Welcome, everybody. Again, apologies. We had votes, and that's what happens.
We're in meeting number 93 of the Standing Committee on Industry, Science and Technology, and we are continuing our study on broadband connectivity in rural Canada.
With us today, we have, from the Canadian Cable Systems Alliance, Jay Thomson, CEO; and Ian Stevens, board member, chief executive officer of Execulink Telecom.
From the Institute for Local Self-Reliance, we have Christopher Mitchell, director, community broadband networks, by video conference from Minneapolis, Minnesota.
From SSi Micro Ltd., we have Dean Proctor, chief development officer.
Finally, from Xplornet Communications Inc., we have C.J. Prudham, executive vice-president, general counsel; and James Maunder, vice-president, communications and public affairs.
You will each have up to seven minutes to do a quick presentation, and then we'll get into our line of questioning.
We are going to start with Canadian Cable Systems Alliance.
Mr. Thomson, you have the floor.
Thank you, and good afternoon, Mr. Chairman and honourable members.
My name is Jay Thomson, and I am the CEO of the Canadian Cable Systems Alliance, or the CCSA. With me today is a member of our board, Ian Stevens, who is also, as mentioned, the CEO of Execulink Telecom based in Woodstock, Ontario, in southwestern Ontario. It's our pleasure to be here today to discuss our recommendations to increase the reach and quality of critical broadband infrastructure in underserved parts of the country.
We are well placed to speak to this issue. CCSA represents more than 110 independent companies providing communications services all over Canada. Our members serve hundreds of thousands of customers in about 1,200 communities, generally outside of large urban markets. Our members connect Canadians who may not otherwise have access to the Internet or TV or telephone services, because they live in areas where the larger players in the industry have not invested. In many rural areas of the country, our members are the only terrestrial providers of these services.
As committee members can see in our written submission, we have a number of concrete recommendations that we believe will help improve broadband connectivity in rural Canada.
In these remarks, I'll highlight three of those recommendations.
First of all, broadband service should be viewed as critical infrastructure that is on par with electricity and roads. The government has made important progress with its $500-million connect to innovate program, but more funding is needed. In today's digital economy, it is vital that the government invest in the country's broadband infrastructure, just as it does for other physical infrastructure deemed critical for the well-being and future of our communities.
It's also important to recognize that Canada's very remote areas are not the only ones that need government investment in their broadband infrastructure. As Ian can attest to, based on his own experience, sparsely populated regions very close to major markets will also often require government intervention to get the broadband services they need.
Our second recommendation is to structure broadband funding programs so as to leverage the resources and networks that local communication service providers have already established. Local providers throughout Canada have tremendous value to add in extending broadband services to rural areas. Because they are on the ground in their communities, it is local service providers who best understand their communities' needs. More importantly, it's local service providers who are the most motivated to provide the connectivity that their communities require to survive and thrive. Why is that? It's because they are members of those communities too.
In order to support smaller local providers in rolling out broadband, the government, in our opinion and recommendation, should adopt a simplified application and reporting process for smaller projects. As successful entrepreneurs, local providers know how to stretch every dollar they might receive from government to achieve the best results. If you overburden their limited administrative resources with lots of complex paperwork, you'll knock them out of the game before they even have a chance to lace up.
The third of our recommendations that we'd like to highlight today is that broadband funding should not just support capital projects but should also help to cover ongoing network operational costs and upgrades. To date, federal funding initiatives have subsidized only direct capital outlays. However, it's equally important to ensure that the networks built with those funds are sustainable.
To that end, funding programs should seek to ensure that backhaul or transport services are available to smaller operators at reasonable, affordable prices. Likewise, funding programs should help defray the ongoing costs of access to support structures such as hydro poles. This hydro pole issue is a very hot topic right now, because the Ontario Energy Board has recently approved huge increases to the pole rates that CCSA's members will have to pay in that province.
For the smaller companies that serve low-density areas, where there are substantially more poles between customers than in urban areas, such increases have a disproportionate negative impact. They create a situation whereby, even with capital funding support, the increased operational costs may foreclose a small company's ability to build a sustainable broadband network.
As such, those kinds of rate increases run directly counter to the government's objectives for its broadband funding programs.
Thank you, Mr. Chair and committee members, for undertaking this important study and for inviting our association to be here with you today. We'd be happy to answer your questions.
Thank you very much, and thank you for the invitation. I'm honoured.
We have a rather unique body of knowledge and study regarding local governments' participation in various investments. My focus is on local government policies around broadband. From the Institute for Local Self-Reliance in Minneapolis, I run a program called “community broadband networks”. This came about largely because we felt that the Internet—we recognized this about 12 years ago—was becoming essential for local businesses, local economies, and quality of life issues that communities were concerned about, but local governments had no ability to compel existing providers to meet the needs as they saw them. We were looking at ways in which local governments could ensure that they had the networks they needed, so we focused on a number of different areas.
I should say that it's a somewhat limited number of governments that have done this sort of thing. We're tracking local government networks in the United States and Canada. There are also quite a few in Sweden. I've had a chance to visit with some of them. Other than that, there aren't very many. This is something that is somewhat specialized and unique to certain nations.
One of the things we've been most known for is what local governments are doing in terms of building their own networks. Two common examples that we cite are Wilson in North Carolina and Chattanooga in Tennessee. For the purposes of talking about rural broadband, I wanted to bring them up, because their goal is not only to serve themselves, which they are doing on a city-wide basis, offering gigabit services, very high-reliability networks, and low prices that are competitive. They're really doing a tremendous job by all measures. They also have ambitions to serve their neighbours. They would very much like to serve the rural areas around them, but have been prohibited from doing so by state law.
We do have other states, such as Minnesota, in which we have local governments such as Windom—it's in what I think of as farm country in southwest Minnesota—which has built a network for itself. It's about 4,000 people. They expanded that to serve 10 towns near them and the farm country in between, a model of where local governments that were focused on regional improvement have been able to first serve themselves and then expand to nearby areas.
One of our areas of study is more relevant to rural, and that is the rural electric and telephone co-operatives we have, which have brought telephone and electricity to much of the rural United States. An example that I would cite is a surprise for many people; in North Dakota, the vast majority of the territory is covered with fibre optics. In fact, if you're on a farm in North Dakota, you're far more likely to have high-quality Internet access than if you're in one of the population centres. That was done almost entirely with co-operatives but also with local, independently owned companies that reinvested in their communities because they are local communities, much like Jay Thomson was just discussing in terms of the incentive for locally based entities.
Those are cities that have built their own networks. Those are co-operatives that have built their own networks. Our electric co-operatives are just getting into this. We're tracking 60 electric co-operatives that are offering service to businesses and residents outside of their own purposes for keeping the grid stable. We expect that to be well over 100, and possibly approaching 150 by the end of this year. For comparison purposes, we have about 800 or 900 electric co-operatives in the United States. That's a substantial jump.
The final thing we tend to study in terms of local governments and these co-operative solutions is partnerships. Here again we have something that's directly relevant to Canada. One of the companies that has one of the most promising partnerships is Ting. It's a company run by Canadians and staffed by Canadians, and it operates almost entirely in the United States of America. It has partnered in five different local fibre optic investments, building fibre optic networks. It also has a wireless division that resells wireless service.
In the city of Westminster, Maryland, which I've written a report about, Ting has partnered with the city to bring universal coverage at affordable rates. It's a balanced partnership that we've identified as a model in which both the government and the private sector share in the upside and the downside. We've seen too many things in the United States that are called partnerships where one side really dominates the risks and the other side dominates the benefits. I think that's something to be concerned about. Ting has offered a model for being willing to share in both.
The reason I bring them up is that they are interested in finding Canadian cities to work with, so it's directly relevant.
I will note one final thing. In preparing, I was looking at some of the briefs. First of all, there's a lot of very good information on the record. wanted to amplify something, which is the need for both last-mile and middle-mile connectivity.
We have seen programs that have focused too much on a middle mile, or backbone in different parlance, connecting one geography to another geography, rather than distribution fibre, on the mistaken notion that with enough backbone fibre, one will spur investment in last-mile services. In our experience, that does not happen. The economics of last mile are challenging. They are so challenging that having a more robust middle mile does not change them significantly.
I strongly concur with the many people who have stated that we need to be focused on both in order to solve this challenge in rural areas.
I'm hoping to be helpful in answering questions relevant to my background.
Thank you very much.
I want to thank the committee for this opportunity to contribute to your study and to discuss plans to improve rural and remote area broadband connectivity.
If I could just take a quick second, I have a very dear friend in the room, Adamee Itorcheak, who I wasn't certain would be here today. Adamee is at the back, and he's the founder of Nunanet Worldwide Communications, the first Internet service provider in Nunavut. He was also a member of the National Broadband Task Force back in 2001, so I know he's extremely interested in the work of the committee.
I'm thrilled that Adamee is here today.
I'll provide a brief overview of SSi and our operations in the north, but my focus is on the policies we believe will sustainably improve connectivity for all of Canada's remote and rural areas. Those policies will let local talent contribute their ingenuity, creating truly Canadian-made and northern-made models that can be exported around the world.
First and foremost, we believe that to deliver attractive and affordable rural and remote area broadband, the policy framework must support developing local talent, which rests on three well-established principles: one is competitive and technological neutrality; two is a focus on funding backbone transport infrastructure; and three is open access for all service providers to the backbone and gateway facilities. I'm happy to say that ISED and the CRTC have already begun to implement many of the needed policy changes since this committee began its work, but more needs to be done. It's increasingly apparent that government and industry must defend the good work and changes already under way.
What is SSi? We were formed and headquartered in Canada's north. We're a family company, launched 28 years ago by Jeff and Stef Philipp. Our roots go further back, to the Snowshoe Inn, from which SSi has its name. The inn was founded 54 years ago by Jeff's parents in the community of Fort Providence in the Northwest Territories.
We specialize in remote area connectivity, we provide broadband, mobile, and other communication services across Canada's north, and we've also carried out projects in Africa, the South Pacific, and Southeast Asia. Our mission is to ensure that all northern communities have access to affordable, high-quality broadband, and to achieve this we've invested heavily in infrastructure and facilities. In 2005, we built and launched the Qiniq network to provide affordable broadband to all 25 communities in Nunavut. Investments by the federal government covered part of the initial cost of satellite transport and infrastructure. Since then we've co-invested over $150 million into Nunavut infrastructure, and we have paid over $10 million to our community service providers. Our local agents were our key to success in each one of our 25 communities.
In September of 2015, we announced a $75-million investment in Nunavut's broadband future, and this includes $35 million from ISED's connecting Canadians program for the purchase of satellite capacity. We've directly committed over $40 million for additional satellite capacity and network-wide upgrades to both the backbone and last-mile infrastructure throughout the territory.
Qiniq, the broadband service, improved the lives of Nunavummiut by providing access to cost-effective broadband. This was previously impossible. Before 2005 most users had no access to broadband infrastructure. With Qiniq, for the first time every Nunavut community had affordable Internet access for the same price, immediately allowing consumers access to the digital age.
Now, with our latest investments, we're delivering another first. As of February 1, just last week, Clyde River and Chesterfield Inlet residents have access to mobile voice and data services for the first time. Until now the vast majority of Nunavut has had no access to mobile services. We've completed the SSi mobile deployment throughout the territory, and all residents will soon benefit from the latest generation 4G LTE technologies—we're doing phased rollouts to the communities—with the same service level and pricing available in every community.
The new 4G LTE system enables high-performance broadband mobile voice and data, telemetry, video conferencing, and more. It's also offering for the first time ever a less expensive and more versatile alternative to the old wireline phone. To make the service unique, we've eliminated long-distance charges between communities, bringing families closer together.
Our company is on the front lines. We know and live daily the positive impact of information technology, and we see the positive impact of our investments for consumers, organizations, and small business in Nunavut. Unfortunately, over the last few years the ever-increasing rates of data transfers, and the corresponding demand for scarce backbone capacity, presented significant challenges to Arctic communication systems.
Where once we made great strides to close the gap, we're once again seeing the digital divide deepen between Canada's north and the south of the country.
Investing in better last-mile technology is an essential step to improving rural and remote area connectivity. To be clear, SSi has deployed last-mile infrastructure into every Nunavut community that can deliver the same quality of broadband and mobile service that you can find in downtown Ottawa. My iPhone 6 and iPhone 7 work in each one of the 25 communities as well as they work here.
To ensure that northerners receive the full benefit of these new last-mile technologies, significant additional investments into wholesale backbone capacity are urgently needed. In this regard, December 2016 was a pivotal month for the evolution of telecom policy in Canada. New policies are recognizing that broadband access is essential and they establish major program changes and new initiatives for public investment in broadband backbone infrastructure.
These advances are important, and we believe they need to be recognized, promoted, and protected by this committee. Together these policy initiatives build a path that will let local talent shine by refocusing away from exclusive support to the phone companies, which despite a century or more of public support have failed to deliver broadband to many Canadians in remote and rural areas. The challenge now for all of us, this committee included, is not to repeat or perpetuate past mistakes. If there are to be public investments into rural and remote-area communications infrastructure—and we believe there should be—the investment process must be transparent, and the funded infrastructure needs to be open to all in order to support competition, further investment, innovation, and consumer choice.
On December 15, 2016, ISED launched its connect to innovate program. For the first time, public funds were dedicated to developing open-access backbone networks, to be made available on a wholesale basis. Susan Hart, ISED's director general for the program, spoke before you in November.
SSi wholeheartedly supports the open-backbone approach. When public investment focuses on backbone infrastructure and requires that it be made available on a wholesale basis, it encourages further private investment and innovation in the last mile by companies such as ours. This leads to a choice of technologies, service providers, and opportunities for consumers.
It's important. As SSi has proven in Nunavut and elsewhere, quality local access networks can be built in remote areas, largely due to advances in technology, in particular wireless and IP technologies.
Moving ahead, the CRTC also presented before you in November, not only noting that broadband is now an essential service, but also establishing a significant new fund, the rules of which are still being worked out. But as is often the case, the devil is in the details. We have to ensure policies are enacted as intended, and that inertia and neglect and incumbency do not bring us back to an end-to-end monopoly where incumbent phone companies receive all the public funding, restrict competitor access to their publicly funded networks, and thereby squeeze out further investment and consumer choice.
We'd hope that you would also recognize how the three principles I mentioned earlier are necessary to support that local talent. These principles are competitive and technological neutrality; funding focused on the backbone; and open gateways, meaning that all local service providers must be offered open and affordable access to backbone connectivity.
In summary, though we've come a long way, much still needs to be done to improve remote and rural area connectivity in Canada.
I will cut this short.
I would like to thank the committee for the opportunity to make my presentation before you today.
I will be very happy to answer your questions.
Good afternoon. I'm C.J. Prudham, the executive vice-president, general counsel for Xplornet Communications Inc. With me is James Maunder, vice-president of communications and public affairs.
Thank you for the invitation. We are delighted to be here today to participate in the committee's study on rural broadband connectivity. At Xplornet, it's a subject we understand very well. Our business was founded over 10 years ago with a simple mission: to make affordable, high-speed broadband available to every Canadian. This is what drives us.
Xplornet is today the eighth-largest Internet service provider in Canada and the only one in the top 10 exclusively focused on rural Canada. We are truly national, serving over 350,000 households, or over 800,000 Canadians, every day in every province and territory. We want rural Canadians, wherever they choose to live, to be able to affordably connect to what matters.
Therefore, our goal at Xplornet is to deliver the Internet to our rural customers at the same speeds that Canadians receive it in the largest cities. As we announced in 2015, Xplornet will deliver packages with speeds of 100 Mbps by 2020 throughout our service area—double the CRTC's target.
As was noted by others before this committee, Canada's geography requires a diversity of technologies—fibre, fixed wireless, and satellite—to connect the country. All of these technologies can achieve the results.
Canada's population density averages just under four Canadians per square kilometre. Yet today, virtually all Canadians, 99%, have access to Internet connectivity, and that includes 95% of rural Canadians. Canada is ranked fourth in the G20 for per capita broadband connections that exceed 15 megabits per second.
We got here through hard work, innovation, and unprecedented private sector investment. In the last five years alone, Xplornet has invested over $1 billion in its network, focused entirely on bringing better service to rural Canada. No doubt other providers will share their figures.
Now that coverage exists virtually everywhere in Canada, the question becomes how to keep up with consumers' growing needs for speed and data. The introduction of 5G networks and the Internet of things is transforming our everyday lives. In 24 months, the average Canadian household will have between 15 and 20 devices connected to the Internet.
So how does rural Canada keep pace? We believe there are three key ingredients to success. The first is private investment. The second is targeted public investment. The third is spectrum.
The first issue, we would submit, is for governments to create the right conditions to allow companies to continue to aggressively invest in their networks. Sometimes this includes governments simply staying out of the way. After all, the goal should be sustainable solutions where networks are economically viable to be able to make continuous private investments that are needed to meet consumers' growing demands. But in certain areas, it will also include targeted public investment. To that end, Xplornet has supported and worked closely with the Government of Canada through its various iterations of funding programs, the first being broadband Canada, the second being the connecting Canadians program, and the third—most recent—being connect to innovate.
Where most companies, including Xplornet, can agree is on the need for a robust backbone network to drive investments and capacity into rural areas. You've heard witnesses today echo that sentiment.
At Xplornet we believe the Government of Canada's connect to innovate program is a great start. Similarly, the details of the CRTC's broadband funding regime, the seeds of which were announced one year ago, are still to be determined, and we await further details on that fund. We think all providers should look forward to clarity and coordination on these programs so that we can accelerate our own investment plans.
Finally, we believe we need consistent and reliable access to wireless spectrum to fuel our networks all across the country in rural Canada. Of course, these policies are determined by Innovation, Science and Economic Development Canada.
We point out that in recent years the explosion of data consumption by Canadians has been the same in rural Canada as it has been in urban Canada. Our rural customer usage across our LTE network doubled in the last year and exceeds over 100 gigabits per month, which is in line with what the CRTC says is the average for all Canadians. Over 60% of that usage is video, which again is in line with the national averages.
While mobile data use has grown significantly, too, the fixed home connection continues to be the workhorse that carries the heavy data uses like Netflix and Apple TV, yet all significant spectrum allocations made in Canada in the last five years have focused on mobile needs. There has not been an allocation designated for fixed wireless broadband. How do we meet growing the needs of consumers if one primary input has not changed?
We strongly believe that there should be a long-term spectrum strategy to allow rural broadband to keep up. Capacity and speed of rural broadband cannot keep pace without additional spectrum.
The cornerstone of this strategy must be a plan that strikes a balance to allow mobile broadband and fixed rural broadband to expand together to meet consumers' needs. One cannot come at the expense of the other. Rural consumers cannot be left behind.
In summary, Xplornet believes three critical factors must be met in order to create the right conditions for rural broadband connectivity.
Governments at all levels must allow the private sector to do what they do best, invest in our networks, driven by consumer demand. Xplornet is proof positive there is a business case for investing in rural Canada.
The second is targeted government investment for fibre transport and backhaul services that can help accelerate broadband deployment in rural areas. This support should be encouraged when it is coordinated and subject to consultation with the private sector.
And finally, rural Canada must be given access to the spectrum it needs to keep pace with urban Canada. It is the oxygen that breathes life into our rural networks.
Thank you again for the invitation to appear here today. We would be pleased to take any questions.