If I understand correctly, you want us to present our project and to talk about what we are doing in our rural areas.
More than three years ago, the RCM of Montcalm began a project to deploy a fibre-optic network to homes. Fifteen years ago, as part of a provincial program called Villages branchés, the RCM had already installed a hundred or so kilometres of fibre-optic cable in order to connect the school boards. So it wanted to use that network and make it available to its residents.
The RCM did a detailed study to find out the number of residents and residences in its territory that were underserved. That turned out to be 7,100 of 22,000 residences. Those figures were very different from the ones that the Government of Canada had. Local service providers claimed that the region was being well served, but our audit of the municipality's residents showed us that the minimum speed was not being achieved.
The project had financial and technological aspects. The RCM obtained funding of $12.9 million through the usual processes for that kind of installation. The amount was approved by the Quebec Ministère des Affaires municipales et de l'Occupation du territoire and by the RCM.
A major federal grant program, called Connecting Canadians—Digital Canada 150, came to support the project in quite a significant way. We had submitted a grant application to the department of the day, known as Industry Canada. The Montcalm project was selected for its excellence. We received grants of $4.7 million, the largest amount to be awarded to a company that did not exist at the time. The RCM was actually still in the process of establishing a not-for-profit organization that would build the network.
This project is close to the RCM's heart. It is being carried out by and for all residents and it is being led by a not-for-profit organization of four non-elected and four elected officials. The project is currently under way.
We are perhaps in a good position to explain one matter of importance to us, an operational constraint on our project: rights of way. For more than 30 years, the field of telecommunications in the country has become increasingly deregulated, as illustrated, for example, by the historic decisions made in 1985, 1987, 1990 and 1992. The CRTC looks very favourably on competition in telecommunications and innovation in Canada. But one obstacle remains: rights of way. Support structures belong to the legal owners, those who built the network and who control access to it.
The number one rule for success in telecommunications is to obtain the right of way. It is still very difficult for us to get access to support structures in our province because all the poles are equally divided between Hydro-Québec and Bell Canada. We also have to modernize those networks at our own expense: the last group to ask for access to them is responsible for the costs of renovating them. That regularly requires us to bury the fibres and to use methods of communication and transmission that are much more costly. We are therefore prevented from progressing as fast and as far as we would like.
I do not know how much time I have left, and I could probably keep talking to you about this for many hours.
But that is basically where we are. The network is being built. The RCM decided that it would have one, and it will indeed have a network bringing optical fibre to the home.
Would you like to add anything, Mr. Thouin?
Thank you for the opportunity to appear.
I've had the pleasure of working for SaskTel for over 40 years, 30 of which have been in a senior executive capacity. I saw our crown corporation deliver individual line service, cellular, and Internet throughout the province for the very first time. As the most rural province in Canada, we have a very good understanding of the challenges that arise in meeting the Internet and cellular needs of our rural residents.
Before delving into those challenges, I want to address the issue of acceptable high-speed Internet service. In that regard, we support the commission's target of fifty-ten, but would note that ultimately what you think of that goal depends on where you are today with regard to Internet connectivity. For example, if you're relying solely on satellite Internet, or if your service is subject to congestion, most of the people we speak to in Saskatchewan would call fifty-ten a pipe dream, and would settle for a consistent five-one or ten-two service. We note that the CRTC acknowledges the challenges of achieving fifty-ten for rural customers and suggests that rural improvements may take up to 15 years. That is far too long a time frame. Rural Canada needs better Internet service today, not up to 15 years from now.
There are realities that we've overcome to provide service. As I said, Saskatchewan is the most rural province in Canada due to the wide open spaces between most rural residents. It is hard to bring this to life for people familiar with their own rural areas in eastern Canada. Basically, think about the distances between farms and houses in your rural areas that you're familiar with and multiply those distances by a factor of about seven.
We recently took DSL Internet to Kendal, Saskatchewan, a village of 77 people. While Kendal is in the middle of productive farmland, with other towns and villages dotting the highway every 13 kilometres, the biggest town around is Indian Head, with 1,900 people, some 35 kilometres away on a grid road. After that it's Regina, which is 80 kilometres away. The issue for us is that in telecommunications, the lack of density drives up capital costs per person served, and distances between groups of people drive up capital costs. We've overcome many things to meet the current situation in Saskatchewan, where virtually any community of any size has wireline Internet service, virtually any town of a decent size has adequate cellular service, and we've recently announced a plan to expand cellular service to those small towns.
The backbone, the backhaul, is a building block for our Internet service. We continue to invest heavily in backbone facilities, facilities that are all made available to competitors at prices that have what I would call the “oversight of regulation”. This job will never be 100% complete, as the data traffic will continue to grow, and we will continue to have to invest. But today, other than a few uneconomic backbone routes that are part of a Connect to Innovate application, our backbone will be meeting our current needs until we need more capacity.
For non-cellular, the next biggest challenge is “last-mile” facilities. If it's wired service, then we require the installation of more fibre, more cabinets and, ultimately, to meet the fifty-ten goal for us, fibre to the premise. We recently fibred Rosthern, Saskatchewan, for $1.8 million for 1,083 residences. That's $1,700 a residence. We won't get all the customers, because there is a cable competitor in that town. For a fixed wireless service, it's all about spectrum, and not cellular spectrum. In rural Saskatchewan we have lots of cellular spectrum. It's the non-cellular spectrum that we need, which is constraining our ability to meet customer demands.
In terms of cellular service, we've been doing a lot of work on the economics of expanding cell service to fill in many of the unserved and underserved areas of Saskatchewan. To cut to the chase, each unserved area requires a new fibre-fed cell tower and the equipment required to be installed at the cell site. On average, it's $1 million per cell tower. Basically, most of the expansion is uneconomic due to the relatively small number of people in the footprint of these new towers. I want to remind you that cellular spectrum is not at all an issue. We have all of our unused cellular spectrum available for these towers. It's the high initial capital costs involved in building a tower.
I have four recommendations for what we need.
First, for fixed wireless Internet service, we need more spectrum suitable for fixed wireless Internet service. Currently, our fixed wireless service offering is spectrum-constrained and we have stopped cells in a number of sectors. Ultimately, in the absence of changes in technology spectrum utilization or spectrum assignment, we do not see a path to 50-10 for fixed wireless Internet service.
Second, rural Canada needs a program in addition to the CRTC program: $750 million, minus the money designed for far north satellite, is a drop in the bucket. The current timelines for deep rural essentially mean that the digital divide between rural and urban Canada will continue to grow.
Third, to meet the future need for speed, ultimately fibre will need to be installed for as many customers as Canada can afford; where fibre is unaffordable, those customers will need to be served by fixed wireless and satellite. That means in terms of fibre, we'll need a capital contribution for locations that are close to being economical. For those that are extremely uneconomical, in addition to a capital contribution, there will be a need for ongoing financial support.
Fourth, for unserved and underserved cellular areas, there will be a need for a capital contribution for those locations that are close to being economical, and—again for more sparsely populated areas—an ongoing subsidy program, because the capital for cellular does not stop with the initial installation, and that capital will be uneconomical as well.
Thank you for having us. Thanks for your time today, committee.
We at SWIFT in southwestern Ontario believe that broadband really should be an essential utility. We cannot participate in the modern economy today without it. We believe that SWIFT is the solution that is in place for southwestern Ontario today.
I'm not going to read this whole slide, but currently we have a lot of underserved areas. The density may be slightly higher than it is in Saskatchewan, but not by much in many of the rural areas in southwestern Ontario. Our residents have unequal access to digital services. Our urban residents have much better access than our rural residents, again, meaning access to education, health care, government services, the whole thing.
Even cows wear Fitbits now. Our agricultural communities are very dependent on technology. The third line in the fourth concession needs as much or, arguably, more broadband than their urban counterpart, because they have to drive farther to get to access services when they don't have broadband.
There are urban needs as well. We have a member of SWIFT who's building a data centre in Cambridge. There's not enough fibre for the customer to build the data centre in our technology triangle in southwestern Ontario.
It's a big problem. How does SWIFT solve this? Our catchment area, our project area, has 10% of Canada's population. We have an aggregated demand model. We have members who join our organization, and we do procurements on their behalf. When we go to the providers—we now have 1,500 sites today, and we hope to have 3,000 by May or June—that then gets on the table so that when providers bid for services, it's not only the current incumbents who are bidding for service but also, potentially, new providers coming into the area. That increases the competition, which is what we're hoping will solve the problem in the long term in these rural areas. If we get more competition, the market will take care of itself.
We have data-driven decisions. We'll get to that in a second with regard to the relationship with the University of Guelph.
Just as a quick snapshot of where we are, for the folks who aren't from Ontario, in southwestern Ontario we have 14 first nations in our catchment area and about 25% of Ontario's population.
I touched on our aggregated demand model. We're a membership-based organization. We have members from the public sector, the private sector, agriculture, all of those organizations that need connectivity. We're going to use that aggregated demand to have more say with the providers when we go to public procurement. We have one on the street right now.
The municipalities that started this project have $17 million to date, and we have a target of $18 million to $20 million for the project. The municipalities are very serious about helping their residents and want to partner with the federal and provincial governments to provide services to our residents.
Just to give you a quick cross-section of our members, we have four first nations that have joined the project already and, as I said, there are 14 in our group. They have the same challenges as our other rural residents. Their high school students can't do their homework when they get home. They can do their homework in school, but when they get home they have to drive to McDonald's to upload their homework, and that's really, in my opinion, not acceptable in Canada.
We have a really unique partnership with the University of Guelph. There are three professors, approximately, who do broadband research in Canada, and Helen Hambly is one of them. Dr. Jamie Lee is also with us here today.
It's very important to us that we measure how effective public investment is in providing incentives for private sector to improve broadband. We're doing a longitudinal study. We started collecting data back in 2012. When our program is done in 2021, we should have some very interesting stats. Jamie will talk about that in just a moment.
We collect data from three main data sets. There's the MUSH sector, including all of the public places, because they're the ones that provide the most revenue to the providers at the beginning of the project. We've collected provider data. We know where all of the providers' fibre in southwestern Ontario is. We have it mapped in a GIS system. We're also collecting residential, farm, and business data from people by using a survey mechanism through the university.
Just to go on to give you a quick snapshot of the data we've collected, we've collected the provider data under NDAs, because, obviously, Bell's not interested in sharing with Rogers where their infrastructure lies. This is a disaggregated view of the data that I'm showing you now on the slide. This is Middlesex County in the centre of southwestern Ontario. The blue areas are within 500 metres of fibre, and the yellow areas are not. You can't deliver high-quality wireless without the tower being connected to the base with fibre. You can see that the folks in the yellow areas shown there are at a serious disadvantage. This is really overstating how well it is in Middlesex, because the fibre that's running along may not have enough capacity to actually break out to connect people.
I'm going to turn it over to Dr. Lee now, who is going to talk a bit about our analysis of the economic outcomes.
Hello, everyone. Since I have about a minute, I'm going to be brief.
At R2B2, we completed some preliminary estimates of the economic benefits, namely consumer surplus and telecommuter surplus. Depending on the assumption of consumer surplus, we see the private net benefit to consumers ranging essentially from $2.6 billion to $6.5 billion. Through our continued research, we'll be able to provide more precise estimates. Right now, the estimates are rather wide, but through our research we'll be able to provide more precise estimates.
Also, please note that this is actually not the social net benefit. To estimate the social benefit or its equivalent, which is a return for the broadband investment in terms of society's point of view, we will have to put a social cost on the total social benefits. This is what we are really hoping to answer in the near future. I think that is the most important question at R2B2.
Now I'll quickly introduce another type of benefit that we had estimated, which is the telecommuter surplus. As you can see in the second-last line, the benefits could be very significant to the average telecommuter—anywhere from $10,000 to $30,000.
Other economic analyses of broadband in our research include the impact of broadband on wages, income, property values, and so forth. At R2B2, the research topics extend further to other areas as well, such as precision agriculture, health care, and so forth.
Thank you, Mr. Chair. My name is William Chen, and I am here on behalf of the Wubim Foundation. We are a non-profit organization based in Vancouver, British Columbia, that advocates for the public interest in telecommunications development, civil society, and scholarly publishing.
First, I would like to thank you for your invitation to participate in this study. My organization is seeking solely to address the first question, “What constitutes high-speed service?”
So far, many of the submissions made in this study focus on numerical speeds, primarily on the 50-10 set by the CRTC. However, that number is insufficient to adequately define what acceptable high-speed service is in Canada. You can't limit what acceptable high-speed service is to a set of numbers. It just doesn't work.
We believe that for there to be acceptable high-speed service, Internet users must be able to make the most of their connection. They shouldn't have certain activities throttled, purposely made slow, or face arbitrary data limits that prevent them from completing certain activities using the Internet.
Acceptable high-speed service is acceptable only because you are actually able to use it, rather than it being a utility that is just there and is effectively unusable. You wouldn't consider it an acceptable service if a hydro company disallowed you to use your refrigerator because it consumes far more electricity.
There are two issues in this domain. One is the neutrality of telecommunications infrastructure, also known as net neutrality. The other is arbitrary data limits. Net neutrality, as you all know, is the basic principle that Internet service providers should treat all content on the Internet equally, whether it be a news article, a streamed television show, a research data set, or any other of the potentially millions of content types that exist on the Internet.
Internet service providers in a regulatory regime that upholds net neutrality would not discriminate, block, or deliberately slow down the acquisition and service of certain content types. This is a critical principle, because net neutrality allows for competition to thrive, and for Canadians to access new and innovative services, such as on-demand streaming, that have been made possible because of the significant technological innovations over recent years.
As communities grow, and as content types evolve to require even higher bandwidth and broadband specifications, Internet service providers who have little incentive, initiative, or urgency to improve rural broadband infrastructure will quite simply leave rural Canadians in the dark. Existing telecommunications infrastructure will become congested by the increased service demands of technological innovation.
In order to maintain a basic degree of service quality and to ensure continued usability, Internet service providers are very likely to seek to discriminate against certain content types that have a comparatively higher degree of bandwidth usage attached to them, such as activities undertaken by the video on-demand industry, by the health care sector, and by researchers. They will do so by deliberately slowing down these content types, or even by completely blocking the content as a whole.
Violations of net neutrality are like going to a golf course only to find that you are only allowed to use a putter. In addition, if you use any other golf club, security will tackle you.
At this moment, Canada enforces and upholds a strong regulatory regime for the telecommunications sector that significantly limits potential violations of net neutrality. However, attempts to overturn this current telecommunications regime will almost certainly occur in the future, and rural communities face the brunt of the loosening of regulations that protect net neutrality. This is likely because the funding of initiatives to develop telecommunications infrastructure in rural Canada is primarily short term in nature.
The goal of these programs is to immediately lay down infrastructure. However, these programs do not emphasize the need for a long-term plan for sustained development of existing telecommunications infrastructure to accommodate for technological innovation and continually increasing broadband speed standards.
The second concern we bring forward is that of arbitrary data limits, and this exists in a similar domain to net neutrality. Data limits are straightforward, as they are simply limits on the maximum usage that a broadband consumer may engage in. Without sustained investment and development in rural telecommunications infrastructures, Internet service providers struggling to maintain basic service quality may choose to implement arbitrary data limits on broadband consumers.
These arbitrary data limits will affect everyone in rural communities by limiting how certain consumers can utilize their broadband service, but they will especially hurt public institutions such as community centres, municipal governments, hospitals, public libraries, schools, and research facilities. These institutions, either by their nature or the size or their work, will either need to negotiate special agreements or pay exorbitant costs in order to maintain their broadband service in a useable state.
The only way to avert violations or a loosening pertaining to net neutrality, and to ensure that rural broadband users may make the most of their services in the future is through a concrete, long-term plan that ensures that Internet service providers will re-invest in improving rural telecommunications infrastructure.
Competition would be the most potent solution, but it is difficult to effectively achieve or promote due to low population densities and the general lack of anchor users in rural communities.
Prioritization of funding, supports, and financing for telecommunications infrastructure operated by non-profit Internet service providers, municipal governments, crown corporations, and co-operatives would serve to be the most potent force as a not-for-profit mandate would help ensure that any profits were reinvested in improving broadband connectivity in rural areas.
Furthermore, the last solution that we propose is government intervention, primarily through continued regulation on net neutrality and arbitrary data limits, and continued existence of funding, financing, and incentives for Internet service providers to serve and improve their service within rural communities.
In summary, the definition of what constitutes acceptable high-speed service is not simply numerical. Acceptable high-speed service is service that can be fully utilized by broadband consumers, without discrimination as to how certain content types are handled, and without arbitrary data limits. Violations of net neutrality and the imposition of data limits are practices that hurt Canadian innovation, industry, rural institutions, and local businesses. Most of all, they hurt rural Canadians. The only way to avert changes in the regulatory regime in this sense is to ensure that there is continued and sustained development for telecommunications infrastructure in rural areas, through competition and prioritization of funding for community Internet service providers that do not operate on the for-profit model and through government intervention.
Yes, we actually have supported a number of issues for the benefit of all RCMs.
In Quebec, RCMs were strong participants in the first wave of applications under the Digital Canada 150 program and the Connect to Innovate programs. Several tens of millions of dollars have been paid in grants and a number of RCMs have projects under way.
To respond to one of your questions just now, I would say that the approaches are reproducible, and they are being reproduced. Rural regions are becoming organized.
We are talking about the RCM of Antoine-Labelle, a major RCM. They have just started a $50-million project to establish a fibre-optic network to serve the homes in a very large rural area. The project will take several years.
As I was saying earlier, deregulation in Canada has happened in a very progressive and very organized way. We have all benefited. We are at the point where everything is completely deregulated, which allows us to have competitive infrastructures. That is what we are in the process of doing: we are building infrastructures in places where others do not want to go.
Our economic model needs grants. We have to reduce our capital costs in order to create sufficient cash flow to keep the companies operating. Rights of way are the final obstacle stopping us from deploying our networks. If we have no access to the structures, it is impossible, unless we dangle from clouds to get access. So we have to use the infrastructures of competing companies, like Bell Canada or other smaller local suppliers. Hydro-Québec is not actually a competitor, but it owns supporting infrastructures.
That is how we do it currently. We have to submit applications and plans. It is very organized and very structured, and the administrative processes come with very precise timelines. When the structures are in a state of disrepair and unable to take any extra load, the owner asks us, as the last group to want to install a cable, to pay all the costs of modifying, upgrading and modernizing the structures. Those costs make the project less profitable.
Let me take advantage of a forum like this one to emphasize that, at the end of the day, it is extremely important to understand that we must have access to the structures. We already have access to the capital, to the technology, and to the customer base, and that is important. When we sell a service to the people in our RCM, you can believe me when I say that they subscribe routinely and naturally, because it is a community project.
It took us six years to get our first funding envelope. The municipality spent about a million dollars on studies and things like that. That was long.
For the private sector capital, we've done some analysis, so our project subsidizes cap funding for the providers up to 66%. The provider would have to provide 33¢, and we would provide 66¢ of subsidy. We've done some math and, through collaborative meetings, we've had feedback from providers that in areas with very low density, they won't bid with only a 66¢ subsidy, because they would not get enough revenue even if they had free capital to operate the system alone.
We're not having trouble getting the private sector money in the slightly denser areas, but when you look at it as a whole in our region, you get the very low density, the medium-density farm, and the small urban towns. If you mix them all together there's a business case if we look at it as a holistic system, but if we just look at the least dense, we're going to have to end up subsidizing it almost 100% for them to be able to even run the system, I think.
When we look at any normal rural area, there are services and buildings. The white square on this slide has the points of presence, and those are owned by private providers today. Let's say the outside ones are Bell Canada and some of the spurs are some smaller providers. All those services are privately held. We go to RFP. We've identified where all those yellow pieces are by doing a pre-qualification with the providers and requiring them to tell us where their fibre is.
We are going to go to public RFP and say these areas in the black spaces need fibre running through them. Not only are you going to run fibre through them, but you're also going to upgrade the telecom infrastructure, the switching stuff, where all the pieces of fibre plug into the existing points of presence, and we'll add some new ones: our little bird logo. The key point is that we have lots of points of interconnection. Some of that fibre could be owned by one company, and some could be owned by another company, but because our funding requires open access, they must be able to use each other's fibre. We can put in one piece of fibre, but all the providers can compete to deliver services across that fibre. That's where we think the competition comes from, and that's really how the private market works. When there's enough competition, it takes care of service and pricing naturally.
If you look at the left side, it's those orange areas where there's now a business case to connect a tower, a subdivision, a larger enterprise, like an on-farm operation that requires.... We have Mennonites in northern Grey County who have very sophisticated operations that require plans to be sent back and forth to their operation on a farm. They need high-capacity fibre to do that.
Does that answer your question?