Industry Committee on Feb. 8th, 2018

[The Chair, Liberal, Dan Ruimy]

All right. You have up to seven minutes.

[William Chen]

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.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to go right into questioning.

Mr. Longfield, you have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Mr. Chair.

Thanks, everybody, for being here, from the west coast all the way through Saskatchewan, Ontario, and Quebec.

Connecting Canadians is one of the things that we're looking at. I'm listening to the different presentations today, thinking about the role of not-for-profits, and how this might be scaled out.

Mr. Collins, is the not-for-profit you're operating a scalable model? Are you aware of that model being successful elsewhere?

[Pierre Collins]

Is it scalable? One of the things that are very important in our case is that it was decided to serve only the territory of the MRC, so there was no plan at all when they created the not-for-profit organization to expand and serve other communities. Within the community, currently we are planning to serve only the residents who are not well served, but eventually we will have access for the 22,000 residents, and therefore it's going to become more..... Until the subsidy is fully utilized, we're limited in the way that we expend that money: it's to serve not-well-served residents. Once this is done, we won't have any limitations on expanding our network into other places where we could guarantee the financials of the not-for-profit organization.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

Moving west to Ontario, Mr. Hogan, it's great to see you again. You did a great job of taking what was a two-hour presentation that I saw at the University of Guelph and making it into about an eight-minute presentation.

You talk about SWIFT's model as a business model. How would you see this as a model that could be used in other communities? Would that be to make a bigger model, or to make multiple models of what you're doing?

[Geoff Hogan]

In my opinion, SWIFT is a very regional project. It covers a lot of Canada's population, but it's actually a fairly compact area. We are a not-for-profit model, and we don't own the infrastructure, but our needs, which are the community's needs, are taken into account. It's not just the bottom line of the providers that drives decision-making.

As to whether this would scale, I think we could scale a little bit more into some other rural areas adjacent to our catchment area, but after that I think it would need to be duplicated rather than expanded, because then it gets too large.

The one piece that I think is important is that we do have some urban and some rural in the area, and there's a symbiotic relationship between the urban and rural, as with a school board, for instance. Typically the school board office is in the centre of an urban area and all the schools are remote. Those organizations want to connect to one provider or two really good providers rather than one, so having a mix of that is, I think, an important piece of the model so that we can generate more funds over time.

[Lloyd Longfield, Liberal, Guelph, ON]

In our limited time, one of the pieces I saw in the more detailed, but also protected, information that you have showed that in some certain connection points, some providers would make more sense than others. Therefore, rather than going out in an open tender system, it would make sense for certain providers to go the rest of the distance into the smaller communities around where they already have services.

The procurement system is one that we would have to take a look at. Can you comment on that?

[Geoff Hogan]

We are following the broader public sector procurement guidelines, absolutely, because we've been funded by public funds. We've taken our large area and split it into about 30 smaller areas so that smaller providers are able to compete with larger providers when we do release RFPs. Our end goal is to have a lot of very successful providers with access to the funding so that we have a system with a lot of competition. As soon as there's more competition, the market should start to take care of itself. The oligopolistic situation we're in now makes the competition not work.

[Lloyd Longfield, Liberal, Guelph, ON]

That was a point you were making, Mr. Chen, when you looked at the work on the social benefits you've been doing in British Columbia and at the other benefits as being part of the decision-making process. Did you have anything further to add on that?

[William Chen]

Non-profits work to an extent, but they work particularly effectively in areas that need to be served or aren't sufficiently served. I would not say that community ISPs would work as effectively in an urban area where there is substantial competition. Not-for-profits are effective in the sense that they have a mandate that ensures that they attempt to serve the communities their mandate covers. At at the same time, not-for-profits aren't motivated by absolute profit, so they might not necessarily make the most efficient or economic investment decisions. We've had cases in British Columbia where community ISPs, not-for-profit mandates, have failed to deliver on their expectations and have effectively gone bankrupt. That's left some rural communities in a worse state, but they are an effective option when there isn't sufficient private competition.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

With the minute I have left, I want to pivot to SaskTel and ask how you work with the not-for-profits in Saskatchewan. How do you work with the smaller providers that need access to your towers or your services?

[John Meldrum]

Our towers are regulated by the CRTC and Industry Canada. We work with those entities through our wholesale group either to allow them to access our towers or provide them with what they need in backbone and those sorts of things. Probably the best example of a not-for-profit in our scenario would be Access Communications. That's a cable television co-operative that serves a lot of small towns that we also serve.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

I'll just say thank you to everybody, and I'll turn over my eight seconds to the chair.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

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

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

I want to start by thanking all the witnesses today for coming out.

Mr. Meldrum's comments struck close to home. I spend a lot of time in some of those small towns in rural Saskatchewan he's been talking about. I have a place that doesn't even have a telephone line, so I know all about that. I really appreciated his being quite forward that one of the big issues here is money. It's capital and ongoing sustainability costs.

I was wondering how your company works with the big players. What's the interaction among crown corporations, non-profits, and the Teluses and the Rogers?

[John Meldrum]

Speaking about cellular service, we are the fourth provider in the province, so we have an extremely competitive marketplace here in cellular service. However, at the end of the day, Bell and Telus ride on our network, so they effectively resell SaskTel service. Rogers has their own network, but it's pretty well restricted to the major cities and the major highway corridors.

As for Internet service, the big players will resell our Internet service, but we don't have big players with lots of local facilities in the major centres. Shaw and Access would be our biggest competitors—Shaw in Saskatoon, and Access Communications in Regina.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Thank you.

Mr. Hogan, I note that your area of focus is in the southwestern corridor that covers about 25% of the population of Ontario, and about 10% of Canada. I've read recently that Bell is advertising their fibre to every home in the Toronto area, I believe. Could you comment on those sorts of infinitives?

[Geoff Hogan]

Bell Canada announced last year that its spending $1.1 billion in Toronto, and has just announced $50 million in Sarnia and $45 million in Windsor. You'll notice the similarities, in that they're spending in high-density urban areas. In fact, even within the boundary of the city of Sarnia there are rural areas, and they're not putting fibre into the homes in those areas. It really goes right back to the return on investment. Here, I think there is a role for government to provide incentive for them to build in areas where they don't have a business case because they are responsible to their shareholders and not to the community.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Are these companies open to partnerships with groups such as yours to get this access broadened to the rural areas?

[Geoff Hogan]

We have 28 providers that were pre-qualified to bid on our proposals. We are doing our core and aggregation...on the street right now. We had five companies come forward and make an offer to bid. We are getting very significant interest from the private sector, but we have a large $200-million pot of funding, and we have a lot of sites on the table. Our members are saying, “We want you to bid together on all of these sites”, which makes it difficult for the existing providers because they may lose customers if they don't bid. Therefore, we have a carrot-and-stick approach. The carrot is that we have some money to help you build. The stick is that if you don't bid, we might take your best customers away. That's the way we're getting the competition to market.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

I understand.

My final question is for Mr. Chen.

What have you been finding? You noted that some of these community ISPs have failed. Could you outline the reasons they are failing, and how we can learn what not to do from those models?

[William Chen]

Overexpansion and poor governance tend to be the primary factors in the failure of not-for-profit ISPs. Overexpansion occurs when a community ISP starts in one community but decides to overexpand to communities nearby. That tends to be an issue. Poor governance is primarily an inability to effectively manage funds, to invest properly in infrastructure.

To a lesser extent, I would say that it also comes from increased transit costs. In British Columbia, Internet transit tends to be particularly expensive. Actually, with regard to a lot of what has been said so far about 50-10 and the comparisons made with Europe, where connectivity tends to be much higher, that is primarily because of open-peering policies and cheap transit costs. British Columbia doesn't necessarily have the same basis in place.

In general, Internet transit tends to be a lot more expensive. Internet service providers are sometimes very reluctant to peer. Just to outline what this is, settlement-free peering is when two Internet service providers connect and agree to deliver transit to each other for free, therefore bypassing any substantial Internet transit costs. That tends to be less of a thing here, where there are fewer things to peer to. The biggest thing that tends to be peered to is Netflix, but we lack major companies that can peer or that would substantially decrease Internet transit costs in British Columbia, such as Facebook, or mainland providers such as Baidu, which I think is a big thing there. The Ontario area is better placed to serve because it has more peering opportunities.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Thank you.

I think my time is up.

Could you elaborate more on this peering process? You threw out some names there like Netflix and Facebook.

[William Chen]

Peering is a really cool thing. Honestly, 90% of the time it tends to be a very beneficial process. It's when two major backbone Internet service providers peer together. They agree that transit between the two entities is free. That's in the case of settlement-free peering. There's also paid peering, where ISPs can charge lower rates for connecting directly to their network. However, in the United States, that has been used to extort companies like Netflix and other video-on-demand companies, by other ISPs refusing to peer and then making Netflix, etc., pay for the Internet transit, ultimately forcing them to cough up.