requirements of PPOL 623 and completion of the requirements for the Master of Public Policy degree

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Acknowledgements

I would like to thank my supervisor Dr. Ronald Kneebone for his assistance in the completion of this project. I would also like to thank all of the professors at the School of Public

Policy for equipping me with the skills to carry out this research, especially Professor Lana Wells for her inspiring Social Policy course. I would like to acknowledge my team at the Evaluations

Branch of Indigenous Services Canada where I completed my summer internship as well for teaching me the basics of program evaluation.

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Table of Contents

Introduction ...... 1 Literature review ...... 3 The Digital Divide in Canada and Steps Taken ...... 3 Impacts of Internet Access ...... 9 International Comparators ...... 13 Regulatory Environment ...... 15 Methodology ...... 18 Data Sources ...... 19 Program Descriptions...... 20 Community Access Program ...... 22 Broadband for Rural and Northern Development ...... 25 Broadband Canada: Connecting Rural Canadians ...... 28 Connecting Canadians ...... 30 Connect to Innovate ...... 32 CRTC Funding ...... 33 Findings ...... 35 Recommendations ...... 42 Bibliography ...... 46 Appendix ...... 52

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Capstone Executive Summary

This Capstone project explores the different programs administered by the Government of Canada to improve internet connectivity in rural, remote, northern, and Indigenous communities. The gap in internet access between rural and urban Canadians is an issue receiving federal funding in light of a new government objective to make high-speed internet access universal in Canada.

A review of the literature describes the digital divide in Canada, the impacts of internet connectivity, and the regulatory environment. It is found that there is still a considerable gap between rural and urban internet access rates, which limits the options that rural residents have for economic opportunity and social participation. The policy objectives of the federal government also represent a conflict between ensuring all Canadians can access essential services while interfering as little as possible with market forces.

Since the 1990s, the federal government has instituted six major national programs to subsidize broadband infrastructure and encourage communities to connect to the digital economy. These programs are described and compared to data on internet access rates over the past two decades in order to assess the impact that each program has made and recommend successful approaches to improve these programs in the future.

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The major finding is that the data available on high-speed internet in Canada does not give policymakers sufficient evidence to make informed decisions. In fact, the level of scrutiny and performance measurement these programs are subject to has decreased over time, at the same time that the focus on market forces has increased.

Given the social, democratic, and economic benefits of internet access, the federal government has made the extension of high-speed internet infrastructure a policy priority. To deliver on this priority and maximize the value of tax-payer dollars, this paper will argue that more attention to data collection in this area is necessary to produce evidence-based public policy. Combined with best practices from international leaders that employ supply- and demand-side interventions as well as balanced public interest and competition regulations, better data will play a large role in meeting the government’s ambitious targets to serve all

Canadians with quality internet access.

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Introduction

In December 2016, the Canadian Radio-television and Telecommunication Commission (CRTC) handed down a ruling that included high speed internet at speeds of 50 megabits per second

(Mbps) with unlimited bandwidth in the suite of basic services it aims to make available to all

Canadians.1 Though Canada was the first country to connect all of its public schools and libraries to the internet, it is no longer a leader in this field.2 A majority of Canadians currently have access to high speed internet, however significant gaps in availability persist.

While 83% of Canadian households are connected to the internet, that number shrinks to 75% in rural areas.3 This is in stark contrast to the urban connection rate of 85%.4 Data from the CRTC shows that while basic internet with download speeds of less than 5 Mbps is available in 100% of the geographic area of Alberta and Ontario, it is only available in 27% of Nunavut.5

The digital divide is evident among income groups as well. While 98% of households in the top income quartile had internet access, only 58% of those in the bottom quartile did.6 As the

1 Telecom Regulatory Policy CRTC 2016-496, Ottawa, 21 Dec. 2016, https://www.crtc.gc.ca/eng/archive/2016/2016-496.htm. 2 Michael McNally et al., “Thematic Analysis of Eight Canadian Federal Broadband Programs from 1994 to 2016,” Journal of Information Policy 7 (2017): 38, http://www.jstor.org/stable/10.5325/jinfopoli.7.2017.0038. 3 “Households with home internet access,” The Daily, Statistics Canada, 26 Nov. 2013, https://www150.statcan.gc.ca/n1/daily-quotidien/131126/dq131126d-eng.htm. 4 Ibid. 5 Broadband Report, Statistics Canada, [Ottawa, ON]: 2012, https://www.crtc.gc.ca/eng/publications/reports/broadband/bbreport1111.htm. 6 “Canadian Internet Use Survey, 2012,” The Daily, Statistics Canada, 26 Nov. 2013, http://www.statcan.gc.ca/daily-quotidien/131126/dq131126d-eng.htm. 1 | P a g e average income in rural areas is lower than that in urban areas, this income effect also plays a role in the rural-urban digital divide.7

For years, the federal government has maintained a series of programs to address the gap in internet access between urban and rural Canadians. Examples include the Broadband

Rural and Northern Development (BRAND) program, the Connecting Rural Canadians program, and the current Connect to Innovate program.8 At roughly the same time that the $500 million

Connect to Innovate program launched in 2016, the CRTC announced its own program in support of the new universal service objective to the tune of $750 million.9

Rural, northern, and Indigenous Canadians have less access to the quality of internet deemed a “basic service” than the country’s population at large. The federal government has made this issue a priority in past budgets that gave millions of dollars to programs aiming to close the Canadian digital divide. This research paper will address the different approaches these programs have taken and how much progress can be attributed to their efforts.

This is a significant issue for policy makers because internet access enables economic participation, social connection, and remote essential service delivery. An emerging body of research sheds light on the benefits of access to high-speed digital technologies, reviewed below. Findings suggest that those that are currently excluded from high speed internet access

7 Desmond Beckstead et al., Cities and Growth, Statistics Canada, [Ottawa, ON]: 2010, http://www.statcan.gc.ca/pub/11-622-m/2010020/part-partie1-eng.htm. 8 Perry Hoffman, “Connecting the North Series, Part III,” CARTT.ca, 22 Nov. 2017. Subscription required to view. 9 “CRTC establishes fund to attain new high-speed Internet targets,” Canada.ca, 21 Dec. 2016. https://www.canada.ca/en/radio-television-telecommunications/news/2016/12/crtc-establishes-fund- attain-new-high-speed-internet-targets.html. 2 | P a g e are more likely to benefit from the support of social services than the average urban resident.10

Not only do benefits accrue to those living in remote areas from expanding internet access, but research shows that more internet access may stand to raise Canada’s GDP as a whole.11

Despite Canada’s challenging geography, it has less bandwidth potential than its per capita income would suggest.12 The research points to this area as one in which Canada underperforms internationally, and thus one in which gains can be made. The paper that follows will review the literature and programs in order to make recommendations for improvement.

Literature review

The Digital Divide in Canada and Steps Taken

The digital divide is defined as the division between those with access to digital technology and those without. Typically, the focus of study on the digital divide has been on the gaps between income groups, age groups, or developed and developing countries. More recently in Canada, the focus has turned to the urban/rural digital divide. As stated above, there is a marked difference in internet access rates between rural and urban areas. Canada’s urban areas are home to more than 80% of the country’s population, however account for only 4% of its land

10 Stéphane Gauvin et al., “Analog Citizens,” Electronic Commerce Research 15 (2015): 374, https://link.springer.com/article/10.1007/s10660-015-9185-4. 11 Michael Minges, Exploring the Relationship Between Broadband and Economic Growth, World Bank [Washington, DC]: 2015, http://pubdocs.worldbank.org/en/391452529895999/WDR16-BP- Exploring-the-Relationship-between-Broadband-and-Economic-Growth-Minges.pdf. 12 Martin Hilbert, “The bad news is that the digital access divide is here to stay: Domestically installed bandwidths among 172 countries for 1986–2014,” Telecommunications Policy 40 (2016): 578. https://www.sciencedirect.com/science/article/abs/pii/S0308596116000276. 3 | P a g e mass.13 The inverse of this urban concentration of course is rural dispersal. In a 2006 study of the urban/rural broadband divide, geography was found to be the best indicator of internet connectivity.14 While more recent work problematizes this claim, significant differences in access to high-speed internet services exist between urban and rural areas.15

One reason that the digital divide in Canada may not hinge entirely on geography is the correlation between education, income and rural-urban locale. Gauvin et al. (2015) show that the negative geographic effects on internet use are reduced when controlling for age, income, and education.16 This shows that geography may not be the most important indicator of internet use. However, because rural communities are on average older, lower-income, and less educated than urban ones, geographic disparities in access persist.17 In other words, though geography may not be the only factor contributing to a rural-urban divide, rural communities are at a disadvantage in the digital economy. In a time when more government services and economic opportunities are available online than ever before, this inequality is a serious policy issue.

In a systematic review of international literature on information and communications technology (ICT) in rural areas, Salemink et al (2015) break down the literature into themes of connectivity and inclusion. Much of the connectivity literature identified by the authors focused on policy and regulation to close the access gap between urban and rural communities.

13 M. Sawada et al., “Analysis of the urban/rural broadband divide in Canada: Using GIS in planning terrestrial wireless deployment.” Government Information Quarterly 23 (2006): 457. https://doi.org/10.1016/j.giq.2006.08.003. 14 Ibid., 460. 15 Gauvin et al., 367. 16 Ibid. 17 Beckstead et al., Cities and Growth. 4 | P a g e

Conclusions suggest that local governmental involvement is a requirement for rural communities to successfully connect, as not many can sustain and economically viable network without aid.18 The authors found that specific attention was paid to Indigenous communities in the Canadian and Australian contexts. These communities are often left out of ICT development due to the remoteness of their territory. Evidence on policy initiatives found that in these communities especially, local support buy in was essential to establishing a positive impact from policy initiatives to establish internet connections. Without local support, these initiatives were often seen as top-down impositions.19

The literature on inclusion touches on the theme of the “rural penalty.”20 This is to say that residents of rural areas often pay a price by choosing to inhabit less densely populated communities. Though they experience certain benefits, rural residents face an economic penalty resulting from a lack of opportunity compared to urban areas. The gap in ICT capacity between urban and rural communities can exacerbate this penalty, as urban areas with high connectivity continue to adopt new technologies while rural areas fall even further behind.21

This presents an opportunity to increase productivity in rural areas and wellbeing in the

Canadian economy as a whole. Recognizing that many rural residents and Indigenous people may not have a choice to leave their families and communities for urban areas with more

18 K. Salemink et al., “Rural development in the digital age: A systematic literature review,” Journal of Rural Studies 54 (2017): 365, http://www.sciencedirect.com.ezproxy.lib.ucalgary.ca/science/article/pii/S0743016715300176 19 Ibid. 20 Ibid., 367. 21 Ibid. 5 | P a g e economic opportunity, it is in the best interest of all Canadians to make rural areas attractive and productive places to live.

This point speaks to the reactionary nature of current ICT policy as a weakness.

Programs in this area have typically responded to advances in technology, but technology evolves faster than policy can be implemented. This leaves the government to catch up rather than act proactively. For example, certain reports argue that the new 50 Mbps high-speed targets set by the CRTC are perhaps falling into this trap. These authors recommend a target of

1 gigabyte per second instead, as there is a fear that 50 mbps service may be outdated by the time it is installed.22 The responsive nature of these policies is identified by the authors as one factor sustaining the rural/urban digital divide.23 The paradox inherent in the issue is that people in rural communities would most benefit from the extension of ICT infrastructure that would allow them to overcome the rural penalty and become more connected to the digital and knowledge economies. However, it is these rural residents who are still often without access.

The policies that are in place to remedy the inequality of access largely rely on one of two theories of regulation. Identified by Picot et al. (2007), these two theories are competition regulation and public interest regulation. While public interest theory aims to correct market failures and prevent discrimination, competition policy aims to encourage robust, mostly free

22 B. Ashton et al., Broadband Connectivity in Rural Canada, Canadian Rural Revitalization Foundation, [Ottawa, ON]: 2017, http://www.ourcommons.ca/Content/Committee/421/INDU/Brief/BR9335285/br- external/RuralDevelopmentInstitute-e.pdf. 23 Ibid., 365. 6 | P a g e markets.24 Much of the regulation in Canada has taken a public interest approach, as the potential benefits of broadband and the concern over the digital divide characterizes broadband networks as a quasi-public good.25 Though broadband networks do not necessarily fit the definition of non-rivalrous and non-excludable public goods, the logic behind policies to connect underserved communities exposes this public interest theory. Accompanying the public interest concerns that drive policy in the area, there are also concerns of market power.

The broadband market, especially in rural and northern Canada involves a lot of sunk costs and barriers to entry, leaving consumers vulnerable to market power of the incumbent and prompting public intervention.26

The types of interventions made through either public interest or competition policy logic stimulate either the demand or the supply of high-speed internet. Picot et al. review various government attempts to assist build-up of broadband networks and enhance competition on the supply side of the market. Demand side intervention focuses on stimulating demand by offering e-services like health care, education, business opportunities, and government administration services. The authors conclude that both supply and demand side intervention with a blend of competition and public interest logic have been successful internationally and thus should be included in successful government strategies.27

Universal service objectives (USOs) have been a common practice in areas with both public interest and competition interests at stake. Cherry (2012) traces the USO back to feudal

24 A. Picot and C. Wernick, “The role of government in broadband access,” Telecommunications Policy 31 (2007): 662, https://www.sciencedirect.com/science/article/abs/pii/S0308596107000833. 25 Ibid., 663. 26 Ibid., 664. 27 Ibid., 671. 7 | P a g e times, in which most occupations were private in nature. The few occupations that served the general public were obligated to serve all reasonable requests and this norm has endured.28

Though markets with formal USOs are often virtual monopolies, Cherry emphasizes that this market power need not exist for the duty to serve.29 Compared to the ICT sector in the United

States, telecommunications companies are subject to tighter obligation to serve requirements in Canada. The CRTC has the power to order telecommunications carriers to extend their facilities to provide broadband service in its service territory to customers willing to pay compensatory rates in order to prevent arbitrary refusals to deal.30 The commission also has powers in section 46.5 of the Telecommunications Act. This section allows the CRTC to establish a fund to support “continuing access” to basic services.31 With the 2016 ruling that high-speed internet is now a basic service, the door is open for the CRTC to enforce a USO, giving it more authority than the analogous US agency, the Federal Communications Commission.

With the background elucidated, what is the current context of internet connectivity, especially in the north? Certainly a problem in rural communities all across Canada, the digital divide is most pronounced in northern communities. These communities are majority

Indigenous, which introduces other challenges and opportunities. With only 0.03 people per square kilometre in the territories, provision of the high speed internet services now considered

“basic” by the CRTC is both physically and financially challenging. Perry Hoffman traces the

28 Barbara Cherry, “The Obligation to Serve for Telecommunications Services: Divergent Policy Paths in Canada and the U.S,” Conference Paper: The 19th ITS Biennial Conference, 18 - 21 November 2012, Thailand, page 8, http://hdl.handle.net/10419/72496. 29 Ibid., 9. 30 Ibid., 28. 31 Ibid., 28. 8 | P a g e problems of stable and affordable service provision in the North to the lack of shared infrastructure.32 His recommendation is to attach requirements to federally funded broadband projects to allow competitors to share the infrastructure for a fair price.33 This will increase the amount of services available in the North as well as the number of providers in order to create a more robust market.

The different options include fibre and low orbit satellites. Connecting the whole north is estimated to cost $2 billion, with the rest of rural Canada roughly costed at $5 billion.34

Combined with maintenance and operations costs, this means that the digital divide is a costly problem to solve. However, many of the benefits of connecting rural and remote Canadians to reliable, affordable high-speed internet are discussed below.

Impacts of Internet Access

The United Nations Broadband Commission for Sustainable Development highlights several of the important benefits of broadband internet internationally, notably the ability to compete in a global and information based economy.35 In addition to the economic benefits of internet connectivity, the UN Human Rights Council Special Rapporteur reported in 2011 that the

32 Perry Hoffman, “Connecting the North Series, Part I,” CARTT.ca, 22 Nov. 2017. Subscription required to view. 33 Perry Hoffman, “Connecting the North Series, Part V,” CARTT.ca, 22 Nov. 2017. Subscription required to view. 34 Hoffman, P. “Connecting the North: Connect to Innovate is just a "drop in the bucket" as a broadband solution.” CARTT.ca. 23 November, 2017. Subscription required to view. 35 Broadband Commission for Sustainable Development (BCSD), Broadband: A Platform for Progress. International Telecommunication Union [Geneva, Switzerland]: 2011, page 31, http://www.broadbandcommission.org/Documents/publications/Report_2.pdf. 9 | P a g e internet is a key enabler of human rights from its sharing of information and opinion.36 In a rural context, extensive literature explores the impacts that access to internet can have at the community-level.

Researchers have examined the indicators of internet use and it is often the case that those who stand to benefit most from online services like tele-health and online access to social safety nets are unable or uninterested in taking advantage of them.37 While Gauvin et al. (2015) find that remoteness is a less important indicator of internet use than age, education, and income, rural areas in Canada see on average a 10-15% lower rate of internet use due to access barriers and unfavorable demographics.38

The link between rural areas and unconnected demographic groups has also been made by Hodge et al. (2016) in the context of internet enabled services. The authors note that health, financial, education, and other social services are increasingly flowing out of small communities and being replaced with online equivalents. The typically older citizens of rural areas may experience barriers to internet access, as well as fewer opportunities to access the internet in public spaces and fewer chances to participate in training programs.39 This illustrates the challenges of stimulating both the supply of high quality internet connections in rural areas but also educating and developing the skills needed to ensure sufficient demand for these

36 F. La Rue, Report of the Special Rapporteur On the Promotion and Protection of the Right to Freedom of Opinion and Expression, UNGA [Geneva, Switzerland]: 16 May, 2011, page 22, http://www2.ohchr.org/english/bodies/hrcouncil/docs/17session/A.HRC.17.27_en.pdf. 37 Gauvin et al., 367. 38 Ibid. 39 H. Hodge et al., “Using internet technologies in rural communities to access services: The views of older people and service providers,” Journal of Rural Studies 54 (2017): 476, http://dx.doi.org/10.1016/j.jrurstud.2016.06.016. 10 | P a g e connections. The authors compare their case study in South Australia to the Canadian context, citing similar degrees of isolation and socio-economic disadvantage in remote areas of both countries.40 This shows the importance of ensuring both availability and uptake of online services to provide quality substitutes for physical services in remote areas.

In rural Ontario, researchers have been assessing both the technological and social changes from large-scale interventions in rural broadband infrastructure. In addition to the benefits to be had from access to essential online services that may be unavailable physically in small communities, economic benefits to small businesses and community organizations were found in the case of the public-private partnership Eastern Ontario Regional Network (EORN).

This network provided high-speed broadband to rural eastern Ontario and Pant et al. interviewed small business owners taking advantage of the service. Numerous benefits were realized by these entrepreneurs, from time savings with wireless payments, advertising on social media, access to niche markets, and attracting customers with free Wifi.41 A case study from rural Scotland also shows that creative industries and mobile workers are more likely to settle in rural areas if they can maintain a connection to their work via high-speed broadband.42

This evidence shows that many different industries can benefit from internet access in rural areas, contributing to more resilient and attractive economies in the communities.

40 Ibid., 478. 41 L. Pant and H. Odame, “Broadband for a sustainable digital future of rural communities: A reflexive interactive assessment,” Journal of Rural Studies 54 (2017): 443, http://dx.doi.org/10.1016/j.jrurstud.2016.09.003. 42 L. Townsend et al., “Broadband and the creative industries in rural Scotland.” Journal of Rural Studies 54 (2017): 452, http://dx.doi.org/10.1016/j.jrurstud.2016.09.001. 11 | P a g e

In addition to service provision and economic benefits, rural communities can stand to benefit socially from internet access. Wallace et al. (2016) shows that under the right circumstances, internet access can help build social cohesion in rural communities43. These circumstances largely depended on the community’s use of the internet to organize and promote in-person social activities. This is an important finding, especially considering the mental health of youth in remote Indigenous communities in Canada. Building a healthy sense of community and stronger social ties with quality internet connections is an important impact that should not be overlooked.

More specific to rural internet access in Canada, the CRTC conducted a series of engagements and published a report in 2016 entitled “Let’s Talk Broadband.” This report uncovers the state of the digital divide in Canada and its impact by examining the differential service that rural and urban Canadians receive. The report profiles several northern and rural residents, making clear the impact that insufficient internet access has on their lives. Seemingly small things that residents of large cities take for granted are often unavailable for these rural individuals. For example, the shift from catalogues to websites for ordering goods adversely affected one respondent. He reported that his lack of reliable internet connection in Slave Lake,

Alberta impacted his ability to run his plumbing business.44 Though this is only one example, it shows how certain advances that are lauded by urban residents can hinder those In communities with incomplete access to the internet.

43 C. Wallace et al., “Information technology and social cohesion: A tale of two villages,” Journal of Rural Studies 54 (2017): 433, http://dx.doi.org/10.1016/j.jrurstud.2016.06.005. 44 Ekos Research Associates, Let’s Talk Broadband Findings Report, CRTC, [Ottawa, ON]: 2016, Appendix D, Page 1, http://epe.lac-bac.gc.ca/100/200/301/pwgsc-tpsgc/por-ef/crtc/2016/030-15- e/report.pdf. 12 | P a g e

As mentioned by the authors above, the CRTC report also touched on the theme of decreasing physical services in rural areas. Most of the rural residents interviewed “argued that their lack of service in the areas of emergencies, health, education, economic participation, staying informed, and social needs, make access to Internet even more important to supplement these needs.”45 Almost all rural residents expressed a desire for the establishment of a minimum level of service.46 Some residents expressed the feeling that the internet has become a basic service and that basic, reliable internet access is an issue of quality of life.47 This report was published in January 2016, and soon after a decision was issued by the CRTC making

50 Mbps high-speed internet a “basic service.” This will be discussed further below.

International Comparators

Part of the reason for the attention to disconnected rural, remote, northern, and Indigenous communities in Canada is our dropping rank in international measures of “connectedness.” The late 1990s were an ambitious time, shown by the 1997 speech from the throne that pledged all

Canadians would have access to ICT by the year 2000.48 In March 1999, Canada became the first country in the world to connect all of its public schools and libraries to the internet.49 By 2001,

Canada was ranked second in the OECD in terms of fixed broadband subscriptions per one

45 Ibid., 64. 46 Ibid. 47 Ibid. 48 Industry Canada, Departmental Performance Report 1999-2000, Industry Canada, [Ottawa, ON]: 2000, page 16, https://www.ic.gc.ca/eic/site/017.nsf/eng/h_00226.html. 49 Ibid, 18. 13 | P a g e hundred inhabitants, but by 2014, Canada’s rank fell to twelfth.50 A study by Hilbert et al. (2016) also shows that Canada has less bandwidth than average incomes would suggest.51

Countries like South Korea are praised in the literature for active policies that have ensured high internet availability and uptake. South Korean bandwidth is greater than its income levels would suggest.52 Investment in broadband in South Korea, as well as “aggressive” government infrastructure promotion made the country the most connected in the world by

2006.53 The government approach to broadband infrastructure followed the public good model discussed above by Picot et al., and its combination of both demand and supply side policies has been very successful.54 The authors conclude that it seems South Korea owes its current state of connectedness to government interventions.55 Another interesting approach is found in countries like Spain and Finland, where broadband has been declared a legal right.56

In contrast, the United States did not have an overarching framework or policy like

South Korea did.57 Similarly to Canada, US bandwidth underperforms when compared to income level.58 The American context is also complicated by dual state and federal jurisdiction over telecommunication policy.59 Service providers were able to lobby for a federal classification as a Title I service, meaning they are free of a legal “duty to serve.”60 The

50 McNally et al., 38. 51 Hilbert, 578. 52 Ibid. 53 Sawada et al., 473-4. 54 Picot et al., 668-9. 55 Ibid., 671. 56 McNally et al., 42. 57 Ibid., 670. 58 Hilbert et al., 578. 59 Cherry, 1. 60 Ibid. 14 | P a g e legislation in Canada, especially the Telecommunications Act discussed below, does not allow

Canadian telecommunications carriers to avoid this duty.

Regulatory Environment

As discussed in the introduction, the regulatory landscape of telecommunications changed in

2016 with a new high speed internet universal service objective. This universal service objective supplies funding to expand broadband infrastructure to remote communities, however relies on market forces when it comes to the prices consumers pay.61 The legal framework surrounding economic access to high speed internet ranges from broad acts regulating the sector to more specific regulations and CRTC decisions detailed below.

Telecommunications Act S.C. 1993 c. 38. As it pertains to this issue, the most important part of the Telecommunications Act is section 7, which codifies telecommunications policy objectives. Notably, this section states that telecommunications policy should aim “to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada.”62 The same section also makes it an objective to respond to the economic and social requirements of telecommunications services.63 However, the Act also encourages reliance on market forces instead of regulation to provide these services.64

Order Issuing a Direction to the CRTC on Implementing the Canadian

Telecommunications Policy Objectives, SOR/2006-355. This regulation is enabled by the

61 Telecom Regulatory Policy CRTC 2016-496, 21 December 2016, Section 8, https://www.crtc.gc.ca/eng/archive/2016/2016-496.htm. 62 Telecommunications Act, SC 1993, c 38, Part 1, Section 7(b), http://canlii.ca/t/52jc7. 63 Telecommunications Act, SC 1993, c 38, Part 1, Section 7(h). 64 Telecommunications Act, SC 1993, c 38, Part 1, Section 7(f). 15 | P a g e

Telecommunications Act, and it guides the CRTC on the implementation of the policy objectives discussed above. This regulation emphasizes reliance on market forces, and specifies that when regulations are necessary, they should interfere as little as possible in competitive markets.65

Telecom Decision CRTC 99-16. This is the decision in which the CRTC initially introduced the concept of “basic services.” The basic services defined in this decision include a local telephone line with access to the long-distance network and dial-up capabilities.66 This decision also allows for the evolution of basic services as technologies and needs evolve.

Telecom Regulatory Policy CRTC 2011-291.This regulation is an update to the original basic services decision. Since the original objective in 1999, basic services evolved to include low-speed internet.67 This regulation also includes a subsidy regime for telephone service providers in areas where the costs of service provision exceed the CRTC-approved local service rates.68

Telecom Regulatory Policy CRTC 2016-496. This ruling modifies the basic service objective further, by including high internet speeds and unlimited bandwidth plans as essential services. Under section 46.5(1) of the Telecommunications Act,69 the CRTC in this ruling allows for a levy on telecommunications service providers that will amount to $100 million per year, increasing each year.70 The fund raised by this levy is available to communities that wish to

65 Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR/2006-355, Section 1(a)(i-ii), http://canlii.ca/t/l7b6. 66 Telecom Decision CRTC 99-16, Ottawa, 19 October 1999, Section 24 https://www.crtc.gc.ca/eng/archive/1999/dt99-16.htm. 67 Telecom Regulatory Policy CRTC 2011-291, Ottawa, 3 May 2011, Section 7 https://www.crtc.gc.ca/eng/archive/2011/2011-291.htm. 68 Ibid., Section 8. 69 Telecommunications Act, SC 1993, c 38, Part 1, Section 46.5(1). 70 Telecom Regulatory Policy CRTC 2016-496, Ottawa, 21 December 2016, https://www.crtc.gc.ca/eng/archive/2016/2016-496.htm 16 | P a g e install the necessary infrastructure for high speed internet and does not apply to subscriber pricing. The fund is accessed by grant proposals from individual communities. The regulation speaks of universal broadband as a target, however does not lay out a timeline for its implementation.

In addition to geographical challenges that make internet service provision in remote and northern communities difficult and costly, the monthly price consumers pay has been cited as a barrier to internet access by 20% of the Canadians who do not have internet at home.71

Compared to similar developed countries like Germany and Australia, the price Canadians pay for their high speed internet is between $10 and $20 more per month.72 Therefore, by mandating basic internet speeds for all regions, the CRTC is only solving part of the problem.

The statutes and regulations described above make clear that the CRTC is only to intervene in the market when market forces fail to produce the desired results. In Section 7 of the Telecommunications Act, two conflicting policy objectives are enumerated. These objectives identify both affordable, equitable access across Canada and competitive market forces as goals.73 However, requiring internet service providers (ISPs) to enter remote communities and build high-quality infrastructure capable of delivering the new basic service is costly, with a low rate of return on investment. Serving the small populations of these

71 “Canadian Internet Use Survey, 2012,” The Daily, Statistics Canada, 26 November 2013, http://www.statcan.gc.ca/daily-quotidien/131126/dq131126d-eng.htm. 72 NGL Nordicity Group Ltd., 2016 Price Comparison Study of Telecommunications Services in Canada and Select Foreign Jurisdictions, Table 3(b), Statistics Canada [Ottawa, ON]: 2016, http://www.crtc.gc.ca/eng/publications/reports/compar/compar2016.htm. 73 Telecommunications Act, SC 1993, c 38, Part 1, Sections 7(b) and 7(f). 17 | P a g e communities does not recoup the costs of providing the services unless subscription rates are inflated.

The legislation and regulations provide for CRTC intervention in cases where relying on market forces do not “to the maximum extent feasible” achieve policy objectives.74 Examining the wide gaps in access, it is clear that market forces have not achieved policy objectives in remote regions like Nunavut. There is a lack of incentive to enter markets with high entry costs and low returns, contributing to this market failure. This shows the conflict between the CRTC’s universal service objective and its mandate to support competitive markets free of regulation.

The CRTC’s regulatory role in this industry is complemented by the federal government’s policies and programs, enacted mainly by Innovation, Science and Economic Development

(formerly Industry Canada). With the regulatory environment elucidated, the various federal programs aimed at extending high speed internet services to remote communities will now be discussed.

Methodology

The method of this research project draws from governmental program evaluation. In each year’s departmental plan for Innovation, Science, and Economic Development Canada, the major programs tasked with stimulating internet access in rural, remote, northern, and

Indigenous communities are assigned indicators. Program evaluation takes into account both performance measurement, or whether the indicators are met, as well as evaluates how

74 Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR/2006-355, Section 1(a)(i), http://canlii.ca/t/l7b6. 18 | P a g e appropriate the indicators are and whether they are truly measuring the success of the program and its impact on its beneficiaries. This project will triangulate evidence from literature, media, as well as statistical and survey data in order to assess the performance and the appropriateness of these indicators.

The crux of the project is the comparison of program performance throughout multiple iterations of broadband infrastructure subsidy programs. After each program has been described and indicators have been evaluated, their performance will be compared to the others. The different structures and program logics afford an opportunity to compare progress between different styles of programs while monitoring the overall progress towards universal broadband service in both rural and urban areas.

Data Sources

Data from a variety of sources will be used to assess the impact of each program. A principal source of data will be the spending information and results reporting contained in annual departmental publications from Innovation, Science, and Economic Development Canada dating back to 1996-1997 (the earliest reports available). The Treasury Board Secretariat’s online resource GC InfoBase will provide the most recent statistics on the progress of indicators.

Statistics Canada data from the Canadian Internet Use Survey will also be utilized. This data is available periodically between 1997 and 2012. The Northwest Territories has also conducted a similar survey twice, in 2009 and 2014. In addition, the CRTC publishes the overall level of availability of broadband internet each year in its Telecommunications Monitoring

Report.

19 | P a g e

Program Descriptions

The connectivity of remote regions has been an issue in the public eye for decades. Since 1994, major government spending programs have attempted to connect communities with reliable and affordable internet access. In addition to the major programs that specifically target broadband infrastructure and operations, programs from Indigenous and Northern Affairs

Canada, Health Canada, and other government agencies make funds available to communities who wish to undertake specific infrastructure projects, including broadband. These federal initiatives are complemented by municipal and provincial level programs as well.

This paper will examine and compare the approaches and results of different federal programs that aim or aimed to connect underserved regions in Canada. The programs were chosen based on the following criteria: (1) a national scope, (2) an exclusive focus on broadband, and (3) a goal of providing internet access to all community members. This narrows the scope of analysis to five federal programs from the department of Innovation, Science, and

Economic Development (ISED – formerly Industry Canada) and one from the CRTC. While other programs, like the First Nations Infrastructure Fund from Indigenous and Northern Affairs

Canada, sometimes funded broadband internet projects, they are not included as their focus was not exclusively on broadband access. Still others, like CanNor, National Satellite Initiative, and Northern Ontario Development Program were not included due to their regional focus.

Another category of programs aimed to provide internet connections to specific institutions instead of the community at large. These programs, like SchoolNet, First Nations SchoolNet, and eHealth Infostructure, were also left out of the analysis.

20 | P a g e

Between its major programs, the federal government has spent a total of $2 billion on broadband improvement, as estimated by a 2017 study.75 This total does not include the two most recent ISED and CRTC programs to be discussed below.

In a 2016 review of funding opportunities available to Indigenous communities interested in strengthening their internet connection, First Mile Connectivity Consortium

(FMCC) aggregates these funding sources. The organization draws attention to the fact that the funding available to communities is discontinuous, sporadic, and unpredictable.76 Often, communities are unaware of the funding sources available to them, lack capacity to deliver proposals, or cannot keep track of the different eligibility requirements of so many different programs. The review highlights 13 current and past federal programs that aid in internet access and finds that these programs largely target capital infrastructure costs instead of operations and maintenance costs. These critiques are useful to keep in mind when reading about the programs below.

75 McNally et al., 48. 76 S. Blake et al., A Guide to Federal Funding for Indigenous Broadband in Canada, First Mile Connectivity Consortium (FMCC), April 2016, page 11 http://firstmile.ca/wp-content/uploads/FMCC- Guide-to-Federal-Funding-for-Indigenous-Broadband-in-Canada.pdf. 21 | P a g e

Quick Facts on Selected Programs77

Program Time Period Total Spending Brief Description Community Access 1994-2012 $420 million Provided public internet access sites Program Broadband for Rural 2002-2007 $115.5 million Funded community business plans and Northern to attract broadband infrastructure Development Broadband Canada: 2009-2012 $190 million Funded communities or ISPs to build Connecting Rural infrastructure Canadians Connecting Canadians 2014-2019 $120 million Subsidizes ISP costs in rural areas Connect to Innovate 2016-2021 $500 million Subsidizes ISP costs in rural areas CRTC Funding 2017-2021 $750 million Subsidizes ISP costs in rural areas

Community Access Program

The Community Access Program (CAP) was a long running initiative that established publicly accessible internet access points in rural and later low-income urban communities. Between

1994 and 2007, this program infused $337 million into internet access.78 Over the lifetime of the program, its spending has been an estimated $420 million.79 The program’s overall goals focused on stimulating economic growth and facilitating participation in the knowledge economy through access to internet and development of skills (a demand-side intervention).

CAP sites were operated in public spaces by federal-provincial/territorial government partnerships. The program supported 8,800 access sites in 2003-2004 at its peak. The highest yearly spending reported was $64 million in fiscal year 1999-2000.80 In 2007, changing

77 Spending data taken from McNally et al., page 74. 78 Blake et al., 32. 79 McNally et al., 50. 80 Industry Canada, “Archived — Final Evaluation of the Community Access Program (CAP),” Canada.ca, 2009, http://www.ic.gc.ca/eic/site/ae-ve.nsf/eng/03126.html. 22 | P a g e government priorities led to the reduction and eventual discontinuation of the program, though certain sites have secured alternate sources of funding and remain open.81

The shift away from public internet access sites to private sector development and household access reflects the advance in technology that allows for affordable home internet access and creates the demand for such a service. After the 2006 election brought in a new

Conservative government that favored private over public development, programs of this nature began to focus on households as a point of access and CAP was eventually discontinued.

This may be evidence of a shift away from the public interest model of legislation described by

Picot et al. (2007) above and toward a competition model of telecommunications policy.

The final evaluation of the program was published in 2009, however the program continued until 2012. Interestingly, this evaluation notes that CAP was created prior to the current notions of the digital divide were formed.82 The report concluded that there is a continued need for the program in so far as there is a continued digital divide that disproportionately affects certain groups of people.83 This is especially true in rural areas, where

42% of CAP sites were the only point of public internet access within a 25 kilometre radius in

2009.84

The program was also successful in its aim to provide training to groups thought to be a part of the digital divide in order to develop digital literacy skills.85 This is an important part of stimulating demand for internet services to accompany the supply that subsequent federal

81 Blake et al., 32. 82 “Archived — Final Evaluation of the Community Access Program (CAP).” 83 Ibid. 84 Ibid, 85 Ibid. 23 | P a g e programs focus on. These people include low-income groups, those with lower levels of education, people without access to the internet at home, and those who are unemployed.86 In this way, part of the aggregation of demand for internet services can be attributed to CAP for raising individual awareness and capacity to seek out online services, as found in key informant interviews.87

Further, a 2005 cost-benefit analysis concluded that the programs benefits outweighed its costs at a ratio of 1.06.88 These costs were an average of $4,944 per year to CAP in 2007-

2008 (the most expensive year).89 The benefits cited by those engaged by the evaluators included more engagement from digital divide groups and increased demand for internet among Canadians. These benefits have a stimulating effect on the economy. CAP also employed

14,520 people directly and 3,408 people indirectly, further stimulating local economies.90 In addition, CAP sites with high usage have been able to demonstrate to private sector ICT firms that small communities are interested in consuming internet services and convinced the companies to deliver services to previously unserved communities.91

However, the evaluation found that in 2009, the program aligned less with the government’s priorities than before.92 For example, the evaluation found that ISED has been steadily reducing its focus on individual skills development, which was a focus of CAP.93 Taking

86 Ibid. 87 Ibid. 88 Bearing Point Cost Benefit Analysis of Information Highway Applications Branch Programs: Final Report, November 7, 2005. Found in 2009 CAP Evaluation Report, http://www.ic.gc.ca/eic/site/ae- ve.nsf/eng/03126.html. 89 Ibid. 90 Ibid. 91 “Archived — Final Evaluation of the Community Access Program (CAP).” 92 Ibid. 93 Ibid. 24 | P a g e into account the other programs, public sites of access were replaced as a priority by private home access to high speed internet. Because other types of public access sites were available in most of the CAP site areas, and because costs of providing home internet access have fallen, the evaluation ultimately concluded that CAP had outlived its usefulness.

Broadband for Rural and Northern Development

Broadband for Rural and Northern Development (BRAND) ran from 2002 to 2007. Its aim was to build broadband infrastructure in communities, especially Indigenous communities that were northern, rural, and/or remote. BRAND was launched in September 2002 as a three-year $105 million initiative to match capital costs in infrastructure projects.94 The program received approval to extend its mandate and operate until 2007 while not exceeding the original $105 million allocation.95

This program had an interesting structure that rolled out in two phases. The first phase offered up to $30,000 in seed funding to communities in order to develop a business case to access more funding. One hundred and fifty four communities were selected for this initial funding. Of these proposals, 63 were selected to be funded for a total of $80 million.96

Applicants dedicated a “community champion” to work within the community to aggregate demand for internet services by raising awareness of the potential usefulness of the internet, and seek a service provider to build the network. The projects funded by this program ended up

94 Industry Canada, “Archived — Formative Evaluation of the Broadband for Rural & Northern Development Pilot-Final Report,” Canada.ca, 2006, page i, http://www.ic.gc.ca/eic/site/ae- ve.nsf/eng/01425.html. 95 Ibid. 96 Blake et al., 30. 25 | P a g e serving 900 communities, greatly surpassing the initially anticipated 400.97 Another interesting aspect of this program was that only communities represented by governments, First Nations bands, or registered non-profits could apply. This is different than subsequent programs that would allow private businesses to apply for government funding as well.

The program prioritized broadband services as a means to job creation, education, health, economic development, and governance.98 A national selection committee reviewed applications to make recommendations to the minister of Industry Canada for approvals.

Regional Industry Canada representatives also played a large role in supporting the program and the community applicants. The 63 business plans that were selected for funding came from every province and territory except for New Brunswick.99

BRAND was evaluated in 2006 and the evaluation report attempted to define the impacts and effects of the program. Similar to the literature reviewed above, the impacts on the community members surveyed were overall positive. Businesses in affected communities opened or remained open because of internet access, residents were able to fill out government forms online, patients saved travel time with online health consultations, more people were able to access online education, and community members felt less isolated by connecting with social networks online.100 The community-based program design helped to raise awareness of the benefits available to communities and stimulate local buy-in. This is

97 Ibid. 98 “Archived — Formative Evaluation of BRAND Pilot-Final Report,” page ii. 99 Ibid., page iii. 100 Ibid., vii. 26 | P a g e because representatives of the program worked with community applicants to assess telecommunications needs and explore options available.

This 2006 evaluation cites the Telecommunications Act section 7(b) as a reason for the program. The government under this act has the mandate to “render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada.”101 This recalls the tension between providing access to all

Canadians and interfering the least with market forces, as the evaluation goes on to state that

“market forces alone will not extend the benefits of broadband access to some communities.”102 Before the program was introduced, 77% of the communities in Canada did not have access to broadband.103 Northern, Indigenous, and remote communities are overrepresented in this group.

Communities often took advantage of joint-proposals in order to save time and money on the development of separate proposals for everyone.104 This was one factor that contributed to exceeding the target of 400 communities. Half of those surveyed in the program evaluation found the program inefficient due to the reporting burden and the need to hire consultants to make the business plan.105 The evaluation report concludes that the program meets a need and recommends that broadband service is extended further.

101 Telecommunications Act, SC 1993, c 38, Part 1, Section 7(b). 102 “Archived — Formative Evaluation of BRAND Pilot-Final Report,” page i. 103 Ibid. 104 Ibid., viii. 105 Ibid. 27 | P a g e

The bottom-up approach of BRAND helped to aggregate demand and awareness and was another important factor contributing to the program exceeding its targets.106 This approach was successful in meeting the program’s goal to ensure that broadband technologies are “tools of inclusion, not exclusion.”107 The 2006 evaluation report recommends that ISED maintain this approach in future programs.108 In the same 2005 study mentioned above, BRAND was found to have the highest benefit-cost ratio out of ISED internet connectivity programs with benefits outweighing costs at a ratio of 2.57.109

Broadband Canada: Connecting Rural Canadians

From 2009-2012, this program provided subsidies for capital costs of telecommunications infrastructure in areas that were designated by the program as “unserved” or “underserved” in home internet access.110 Eligible projects were able to apply for a subsidy of fifty percent of eligible costs, while First Nations projects were eligible to apply for one hundred percent of project costs. First Mile mentions that despite the extra funding made available for First

Nations, neither the AFN nor individual First Nations were invited to provide input into the selection criteria for this fund.111 In addition, the communities that were eligible to apply were defined in advance unilaterally by the federal government.

106 Ibid., page x. 107 McNally et al., 55. 108 “Archived — Formative Evaluation of BRAND Pilot-Final Report,” page x. 109 Bearing Point Cost Benefit Analysis of Information Highway Applications Branch Programs: Final Report. 110 Blake et al., 28. 111 First Mile, “Broadband Canada: Connecting Rural Canadians (Industry Canada),” FirstMile.ca, 2010, http://firstmile.ca/books/federal-government-initiatives-that-support-first-nations-broadband- development/broadband-canada-connecting-rural-canadians-industry-canada/. 28 | P a g e

This program was a notable change from BRAND and CAP. The previous two programs were more focused on funding communities rather than internet service provider (ISP) entities.

For Broadband Canada, any entity that could build and operate broadband infrastructure to serve households within eligible areas was able to submit an application. While communities were still eligible to apply for Broadband Canada funding, this was the first program that allowed private companies to apply.112 Indeed, the majority of funding from this program flowed to private sector companies.113 The majority of program funds from Broadband Canada went to four ISP companies that are characterized as part of the “competitive fringe” rather than the “oligopolistic centre” of the Canadian telecommunications marketplace.114

The program funded a total of 84 projects to improve service for 218,000 households.115

A 2011 audit of the Broadband Canada program concluded that overall, the program is meeting its predetermined criteria.116 However, this program was not subject to the same rigorous scrutiny as CAP and BRAND, with no evidence found of a similar cost-benefit analysis.117 McNally et al. (2017) argue that meaningful analysis of federal broadband program performance was not published after roughly 2005. 118

The major rationale emphasized by program documents was the importance of broadband for participation in the digital economy.119 As seen in the literature review, there are

112 McNally et al., 63. 113 Ibid. 114 Ibid., page 52. 115 Blake et al., 28. 116 Industry Canada, “Audit of the Broadband Canada Program,” 2011, https://www.ic.gc.ca/eic/site/ae-ve.nsf/eng/h_03405.html. 117 McNally et al., 50. 118 McNally et al., 50. 119 McNally et al., 72. 29 | P a g e many different impacts that could have been used as rationale for this program, however the timing in 2009 just after the financial downturn may be a factor as to why solely the economic benefits of broadband were emphasized over governmental service provision like with CAP.

Unlike the BRAND model of community champions aggregating local support and demand for the project, this program focuses on private sector companies, non-profit organizations, or provincial/territorial entities that would like to be able to provide internet to underserved areas.120 One reason for this may be that CAP, BRAND, and the general advancement of technology created sufficient demand so as to make that function redundant.

It is important to note that this program and those that succeed it were not subject to the same level of scrutiny as CAP and BRAND, with no cost-benefit analyses published.

Connecting Canadians

Connecting Canadians is a program that started in 2014 and will end in 2019. This program incorporates elements of the previous BRAND and National Satellite Initiative programs. The investment of roughly $305 million aims to subsidize the upfront costs of telecommunications infrastructure in rural, remote, and northern areas.121 Of the total program funds, $50 million is designated for satellite internet projects in Nunavut and Nunavik and $240 million is targeted to rural areas in the rest of Canada.122 In northern areas, the program aims to support download speeds of 3 megabits per second, while in rural areas it aims for 5 megabits per second. Like

Broadband Canada, Connecting Canadians pre-determined a map of eligible areas that

120 Industry Canada, “Broadband Canada Launches its Call-Applications Process.” Canada.ca, 1 September, 2009, https://www.canada.ca/en/news/archive/2009/09/broadband-canada-connecting- rural-canadians-launches-call-applications-process.html. 121 Blake et al., 12. 122 Ibid. 30 | P a g e currently experience slower speeds than the targets. Private companies, government entities, non-profits, and Indigenous ISPs serving areas in the eligible regions submitted applications to receive funding. Also like Broadband Canada, Connecting Canadians funded mostly smaller and regional ISPs.123

Compared to Broadband Canada, Connecting Canadians has been slightly more cost effective. McNally et al. calculate that the program was able to connect households at the average per household cost of $527, compared to Broadband Canada’s $679.124

An important change noted by McNally et al. occurred between Connecting Canadians and Broadband Canada. This program was the first to attempt to quantify and reward proposals based on their end-user affordability.125 For example, northern projects applying for Connecting

Canadians funding must allow 20 GB/month plans for under $80/month.126

In addition to this new focus on affordability, Connecting Canadians came to rely even further on market forces, funding only ISPs instead of communities.127 As part of the program,

ISED states that “the final decision to offer high-speed internet in a given area rests with

ISPs.”128 McNally et al. argue that this program language is an “overreliance” on market forces and the reduction of the government’s role in an area of crucial infrastructure.129 Following from this shift is a reduction in the overall benefit that will accrue to rural and remote areas where market forces are weak. This again recalls the pervasive tension that ISED and the CRTC

123 McNally et al., 52. 124 Ibid. 125 Ibid., 62. 126 Ibid. 127 Ibid., 63. 128 Ibid. 129 Ibid., 64. 31 | P a g e find between competing sections of the Telecommunications Act to allow market forces to act uninterrupted while simultaneously guaranteeing access for all Canadians.

Connect to Innovate

When $500 million was made available through Connect to Innovate (CTI), 892 applications requesting a total of $4.4 billion came in before the deadline.130 This program was launched in

2016 and will invest $500 million by 2021 to bring high-speed internet connections to 300 rural and remote communities.131 The program mainly focuses on bringing backbone infrastructure to community institutions like hospitals, schools, and First Nations band offices that are currently underserved.132 This backbone may be fibre optic based, or may consist of microwave, satellite, or wireless service.133 A smaller portion of the funding is allocated for upgrading existing infrastructure and providing “last-mile” connections to households and businesses.134 The logic behind this model is to provide the most costly part of the infrastructure needed to attract private sector investment in household and private business connections.135

Projects that serve eligible communities were invited to apply, and due to overwhelming uptake, there is not expected to be another intake of applications.136 The communities that were defined as eligible were either more than 2 kilometres from the nearest point of access to

130 Perry Hoffman, “ Connect to Innovate is just a "drop in the bucket" as a broadband solution.” 131 ISED, “Connect to Innovate,” Canada.ca, 28 May, 2018, https://www.canada.ca/en/innovation-science-economic-development/programs/computer-internet- access/connect-to-innovate.html. 132 Ibid. 133 ISED, “Connect to Innovate – Frequently Asked Questions,” Canada.ca, 9 July, 2018, https://www.canada.ca/en/innovation-science-economic-development/programs/computer-internet- access/connect-to-innovate/faq.html. 134 ISED, “Connect to Innovate.” 135 ISED, “Connect to Innovate – Frequently Asked Questions.” 136 Ibid. 32 | P a g e a high-speed backbone network or those without year-round road access and/or dependent on satellite internet access.137

Following the example set by Connecting Canadians, CTI required projects to provide end-user prices to take affordability into account when assessing applications.138 Though a difference between CTI and the previous two programs is that telecommunications giant Bell

Canada is behind almost half of the projects that have been announced so far.139 This is unlike

Broadband Canada and Connecting Canadians, two programs that gave the majority of their funds to smaller companies on the competitive fringes of the telecommunications market. To date, only $366 million of the allocated $500 has been dispersed to ISPs and communities.140

CRTC Funding

The new CRTC funding aims to complement existing programs. Applicants who can demonstrate funding support from other federal, provincial, Indigenous, or municipal government sources will be given preference.141 Projects with funding from community groups and non-profit organizations will be given this consideration as well. The CRTC has given early indications that they will intervene to promote open access to infrastructure made with its grants.142 Part of the funding from this program will come from phasing out the local voice

137 Ibid. 138 Ibid. 139 ISED, “Announced Connect to Innovate projects,” Canada.ca, 16 July, 2018, https://www.canada.ca/en/innovation-science-economic-development/programs/computer-internet- access/connect-to-innovate/announced-projects.html. 140 Ibid. 141 Perry Hoffman, “ Connect to Innovate is just a "drop in the bucket" as a broadband solution.” 142 Ibid. 33 | P a g e subsidy.143 In June 2018, the CRTC decided that the voice subsidy would be phased out over the next three years to focus on an internet-first approach.144

This program stems from the new ruling that broadband at speeds 50 megabits per second (Mbps) with unlimited bandwidth is an “essential service” across the country. The 2018-

2019 Departmental Plan for the CRTC states that its target is to ensure that 90% of homes have access to universal service objective speeds by 2021.145 However, this new universal service objective was not accompanied by any accountability measures to ensure that those in hard to reach areas are provided access to the newly essential services.146 The CRTC broadband infrastructure fund will be one tool that the commission can use to encourage ISPs to offer these services by subsidizing new infrastructure and upgrades.

Many details of the program are still unknown. After the announcement of the general program design in late 2016, the CRTC spent roughly one year consulting with stakeholders on the specifics of the fund.147 Since consultations have concluded in December 2017, ISPs have been waiting for details that are to come “as soon as possible in 2018.”148 The distribution of funds will competitive and proposal based, meaning once the full eligibility requirements are

143 CRTC, “New Funding Mechanism – Backgrounder,” Canada.ca, 21 December, 2016, https://www.canada.ca/en/radio-television-telecommunications/news/2016/12/new-funding- mechanism.html#fn2. 144 Telecom Regulatory Policy CRTC 2018-213, Ottawa, 26 June 2018, https://crtc.gc.ca/eng/archive/2018/2018-213.htm. 145 Treasury Board of Canada, “Infographic for Canadian Radio-television and Telecommunications Commission,” TBS InfoBase, accessed 19 August 2018, https://www.tbs- sct.gc.ca/ems-sgd/edb-bdd/index-eng.html#orgs/dept/93/infograph/results. 146 The Canadian Press, “Basic internet speed, service levels may not be enforced by CRTC,” CBC News, 12 April 2016, https://www.cbc.ca/news/technology/crtc-internet-1.3531585. 147 Matt Prokopchuk, “Internet providers still awaiting details of announced CRTC broadband fund, Tbaytel says,” CBC News, 7 March 2018, https://www.cbc.ca/news/canada/thunder-bay/tbaytel- waiting-crtc-decision-1.4564590. 148 Ibid. 34 | P a g e released, there will be a considerable amount of time before funds are distributed as applications are reviewed by a third-party administrator.149 With funds distributed in 2019, there will be considerable pressure to complete projects and meet deadlines to ensure the target of 90% high-speed availability by 2021, though it is important to note that the commission does not report the current access rates in its Departmental Plan or on the

Treasury Board InfoBase.150

Findings

This section aims to show how the rates of internet access have increased and compare urban and rural areas with special attention paid to the different federal funding programs in operation over time. In short, rates of increase have been relatively steady, and a difference-in- differences approach cannot discern significant impacts of any one program with the data available.

149 CRTC, “New Funding Mechanism – Backgrounder.” 150 Treasury Board of Canada, “Infographic for Canadian Radio-television and Telecommunications Commission.” 35 | P a g e

Statistics Canada Internet Use Survey Data 90

20 % of % respondents whothe use internet

0 1996 1998 2000 2002 2004 2006 2008 2010

Rural Urban Canada

Figure 1. Source: Statistics Canada Internet Use Survey.151

The first source of data analyzed, presented above in Figure 1, is the Canadian Internet

Use Survey. This survey was conducted periodically between 1997 and 2012. Between 1997 and

2009, the data is presented by census metropolitan area and “other” or rural areas. After 2010 the data cannot be compared in this way. The chart above compares the 15-17 largest census metropolitan areas to rural regions as well as the national average. It is apparent that internet use consistently lags in rural areas. In addition, the rate of increase has been slower in rural areas than in urban areas, with rural areas gaining 56.6 percentage points and urban areas

151 Statistics Canada, “Surveys and Statistical Programs – Canadian Internet Use Survey,” Statistics Canada.ca, 26 November, 2016, http://www23.statcan.gc.ca/imdb/p2SV.pl?Function=getSurvey&SDDS=4432. 36 | P a g e gaining 62.5 points. The biggest improvements were made between 1999-2000 and 2005-2007 in rural areas as represented by this survey data. It is unclear how much of this progress may be due to the CAP and BRAND programs that were operational during those years.

Increase in Household Internet Access 100

40 athome 30

1996 1998 2000 2002 2004 2006 2008 2010 2012 Percentage Percentage of respondents withaccess internet to Calgary Alberta Canada

Figure 2. Source: Statistics Canadian Internet Use Survey.152

152 Ibid. 37 | P a g e

Trends in Internet Access Rates 14

6 increased 4

1998 1999 2000 2001 2002 2003 2005 2007 2009 2010 2012 Percentage Percentage pointsby which holdholdinternet access

Calgary Alberta Canada

Figure 3. Source: Statistics Canadian Internet Use Survey.153

Drawing again from the Canadian Internet Use Survey, Figures 2 and 3 compare Calgary’s home internet access rate to that of all of Alberta and all of Canada. Statistics Canada found that

Calgary was the most connected city in Canada in 2012, which makes it an interesting urban area to compare to the Canadian and Albertan averages. Figure 3 shows the increase in rates.

Figure 3 shows the number of percentage points by which access rates increased each year as well as the general trend lines. As expected, the increase in internet access rates is slowing down faster in Calgary, a highly connected city, than Canada in general, with lower average access rates. The CAP, BRAND, and Broadband Canada programs were in place during the years in which Canadian rates experienced the most progress, however again it is difficult to attribute

153 Ibid. 38 | P a g e increases in access to any one program.

Home Internet Access in Northwest Territories 100

20 % housholds % withinternet athome

0 2009 2014

NWT Yellowknife Dehcho

Figure 4. Source: NWT Bureau of Statistics.154

Data is scarce when it comes to internet access in the northern territories, in large part because the principal Statistics Canada measurement of internet use does not survey the territories. Therefore, Figure 4 provides a point of comparison between the territories and the provinces. This also illustrates the gaps between rural and urban access in the Northwest

Territories by comparing Yellowknife and Dehcho to the territorial average. As in southern

Canada, the major urban centres enjoy more internet access and uptake than the rural areas. In

2009, Yellowknife had a higher rate of home internet access than Calgary, however the rural

Dehcho region lagged 27.7 percentage points behind the rural Canadian average.

154 Northwest Territories Bureau of Statistics, “2009 and 2014 Community Surveys,” Recently Released Survey Reports, accessed 19 August 2018, https://www.statsnwt.ca/recent_surveys/. 39 | P a g e

Availability of Basic Internet Services 100

% of % householdswith internet basic available 70 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Urban Rural

Figure 5. Source: CRTC Communications Monitor reports.155

Using the of all CRTC Communications Monitor reports currently available, Figure 5 illustrates the differing availability of basic internet service (1.5 megabits per second) between rural and urban areas. The rates of availability are higher than the rates of use given in Figure 1 because internet availability does not equal internet uptake. Though a broadband connection is physically available in virtually all urban areas in Canada, the rate of uptake is lower due to economic and skills barriers, or simply a lack of interest. The dip in rural availability in 2008 has been double-checked and is most likely a reporting error in the Communications Monitor reports. The largest improvement in rural internet availability rates occurs between 2008 and

2009 in this graph, during the CAP and Broadband Canada programs. While it is useful to look at availability rates, and this is indeed the indicator that makes a community eligible for funding

155 CRTC, “Communications Monitoring Reports,” General Plans and Reports, accessed 19 August 2018, https://crtc.gc.ca/eng/publications1.htm. 40 | P a g e under the federal programs discussed here, this data must be combined with the internet use rates above to understand the real impact that internet availability is having.

The figures above appear to show that these federal programs achieved many of their stated objectives as internet became more available and use increased over time. As seen in

Figure 5 above, the availability rate of the internet has been rising over the active time period of these programs. However, the reporting frameworks for these programs and the current state of data collection on this issue make proper analysis very difficult. Certain programs have reported their results in raw numbers of beneficiary households or communities, however broad data collection exists solely in percentages. This makes comparison and attribution very difficult with the data available.

The program data discussed above indicates that internet availability has increased in rural areas. BRAND connected 884 communities (no data on households), while Broadband

Canada and Connecting Canadians connected a total of 518,000 households.156 Further, Connect to Innovate aims to connect 300 more rural and remote communities to a high-speed internet backbone infrastructure. These gains are certainly significant. However, a difference-in- differences approach to comparing progress in rural and urban areas over the same time period reveals that this rural increase cannot necessarily be attributed to these programs. A significant difference between the progress made in rural areas and the progress in urban areas was not found given the available data.

It is also difficult to fully assess the impact on the communities connected by these programs because internet access does not equal internet penetration, illustrated by the

156 See program information on pages 24-31. 41 | P a g e difference between Figures 1 and 5. This means that even though all households in a given community may be able to subscribe to broadband internet services as a result of the program intervention, some choose not to.

As indicated by the 2012 Statistics Canada Internet Use Survey, 20% of Canadians who do not subscribe to the internet cite unaffordability as the reason.157 The Connecting Canadians program’s attempt at quantifying affordability is a step in the right direction to promote internet uptake for these consumers. An additional 61% of Canadians in the same survey indicate that they choose not to subscribe because they have no interest.158 This data shows that knowledge of the potential value of internet access and perhaps the skills needed to take advantage of it are lacking as well. After the CAP and BRAND programs, federal government initiatives to promote broadband nationally have not focused on remedies to these deficiencies that stand in the way of meaningful uptake of services provided through expensive programs.

The programs that succeeded CAP and BRAND focused solely on the supply-side of internet uptake, when there is perhaps an opportunity to maximize the value of these programs with more demand-side intervention.

Recommendations

After an analysis of program documentation, academic literature, and internet use and availability data, several key recommendations emerge. The first relates to data collection, dissemination, and results reporting. From a program evaluation perspective, the programs

157 “Canadian Internet Use Survey, 2012.” 158 Ibid. 42 | P a g e discussed here that followed CAP and BRAND were not subject to a meaningful scrutiny and data was not provided in useful ways. This decline in scrutiny coincides with an increased focus on private sector provision of internet, as the programs that targeted ISPs instead of community organizations were not subject to the same level of cost-benefit analysis as in the

CAP and BRAND evaluations.

For example, in ISED departmental results reports, the progress of programs like

Broadband Canada and Connecting Canadians is given in terms of number of households connected. While 518,000 households connected seems impressive, it is hard to scrutinize the progress made by these programs because Statistics Canada and the CRTC report on internet use and availability in terms of percentages, not raw totals. Indeed, this problem of proper data collection and reporting has been noted by other scholars in the field.159 Therefore, one recommendation is to gather both raw numbers and percentages of households with internet access on a community level before and after major interventions.

It is also worth noting that Statistics Canada has discontinued the Canadian Internet Use

Survey since 2012. In the midst of unprecedented government investment in internet access for remote communities, policymakers are making their decisions without a strong evidence base in the absence of quality data collection. Thus, another recommendation is to reinstate the

Canadian Internet Use Survey to understand how people are using the internet and the impacts of these trends on policy.

Certain other recommendations emerge from the literature. As pointed out by the First

Mile Connectivity Consortium (FMCC), funds for broadband infrastructure in Indigenous

159 McNally et al., 2017. 43 | P a g e communities are proposal-based, unpredictable, and non-continuous.160 There is an opportunity to simplify proposal and reporting processes for these funds to allow low-capacity Indigenous communities access. As well, providing smaller ISPs with sustainability, operations, and maintenance funding instead of only capital funding would help keep costs down for consumers. In these rural communities it is essential to ensure that consumer price points are affordable, lest the capital investment go to waste from the lack of a strong subscriber base.

Another emerging recommendation is to focus on the backbone infrastructure and encourage sharing these infrastructure networks between ISPs.161 As Terry Hoffman points out, this will be essential to ensuring that multiple companies are able to enter the market and provide the competition needed to keep consumer subscription fees affordable. This will also maximize the value of the immense public investment that the federal government is committing towards high-speed broadband for remote and rural areas. It is important to ensure that more than one company is able to benefit from the investment and as many consumers as possible are able to take advantage of the service. Therefore, regulation of ISP access to publicly-funded broadband backbone infrastructure must be carefully considered to allow for affordable sharing between multiple firms.

Following the example set by international leaders can help Canada regain the competitive advantage in connectedness it once held. This includes combining supply-side and demand-side policy interventions to make internet available as well as to develop skills and interest necessary to benefit from that availability. It also includes a mix of public interest and

160 Blake et al., 9. 161 Hoffman, “Connecting the North Series, Part V.” 44 | P a g e competition oriented regulation that recognizes the positive social and democratic impacts of internet connection as well as the economic impacts.

"Broadband internet access services are necessary to the quality of life for Canadians and empowers them as citizens, creators and consumers.”162 This statement was used by the

CRTC to introduce its new funding program. The discourse is indicative of the government’s priority to improve broadband services. If the CRTC and the federal government stand by this statement, it follows that public investment needs to be used wisely to achieve universal service goals. The present paper recommends that this is done by properly measuring program performance to gather information for evidence-based public policy decisions in the future, as well as following international best practices of active telecommunications policy.

162 CRTC, “CRTC establishes fund to attain new high-speed Internet targets,” Canada.ca, 21 December 2016, https://www.canada.ca/en/radio-television-telecommunications/news/2016/12/crtc- establishes-fund-attain-new-high-speed-internet-targets.html. 45 | P a g e

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Appendix: Illustration of programs over time

Figure 6: This graphic shows the programs in effect at different points in time. This illustration makes it apparent that interest in broadband provision has been increasing over time.

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