Industry Committee on May 30th, 2017

[The Chair, Liberal, Dan Ruimy]

Good morning, everybody. Welcome to meeting number 63 of the Standing Committee on Industry, Science and Technology.

Today, for our first hour, we are getting a briefing on broadband in rural Canada.

From the CRTC, Canadian Radio-television and Telecommunications Commission, we have Christopher Seidl, executive director of telecommunications; and Alastair Stewart, senior legal counsel. From the Department of Industry, we have Sue Hart, director general, spectrum, information technologies and telecommunications, connecting Canadians branch; Pamela Miller, director general, strategic policy sector, telecommunications policy branch; and Luc Delorme, acting director, spectrum, information technologies and telecommunications, connecting Canadians branch, and programming and engineering. Is that all on your business card?

[Some hon. members]

Oh, oh!

[Luc Delorme, Acting Director, Connecting Canadians Branch, Program and Engineering, Department of Industry]

I don't even have them yet.

[The Chair, Liberal, Dan Ruimy]

We're going to start off with the Department of Industry. You have 10 minutes.

[Pamela Miller, Director General, Strategic Policy Sector, Telecommunications Policy Branch, Department of Industry]

Thank you, and good morning, all. We really are pleased to be here today.

Thank you for inviting us to discuss access to broadband Internet across Canada.

As the chair mentioned, my name is Pamela Miller, and I am the director general of the telecom policy branch at Innovation, Science and Economic Development Canada.

I am going to speak to the deck that you have, “Broadband in Canada”, giving the overall overview, and then Sue Hart is going to describe in more detail the programs that our department has available for broadband.

As you know, telecom and broadband connectivity play an integral role in our country's economic prosperity, as well as in our everyday lives. Internet access is an essential service, whether it be to look for employment, register for government services, or do banking online. For Canadian businesses, the Internet is a doorway to global markets, cloud-based services, and remote workers. Governments are investing in digital infrastructure as it is also an opportunity to support economic growth, innovation, and social inclusion, particularly for indigenous peoples.

A wide variety of research has linked broadband to a number of positive economic outcomes, including GDP growth, productivity and efficiency gains, improved research and innovation, and enhanced opportunities for local communities. I don't think I have to convince you; you are all here and want to study this topic because you know how very important it is.

I just want to take a brief moment to talk about the technologies that play a role in providing Canadians across the country with broadband access. With constant advances in technology, broadband Internet services have been made available over a variety of platforms. Wired networks include fibre optics, digital subscriber lines, and cable networks, which can typically achieve the highest speeds. These networks have good coverage of urban and suburban areas. Almost 90% of Canadian households have access to at least one wired network.

Fixed wireless networks provide access using towers and wireless radios, with subscribers using antennas fixed to their residence to receive the signal. They are typically used in lower-density regions, such as rural areas, to provide broadband service where the distance between households makes it unaffordable to run wires.

Mobile wireless networks have a national footprint, helping to keep people connected no matter where they are. Satellite networks offer national coverage and are typically used in rural and remote areas that are the most challenging to reach.

In Canada, the principal driver of telecom investment is the private sector, which has made considerable investments—over $13 billion in 2015, which is very impressive. The government has taken actions to support broadband by establishing marketplace frameworks to foster competition and investment, effectively managing the spectrum to encourage the availability of mobile broadband, and providing funding for rural and remote broadband network expansion, which we'll talk more about shortly.

I am pleased to report that there has been good progress. There are certainly gaps that remain, but we have also made progress. Over the past several years, market-led development supplemented by government programs has made significant improvements in broadband coverage and speed. Virtually all Canadians have access to some form of broadband. Broadband coverage at 5 megabits per second is available to 96% of Canadians, and it is anticipated to reach 98%.

The most dramatic jump has been in the availability of higher speeds, sometimes referred to as next-generation networks. In 2015, for example, 75% of Canadians had broadband speed of 100 megabits per second, a jump from just 28% in 2011.

These improvements have been primarily due to cable network upgrades and telco investment, which are bringing fibre closer to customers' homes in large urban markets. Service providers are also making some big investments in gigabit networks. A gigabit is equal to 1,000 megabits. For example, Bell and Telus each have announced $1 billion of investment in Toronto and Vancouver, respectively, and Rogers has expanded gigabit Internet to its entire network footprint of four million customers.

Internationally, Canada performs strongly at speeds such as 100 megabits per second, and we are in fact second in the G7.

Canada is also doing very well when it comes to mobile coverage. Over 99% of the population has access to a mobile network, and 4G LTE, which allows even greater speeds, is available to 97% of the population.

As I mentioned investment, an important indicator is telecom investment, as it provides insight into how much capital is going into network improvements and upgrades. In this regard, Canada performs well in terms of investment for both wire line and mobile compared to our peers. Total telecom investment in Canada as a percentage of revenue is over 20%, which is above the OECD average of 15%.

If you look at the progress, there have been gains in rural and remote access as well. In 2011, 87% of Canadians had access to 5 megabits. Now it is 96% of Canadians, and it will reach 98%. New technologies, such as next-generation high throughput satellites, have also come on line, providing more capacity for users reliant on satellite connectivity.

Despite the strong progress, as we all know, there are still broadband gaps in certain parts of the country, particularly in rural and remote areas. These areas typically have lower population densities, making the business case for private sector investment more challenging. For example, 99% of Canadians in large urban areas have access to speeds of 50 megabits per second. In rural areas, only 29% of Canadians have access to these speeds.

Canadians living in rural and remote areas, such as Swan Lake first nation or La Tuque, Quebec, expect to have the same access to high-quality, affordable broadband services as Canadians living in Calgary or Montreal. They want a broadband service that meets their needs, that allows them to fully participate in the digital economy.

The north in particular is a challenge, as there are nearly 100 communities that are completely reliant on satellite technology. Many of these communities are very difficult to serve, as they can lack access to a permanent road network or the electrical grid.

Turning to adoption of the Internet, Canada does well in terms of the percentage of households that subscribe to broadband, with 85% of households reporting that they use the Internet. However, adoption rates are lower for low-income Canadians. For example, only 63.5% of Canadians in the lowest income quintile subscribe to broadband compared to over 98% in the highest quintile.

I'm now going to turn to my colleague, Sue Hart, who is going to describe the connecting Canadians and connect to innovate programs.

[Sue Hart, Director General, Spectrum, Information Technologies and Telecommunications, Connecting Canadians Branch, Department of Industry]

Thank you, Pam.

The connecting Canadians program was launched in 2014 to enhance broadband in rural areas and the north.

That program, which targets last-mile networks, has a goal to reach 280,000 households in Canada. That said, we expect to reach about 300,000 households.

The north, specifically Nunavut and Nunavik, is a separate component, as they are entirely dependent on satellite for all their communications. Back then, time was of the essence, as the satellite leases were set to expire in 2016. Today, there are 86 connecting Canadians projects under way. There are projects in every province and territory. There are 12 that are now completed, and many more will end by March 2018. All projects will finish by March 2019, when the program ends.

As an example, for the Internet company goZoom, in Renfrew County, Ontario, the connecting Canadians program allowed them to put in three new wireless towers and increase services to households. It also enabled a local sawmill in Renfrew to do real-time monitoring of its operations.

The connect to innovate program, which was launched on December 15, 2016, will invest up to $500 million by 2021 to provide reliable high-speed Internet services to Canada's rural and remote communities.

This program is focused on new backbone infrastructure and will also connect institutions such as schools, hospitals, first nations band offices, and others. As well, and as a result of our consultations, upgrades, resiliency, and last-mile infrastructure are eligible.

In designing the program, we conducted extensive consultations over the spring, summer, and fall of 2016. This included all provincial and territorial governments. It included private sector service providers, municipal organizations, and first nations organizations. We spoke to some mayors and councillors, other departments, and industry associations. We also held several information sessions with MPs, some of whom are in this room, as well as with the digital caucus and the rural caucus.

The application period closed on April 20, and we had an unprecedented, incredible demand of close to 900 applications to the program, requesting over $4.4 billion. These are from coast to coast to coast. Applications are currently being reviewed, and we expect that the minister will select projects by the end of the summer.

I'll turn it back to Pam.

[Pamela Miller]

I now turn to slide 12, on affordable access.

We are also moving forward with initiatives designed to help increase broadband adoption.

Budget 2017 proposed to invest $13.2 million over five years in a new affordable access program that will facilitate access to low-cost home Internet packages. As computer cost is also a barrier for some families, we have a target of providing 50,000 refurbished computers through the existing computers for success Canada program to families along with the low-cost Internet packages.

Budget 2017 also proposes $29.5 million over five years starting in 2017-18 for a new digital literacy exchange program. This program will foster more inclusive Canadian Internet literacy by supporting initiatives that teach basic skills including how to use the Internet safely and effectively to certain groups that are affected by digital divides including seniors, low-income Canadians, indigenous peoples, and those living in northern and rural communities.

Looking at other actions to support broadband, we have also consulted on a streamlined licensing framework to support the development of next-generation satellites. These initiatives are complementary to actions being taken by other government departments and agencies such as the CRTC. Chris Seidl from the CRTC is here to speak in more detail. I will just mention that in December, 2016, the CRTC established broadband as a basic service and set national broadband targets of 50 megabits per second down and 10 megabits per second up and announced a new $750-million regulatory fund to achieve them. This fund is complementary to our connect to innovate program and we will work closely with the CRTC to identify opportunities for partnership. Infrastructure Canada is also proceeding with its $2-billion rural and northern communities fund where connectivity is an eligible category. ISED has also been working with our provincial-territorial partners to leverage available funding and local expertise.

Looking ahead, we anticipate the private sector will continue to lead the way in terms of broadband investment. This approach has served Canada to date and we expect this to continue. We will be supplementing private sector investment where the business case does not exist.

As technology and competition evolve we foresee new broadband technologies coming online offering Canadians even faster speeds and more robust services. For example, we expect the wire providers to keep deploying fibre deeper into their networks and to provide higher-speed offerings.

In mobile we have seen the widespread emergence of advanced mobile wireless networks such as long-term evolution, LTE, and we expect to see continued improvement in the future. Now 5G, fifth generation, wireless technology, is the next big thing and Canada is well-positioned to be on the leading edge. The satellite industry is also making dramatic improvements with a new generation of satellites providing significant increases in capacity.

Going forward, our role will be to continue to ensure the right frameworks are in place to encourage competition, investment, and innovation. We will also continue to evaluate the need for future programs to expand broadband services and continue to work with our federal, provincial, and territorial counterparts in this regard.

Thank you very much.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to the CRTC with Mr. Seidl.

[Christopher Seidl, Executive Director, Telecommunications, Canadian Radio-television and Telecommunications Commission]

Thank you, Mr. Chair, for this opportunity to talk about broadband Internet services and the recent regulatory action taken by the CRTC to increase access in rural and remote areas.

My name is Chris Seidl, and I am the executive director of Telecommunications at the Canadian Radio-television and Telecommunications Commission, or CRTC. With me today is my colleague Alastair Stewart, senior legal counsel. We welcome this chance to outline the commission's recent decision concerning modern telecommunications services.

All Canadians, no matter where they live, should have access to broadband Internet services, on both fixed and mobile wireless networks. That commitment was made clear in the CRTC's December 2016 announcement that, in addition to voice services, broadband Internet access is now also a basic telecommunications service.

This decision confirms that modern telecommunications services are fundamental to foster innovation. Broadband will play a pivotal role in Canada's future economic prosperity, global competitiveness, and social and democratic development. A broadband Internet connection is as crucial today as electricity was to the industrial revolution, so access to these networks is vital to Canadians from coast to coast to coast. This is a major departure from our previous approach, which focused primarily on telephone voice services.

The CRTC has now established a universal service objective, which underlines our belief that broadband Internet access is vital in today's digital economy. Under this ambitious new objective, Canadians should have access to broadband speeds of 50 megabits per second download and 10 megabits upload for fixed Internet services. This is 10 times faster than the targets we set in 2011 and is a reflection of the rapid rate of technological change and the need to keep pace with our international competitors.

More than eight in 10 Canadians already have access to the new speed targets. We expect that they will be available to 90% of Canadian homes and businesses by the end of 2021, with the remaining 10% available within 10 to 15 years.

To foster innovation, we expect service providers to offer an unlimited data option for fixed broadband Internet services. Canadians need to be able to access the applications of their choice and not feel limited by concerns over data usage.

Equally important for Canadians is the mobile wireless broadband Internet access service. Currently, the latest mobile wireless technology, long-term evolution, or LTE, is available to 97% of the population. The commission has decided that the latest generally deployed mobile wireless technology should be available not only in homes and businesses, but also along as many major Canadian roads as possible.

However, as committee members are undoubtedly aware, there are areas across the country that currently fall short of these standards. Fast, reliable, affordable Internet is often out of reach for approximately 18% of households, which are typically located in rural and remote regions of Canada. They are lagging behind their urban counterparts, at great cost to local social and economic development.

To help bridge the gap, the CRTC is establishing a fund to support projects in areas that do not meet these targets. We are making up to $750 million available over five years for upgrades to existing infrastructure and new construction to provide fixed and mobile broadband Internet access services.

Where will the $750 million come from? The Telecommunications Act gives the CRTC the ability to require telecommunications service providers to contribute to a fund to support access by Canadians to basic telecommunications services. Telecommunications service providers currently provide a small percentage of their revenues to support residential local voice service in rural and remote areas. Contributions to this local voice subsidy, which are approximately $100 million per year, will be transitioned to the new broadband fund. The CRTC has launched a public consultation to set out the details of this transition away from local voice subsidy.

The new broadband fund will be technology neutral. This means that Internet service providers will be able to submit proposals featuring the technology they think will best meet the needs of the community. Our objective is to make sure that rural residents have service that is comparable to that available in urban centres, and that the solutions will support the evolving requirements.

A key feature of the proposed fund is that applicants will need to secure a minimum level of financial support from some level of government—federal, provincial, regional, municipal, or indigenous—or community groups and non-profit organizations, and they will be required to contribute a minimum investment toward their projects. The fund will rely on a competitive bidding process, based on similar programs, to minimize the contribution from the fund and maximize the outcome.

Recipients for this funding will need to demonstrate how they will deliver the targets set by the CRTC in terms of speed, capacity, quality of service, levels of government funding, and private investment. To the greatest extent possible, the fund will be managed at arm's length by a third-party administrator, based on objective criteria, and will be administered in a manner that is transparent, fair, and efficient. The CRTC will retain oversight of the fund, approve projects, and appoint a fairness monitor.

The new CRTC broadband funding regime will be designed to complement—and not replace—existing and future private sector investments and government funding within the broader funding ecosystem. This includes the government's connect to innovate program.

I would also like to indicate that we currently work closely with Innovation, Science and Economic Development Canada in the collection and sharing of data concerning the state of broadband deployment. In addition, we fully expect the connect to innovate program and the new CRTC funding regime to complement each other, leading to a significant improvement in broadband access across the country.

The details surrounding the CRTC's broadband funding regime are still being finalized. We have launched another public consultation to develop the new regime. The consultation is examining how the fund will work and other matters related to its establishment. We are seeking input on the funding framework, including the eligibility and assessment criteria for proposed projects, and the governance, operating, and accountability framework.

Anyone can comment on the issues set out for consultation. Stakeholders in the fund—such as Internet service providers and public funding bodies at all levels of government—and Canadians are encouraged to provide their comments. All parties have until June 28 to submit their interventions.

Given that the consultation is ongoing, I would note that we are limited as to what further details we can provide you with at this time.

We expect to issue a decision in early 2018, after which the third-party administrator will be established and the broadband funding regime will be implemented. It is expected that the fund will be operational in spring 2019.

As promising as these developments are, Mr. Chairman, it is important to understand that the availability of broadband Internet service is just one aspect that helps Canadians to participate fully in the digital economy. The commission has identified further gaps regarding the adoption of broadband Internet services that are uniquely critical but outside of its core mandate.

In our report to support the government's innovation agenda, which was submitted last December, we outlined affordability and digital literacy as barriers to connectivity in many communities, especially for those among indigenous communities and across Canada's north.

The government's most recent budget outlined two new programs to tackle these gaps, one to teach basic digital skills, another to help service providers offer low-cost home Internet packages to low-income families.

Extending broadband coverage to underserved households and businesses requires investment from the private sector in some cases and, in more difficult cases, public sector support. There is much work to be done. The efforts to close these gaps require a shared leadership and collaborative approach between all parties.

The CRTC universal service objective can be achieved only with the help of different levels of government, including municipal and indigenous governments, the telecommunications industry, and non-governmental organizations.

One thing is certain: closing the gap will be expensive. Our estimates show that many billions of dollars will need to be invested to fully address the broadband Internet access services availability gap in Canada. There is no denying this will be a daunting task. The CRTC's new universal objective is one of the most ambitious in the world, and in a country the size of Canada with its varying geography and climate, there are unique challenges to offering similar broadband Internet access services to all Canadians.

We don't expect to get to the 50/10 Mbps standard in one leap. Providing access in more difficult underserved areas is expected to be accomplished in incremental steps.

The commission was careful to provide enough flexibility in its regulatory framework to support the efforts of other parties with a contribution to make. We want to encourage the continued development of private and public sector initiatives.

Given the importance of broadband to Canadians' participation in the digital economy, we are confident that together we will be successful in meeting this important challenge.

We would now welcome any questions you may have.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Questions will abound.

We will start off with Mr. Longfield.

You have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Mr. Chair.

Thanks, everyone, for coming today.

It is a big topic, and we're looking at a study that we'd like to get focused in the right areas and that could help with the work you are doing.

We visited the States. We were in Washington a few weeks back, and we heard a lot about harmonization between Canada and the United States. We had a discussion about a 600 MHz spectrum. We heard that Canada was a leader in 4G and that now the States is ahead of us. We talked about the 600 MHz spectrum as being important for video and being important as we move toward 5G, and again the U.S.A. is ahead of Canada on the 5G.

What are we looking at from either CRTC or the others in terms of keeping up with the States or getting back into a leadership position when it comes to spectrum?

[Pamela Miller]

I'd point to a number of initiatives we have done for spectrum management in Canada. Since 2008, the government has more than doubled the amount of spectrum available for commercial mobile services through the spectrum auction AWS-1 in 2008 as well as auctions for 700 MHz AWS-3 and 2500 MHz. These spectrum licences include deployment conditions to ensure the spectrum is put into use in a timely manner.

Building on these efforts, we are in the process of repurposing the 600 MHz band for mobile use. As you know, the band carries signals well over long distances. It's excellent for delivering commercial mobile use. We will be conducting a public consultation on the licensing rules at a later date, and, as you noted, we are in very close contact with our FCC counterparts on this.

Concerning 5G, it is an important new technology that will be a key driver of the Internet of things and that involves a significant increase in speed and the number of connected devices, and, yes, absolutely, the government has an important role to play in leadership regarding spectrum management, privacy, security, and standards development. As well, 5G will be a consideration in our approach to digital policy under the innovation and skills plan.

We are very much on top of these issues and in very close collaboration with our FCC counterparts on these issues.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you for the details.

For things like autonomous vehicles, precision agriculture, some new applications in rural and remote areas, or even being able to drive a car across the border, is this where you're working with the FCC, in terms of the Internet of things and new applications?

[Pamela Miller]

We've always had a close collaboration with the FCC on border frequency issues and interference issues. It's a long-standing management issue we've always had with the United States.

[Lloyd Longfield, Liberal, Guelph, ON]

Okay. Thanks.

I'm looking for gaps. There are a lot of things that are being done in this area. A lot of investments have been announced.

The Americans have a system about which we heard that every American pays a $1.50 on each bill and it goes into a fund. It sounds like our fund is going to be done differently, but it's still in development. So we couldn't really study that because of the proposals that are on the table.

Am I understanding that correctly?

[Christopher Seidl]

Yes.

Concerning the CRTC program, we do have an open consultation right now that will define the details. The commission has defined certain aspects of the program. One key component of that is it includes fixed broadband, so your wire line connections into the home, but also mobile broadband, so mobile connectivity. Those different technologies are eligible for the funding from this program. We are working through the details of how to evaluate the project proposals, to set eligibility criteria, and to decide how to manage the fund going forward.

Yes, the program has been defined, the objectives defined, but the details are still being worked out.

[Lloyd Longfield, Liberal, Guelph, ON]

I'm trying to look for what we could be studying that isn't currently being worked on. The 18% of households that don't have access.... We've heard 97% numbers, 99% numbers. Some of the large telcos say that we're all covered. We always say, at what cost? Is it affordable?

Is there an affordability study that we could do? The 18% of households, is that something that could be picked up on? Or is that something that you're working on already, that you're ahead of us on?

[Christopher Seidl]

I think as part of the project of designing the fund we're also working closely with ISED to determine where those 18% are specifically. We will be developing detailed information on the actual state of broadband deployment at the new targets that the CRTC has set. We will be working that information.

When we do go out and do a call-out for projects, we'll have to identify which areas are eligible for the projects. That will be based on the data that we collect from the service providers themselves across the country and develop.

Back to your earlier point in terms of where the funds come from, as I mentioned, we get it from telecommunications service providers. They get it from their revenue, which obviously comes from some portion of what Canadians are paying into their broadband services and others, all telecommunications revenue.

[Lloyd Longfield, Liberal, Guelph, ON]

In my area, in southwest Ontario, there's a SWIFT project that's being worked on with the Province of Ontario, federal government, and municipalities with fewer than 100,000 people. Is a federal-provincial study looking across Canada, or are federal agencies working with provinces across the board? Is that something we need to study?

[Sue Hart]

We have an ongoing working relationship with all the provincial and territorial governments in terms of looking at what their priorities are. As we're assessing applications, we're speaking to them about what their priorities are before the minister selects projects. In terms of the gap, where we really will complement nicely with the CRTC fund is that once our projects are selected then we would recalculate and relook. Assuming that those projects are successful then, where is the remaining gap? That will help the CRTC to look at where they need to focus their $750-million fund so that the timing flows nicely that way.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you all.

[The Chair, Liberal, Dan Ruimy]

We're going to move to Mr. Dreeshen. You have seven minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

Welcome, everyone. We certainly appreciate having you here today. As Mr. Longfield had mentioned earlier, we spent some time in the U.S. to take a look at what they are trying to do. We recognized when we were there that a lot of issues that Canadians are going to have to deal with are going to be cross-border as well.

I think the first thing we want to make sure is that regulations we have here in Canada are also attuned with those in the U.S. Of course, that means organizations such as yourself and FCC are going to have work closely.

I'm just wondering what type of co-operation you have at the present time and whether you are making efforts to ensure that, as we try to deal with a North American market, you're able to ensure that flexibility exists.

[Pamela Miller]

In ISED, there is a long-standing coordination group with the FCC that exists in the spectrum information management section of the department. I don't want to put an exact number of years on it, but it's very long standing. There is a well-known need to have cross-border frequency collaboration, both for us and for the United States. There is a well-established and well-functioning system in place. Also, on an officials level, we are in contact with the FCC officials.

I would say that we have very good alignment in that regard.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

With some of the discussion about self-driving cars, trucks, and so on, I think people look at it and say, “What's going to happen when you go across the border, in terms of where the data lines are?” That's one of the things, as we go through the study.

It has been said that you're looking at setting in stone what the regulations are going to be and going from there. I think the hope is that we recognize all the possibilities as we move forward in the Internet of things to make sure that we haven't already carved out a position and don't have that flexibility, and to make sure that we have the cost relationship so that Canadians aren't disadvantaged.

Could you quickly comment on how that might work?