Intervention: Shaw Cablesystems G.P.

Document Name: 2015-134.223977.2394508.Intervention(1fbm401!).pdf
July 14, 2015
Mr. John Traversy
Secretary General

Canadian Radio-television and Telecommunications Commission Ottawa, Ontario

*** ***
**** Mr. Traversy:

Re: Telecom Notice of Consultation 2015-134; Review of basic telecommunications services – Shaw’s Response to Requests for Information File: 8663-C12-201503186

1. In accordance with paragraph 47 of Telecom Notice of Consultation 2015-134;

Review of basic telecommunications services, as amended, Shaw Cablesystems G.P.

(“Shaw”) submits the attached intervention.

2. If you have any questions or concerns regarding this intervention please contact **** Snow, Manager, Regulatory Affairs at (250) 417-3885 or ******@***.com.

Yours truly,
Shaw Cablesystems G.P.
**** Cowling
Vice President,
Regulatory Affairs
Attach.
mailto:******@***.com

Intervention: Shaw (Intervenor 237)

Document Name: 2015-134.223977.2394508.Intervention(1fbm401!).pdf
July 14, 2015
Mr. John Traversy
Secretary General

Canadian Radio-television and Telecommunications Commission Ottawa, Ontario

*** ***
**** Mr. Traversy:

Re: Telecom Notice of Consultation 2015-134; Review of basic telecommunications services – Shaw’s Response to Requests for Information File: 8663-C12-201503186

1. In accordance with paragraph 47 of Telecom Notice of Consultation 2015-134;

Review of basic telecommunications services, as amended, Shaw Cablesystems G.P.

(“Shaw”) submits the attached intervention.

2. If you have any questions or concerns regarding this intervention please contact **** Snow, Manager, Regulatory Affairs at (250) 417-3885 or ******@***.com.

Yours truly,
Shaw Cablesystems G.P.
**** Cowling
Vice President,
Regulatory Affairs
Attach.
mailto:******@***.com

Intervention: Shaw Cablesystems G.P.

Document Name: 2015-134.223977.2394509.Intervention(1fbm501!).pdf
1
Comments of Shaw Cablesystems G.P. in
Review of basic telecommunications services,
Telecom Notice of Consultation CRTC 2015-134
July 14, 2015
1
Table of Contents

Introduction & Executive Summary ............................................................................................ 2 Canada’s Rapidly Evolving Telecommunications Landscape ..................................................... 3 Competition and Market Forces Drive Innovation and Change ................................................... 8 Addressing Gaps in Service Availability ..................................................................................... 9 Aspirational **** Targets .......................................................................................................10 Focused Funding ......................................................................................................................12 Conclusion ................................................................................................................................15 Appendix A: Responses to Questions Posed in TNC 2015-134 .............................................. A-1 Appendix B: Broadband Funding Programs ............................................................................ B-1 2

Introduction & Executive Summary

1. Shaw Cablesystems G.P. (“Shaw”) is pleased to provide these comments in response to Telecom Notice of Consultation CRTC 2015-134 – Review of basic telecommunications services (“TNC 2015-134”). In this proceeding the Commission will review its policies and rules regarding the provision of basic telecommunications services in Canada and examine the telecommunications services that Canadians require to participate meaningfully in the digital economy. Shaw wishes to receive intervener status in this proceeding. Shaw requests to appear at the public hearing.

2. Shaw agrees with many of the premises in the Notice of Consultation that launched this review. There is no question about the important role that telecommunications play in the lives of Canadians today. Telecommunications enable Canadians to participate in the digital economy and facilitate access to critical services, such as health care, education, government, public safety, and banking. We expect that role to only grow as our lives become increasingly digitized.1

3. At the same time, and as also noted in TNC 2015-134, the way Canadians access and use telecommunications services is rapidly evolving due to advancements in technology.

The landscape has changed drastically from the monopoly era in which the obligation to serve was critical to ensuring that Canadians had access to landline telephone services.

21st-century telecommunications are characterized by a diversity of technologies and networks that has emerged to meet a variety of consumer needs and preferences. Policy tools fashioned for a monopoly-era landline telephone environment may not be appropriate in the highly competitive, technologically diverse and constantly evolving broadband era. In particular, the concept of “basic service”, which was developed in a single service, single need era, is less useful in the current context.

4. Shaw also agrees that in certain rural and remote parts of the country, Canadians do not have reliable or affordable access to certain modern telecommunications services, which may impede their ability to participate meaningfully in the digital economy. Canada’s vast geography makes this a challenging and complex policy problem for the Commission, as well as governments at all levels. To address these gaps, a combination of market forces, 1

According to Mergent **** America IT & Technology, “the digital platform ecosystem contributes C$7.3 billion (US$8 billion) annually to Canadian GDP, and is likely to rise to C$14.8 billion (US$16.2 billion) by 2018”, December 2014, online at webreports.mergent.com.

http://webreports.mergent.com/
3

focused government funding and public-private partnerships have been relied on as the principal means of rolling out broadband services to the far reaches of our country without imposing onerous subsidy burdens on Canadian consumers. In fact, by mid-2017, close to 99% of Canadians will have access to broadband Internet Services at speeds of 5 Mbps download and 1 Mbps upload or greater.

5. This approach, along with the setting and monitoring of aspirational speed targets by the Commission, has been extremely successful. In the vast majority of regions across Canada, competition and market forces have fostered consumer choice, while driving investment and innovation. This has been spurred on by the broadband speed targets established by the Commission in 2011. In rural and remote areas, solutions that are precisely tailored to the problem, such as focused government funding programs, have proven to be efficient, effective and equitable. The funds for these programs are drawn from the widest possible base of revenues and, therefore, do not unduly burden consumers.

6. In this submission, Shaw discusses the current state of Canada’s telecommunications market, including the needs and expectations of consumers for telecommunications services, and then considers how best to address any gaps in service availability that may act as a barrier to participation in the digital economy for some Canadians. In Appendix A, Shaw answers the specific questions posed by the Commission in TNC 2015-134.

Canada’s Rapidly Evolving Telecommunications Landscape 7. The Canadian telecommunications market has changed considerably since the monopoly era in which the obligation to serve was critical to ensuring that Canadians had access to landline telephone services. Today, the market is characterized by intense competition among a number of different service providers investing in a variety of technological platforms and offering a highly diversified and ever-evolving range of products, services, applications and features.

8. The unprecedented level of competition and innovation in the telecommunications services sector has delivered tremendous benefits to Canadians, along with exceptional levels of service. In fact, service availability levels have reached record highs. By the end of 2013, local telephone service was available to over 99% of Canadian households and 4

mobile wireless service covered 99.4% households. In addition, 95.5% of Canadians had access to broadband Internet services at the Commission’s target speed of 5 Mbps download and 1 Mbps upload,2 and a new government funding program promises to bring this number close to 99% of Canadians by 2017.3 9. The number of technologies that are used to deliver the current suite of telecommunications services has also grown dramatically over the past few years. For example, in the past, voice services were delivered almost exclusively over landline access facilities consisting of twisted copper pairs. Today, these services can be delivered using wireline copper, cable and fiber facilities, or they can be delivered via wireless technologies such as mobile wireless networks, fixed wireless networks, including Wi-Fi, and FSS and MSS satellites. Many of these technologies can deliver basic voice connectivity capabilities to Canadian homes and businesses, as well as access to community and emergency response services (911), health services, medical monitoring, home security and international long distance.

10. The range of technologies used to deliver broadband Internet services is equally diverse: it includes copper, coaxial, fibre, satellite, cellular, fixed wireless and Wi-Fi. These technologies are used by Canadians for online shopping, social media, email, instant messaging, information and entertainment, VoIP and video-conferencing, health and education services, and so much more.4

11. This explosion in service delivery platforms is driving, and is driven by, corresponding shifts in consumer preferences and needs. With a vast range of services and applications available to them – each with subtly distinct functional attributes – Canadians are using a broader than ever set of services to participate in the digital economy. In a classic virtuous cycle, innovative services are emerging to meet fresh consumer needs and desires which, in turn, drive further investment and more innovative services. These services and applications are meeting needs that we were not able to predict a decade ago. In this world of diversity, there is no one service, application or platform that is “most important” to Canadians. There is no longer one single, or “basic”, telecommunications service that is 2

CRTC, Communications Monitoring Report 2014, Table 5.3.15 3

Industry Canada News Release, High-Speed Internet Coming to Rural Canada, May 20, 2015, online at news.gc.ca/web/article-en.do?nid=976709.

4

CIRA, Fact Book 2015, What Canadians are doing online, online at cira.ca/factbook/current/the-canadian-internet.html

http://news.gc.ca/web/article-en.do?nid=976709http://cira.ca/factbook/current/the-canadian-internet.htmlhttp://cira.ca/factbook/current/the-canadian-internet.html5

essential for engagement and participation in Canadian society. It depends on the consumer, the situation, the location and the need.

12. Not surprisingly, we have also witnessed a dramatic increase in service substitutability.

Consumers are increasingly focused on functionality – they care more about what the technology or platform can do for them than they do about the nature of the technology or download speed. Mobility is also becoming increasingly important to Canadians. The evidence shows that 2013 marked a milestone for wireless substitution: for the first time in Canada, mobile-only households surpassed landline-only households. In 2013, 20.4% of Canadians relied exclusively on mobile telephone service, up from 10.2% in 2010. 5 Moreover, 5% of mobile broadband subscriptions in 2013 were for data-only services.6 13. In addition to the general trend toward wireless substitution, consumers are using Internet-based services as substitutes for traditional voice and messaging services, regardless of the service platform. For example, from 2009 to 2013, residential long distance use declined by 29%.7 Within the same period, the number of Canadians making telephone calls online increased to 82%, up from 23.8% in 2010.8 14. Consumer demands for broadband services are constantly evolving, often in a manner that is hard to predict. We are learning from our customers that there are several elements of the broadband experience that they value – including reliability, price, usage, innovation and value-adds – in addition to speed. Moreover, the way consumers use broadband, and their associated preferences and needs, varies widely. For a consumer primarily engaged in social media, speed may not be as important as reliability, portability and availability. On the other hand, a gamer playing in real-time will place higher value on speed and latency.9 Even so, many of our customers on lower speed services at or under 3 Mbps download can and do use their broadband service for diverse purposes, including streaming media, web browsing, file sharing and transfer, messaging and collaboration, and even gaming.

5

Statistics Canada, Survey of Household Spending, household equipment, CANSIM Table 203-0027.

6

CRTC, Communications Monitoring Report 2014, Table 5.5.10.

7
Ibid, Tables 5.2.2 and 5.2.8.
8

Statistics Canada, Canadian Internet Use Survey, CANSIM Table 358-0153.

9

FCC, Report on Consumer Wireline Broadband, 2014, online at fcc.gov/reports/measuring-broadband-america-2020

http://www.fcc.gov/reports/measuring-broadband-america-2020http://www.fcc.gov/reports/measuring-broadband-america-20206

15. Because of this extremely broad and multifaceted range in the uses and preferences of our customers, we are constantly reviewing and refreshing our broadband offerings to satisfy ever-changing and disparate needs.

16. The Commission itself has acknowledged that broadband is about more than just speed.

Its recently-launched broadband measurement project will study a number of parameters that comprise “Internet performance” – latency, web browsing and connection speed – with a view to helping customers understand the differences that might exist between different ISPs’ service offerings and their impact on the customer’s experience.10 17. Looking ahead, a number of new technologies and service delivery platforms will be launched in the next few years that will go even further to satisfy consumer broadband needs. For example, in 2018, a constellation of 650 micro-satellites will be launched by OneWeb, a company backed by Qualcomm and the Virgin Group, which will be capable of delivering high-speed Internet services to every region of the earth, including the far ****, at download speeds of 16 Mbps.11 These satellites will operate in low earth orbit on a non-geosynchronous basis, which could eliminate or significantly reduce many of the common service quality complaints associated with geosynchronous satellite systems relating to service speed, rain fade and latency issues.12 18. This is in addition to the over 85 satellites operated by nine different satellite operators that are already authorized to provide fixed satellite services in Canada,13 including satellites in the C- and Ka-bands that have service footprints covering virtually every square kilometre of the country, including in Canada’s most northern and remote communities. Right now, these satellites can deliver broadband Internet services at speeds ranging anywhere from 3 to 10 Mbps. By mid-2016, two additional high throughput satellites will be launched, 10

Measuring Broadband Canada, online at measuringbroadbandcanada.com 11

See Motherboard, “OneWeb's Plan to Beat SpaceX to Provide Satellite Internet to Everyone on Earth” **** 17, 2015, online at motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earth and Vox Technology, “SpaceX and OneWeb are racing to build an internet in space” February 5, 2015, online at vox.com/2015/2/5/7985645/satellite-internet-spacex-oneweb 12

A separate micro-satellite project has been announced by SpaceX, which intends to launch a constellation of low earth orbit satellites by the end of the decade, see NBC News, “How SpaceX Plans to **** Its Satellite Internet Service in 2016” **** 4, 2015, online at nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n370196

13

Satellite Inquiry Report, October 2014, page 20.

http://www.measuringbroadbandcanada.com/

http://motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earthhttp://motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earthhttp://www.vox.com/2015/2/5/7985645/satellite-internet-spacex-onewebhttp://www.nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n370196http://www.nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n3701967

which are expected to be capable of delivering broadband Internet services to these very same communities14 at much higher download speeds of 25 Mbps.15 19. It is also widely anticipated that Industry Canada will make more mobile wireless spectrum available for auction in the 600 MHz band within the next few years. The propagation characteristics of this spectrum are superior to spectrum in the PCS, AWS and BRS spectrum bands, which will make it easier for mobile network operators to extend their service coverage areas and improve overall service speeds, particularly in rural and underserved regions of the country.

20. In the interim, HSPA+ technology reached 99.2% of households in 2013, 16 and now permits average download speeds of up to 18 Mbps.17 LTE reaches 81% of households, up from just 45% in 2011, 18 and LTE Advanced technology will permit peak mobile download speeds of over 200 Mbps and continuous speeds over 50 Mbps. Moreover, 700 MHz spectrum is subject to specific rural deployment obligations, requiring certain licensees to deploy 700 MHz networks covering at least 97% of their 2012 HSPA+ footprint.19

21. In light of the rapid pace of technological change and unprecedented level of competition, network diversity and innovation in today’s Canadian telecommunications market, the policy framework that results from this proceeding must be future-oriented and technologically neutral. As we did in the trio of major regulatory reviews that were conducted in 2014, we should review the regulatory framework for basic telecommunications services with our eyes firmly fixed on the future. We should be wary of applying outdated regulatory concepts to new, innovative and highly-competitive services such as broadband. Instead, we should focus on modernizing a framework that 14

See Viasat-2 Coverage Map, online at

viasat.com/files/assets/Broadband%20Systems/ViaSat_2_Coverage_Map_zoom_labeled_0.png 15

See Response to Request for Information Xplornet(CRTC)7July 2014-2.2, TNC 2014-44, in which Xplornet states that its new satellites, to be launched in 2016, “will make Internet packages with speeds of 25 Mbps available to all Canadians.”

16

CRTC, Communications Monitoring Report 2014, Table 5.3.11.

17

Bell and Telus both cite average download speeds of 7-14 Mbps for DC-HSPA+, while PCMag measured average speeds over 18 Mbps on Videotron’s DC-HSPA+ network. See PCMag “Fastest Mobile Networks Canada” October 13, 2013, online at pcmag.com/fastest-mobile-networks-canada/ and Bell Network Coverage, online at support.bell.ca/Mobility/Network_coverage/What_is_the_Bell_network_coverage_in_Canada and Telus Network Coverage, online at telus.com/en/ab/mobility/network/coverage-map.jsp?INTCMP=NETWORKcoveragemap.

18

CRTC, Communications Monitoring Report 2014, Table 5.3.11.

19

Industry Canada, Licensing Framework for Mobile Broadband Services (MBS) - 700 MHz Band, November 8, 2013, section 6.12, online at ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10584.html.

https://www.viasat.com/files/assets/Broadband%20Systems/ViaSat_2_Coverage_Map_zoom_labeled_0.pnghttp://www.pcmag.com/fastest-mobile-networks-canada/http://support.bell.ca/Mobility/Network_coverage/What_is_the_Bell_network_coverage_in_Canadahttp://www.telus.com/en/ab/mobility/network/coverage-map.jsp?INTCMP=NETWORKcoveragemaphttp://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10584.html8

was developed around the provision of a monopoly era service so that it fits with today’s dynamic market.

Competition and Market Forces Drive Innovation and Change 22. The widespread availability of broadband Internet services in Canada has largely been driven by consumer demand and market forces acting to satisfy that demand. This is evident in the rapid pace of service innovation and the introduction of more advanced and feature-rich services. Investment by facilities-based providers has been largely responsible for the expansion and improvement in broadband Internet services.

Competitive market forces have driven service providers to respond to consumer demands through innovation and investment, just as Shaw did with Shaw Go WiFi, a compelling, cost-effective and customer-friendly alternative to mobile data services. The intense, platform-based rivalry that Shaw has experienced in Western Canada is a key driver behind our investment decisions and it requires us to constantly innovate in order to differentiate ourselves and meet our customers’ ever-evolving needs and preferences.

Innovative services like Shaw Go WiFi meet those needs for on-the-go broadband access, while extending our network and the value of our customers’ broadband experience.

23. This investment and rivalry is not limited to wireline markets; it permeates the broadband market generally, as wireline, fixed wireless, satellite and mobile wireless service providers compete for broadband-hungry consumers. More than 99.4% of Canadians had access to wireless services in 2013, which they use not only as an alternative to traditional landline voice services, but also for broadband Internet access, text messaging, VoIP and IP-based video conferencing applications to name only a few.

24. Competition and innovation also remain pervasive forces in the market for traditional local telephony services, which are now delivered over wireline and wireless networks using both circuit switched and packet switched technologies. In 2001, the incumbent telephone companies accounted for more than 99% of the residential local telephone subscribers in Canada and nearly 98% of households had a home phone.20 By 2013, fewer than 79% of homes had a home phone and less than 57% of those were served by incumbent telephone companies. Together, more households are now served by new entrant wireline 20

CRTC, Report to the Governor in Council on the Status of Competition in Canadian Telecommunications Markets, December 2002, page 40.

9

providers and mobile substitution than by traditional landline service.21 These numbers illustrate the ease with which consumers can not only switch between service providers, but also between wireline and wireless technologies.

Addressing Gaps in Service Availability

25. Given the rapid growth and rate of change that we have seen in the Canadian telecommunications landscape over the past ten years, it is difficult to predict what new or disruptive technologies, services and applications will materialize over the next decade to offer new and unique customer experiences and choice. What we do know is that it is vitally important to create an environment that brings these unknown opportunities to life for consumers by encouraging innovation, investment and experimentation.

26. Four years ago, in Obligation to serve and other matters, Telecom Regulatory Policy CRTC 2011-291 (“TRP 2011-291”), the Commission determined that the rollout of broadband Internet access services across the country had been successful through a combination of market forces, focused funding programs, and public-private partnerships at all levels of government.22 In fact, it was because of the successful combination of these factors that the Commission decided that the deployment of broadband Internet access services, including deployment in rural and remote areas, should continue to rely on market forces and government funding, 23 rather than on regulatory subsidy mechanisms, such as the contribution regime.

27. In Shaw’s view, the Commission should continue to rely on market forces to the maximum extent feasible, as required by the Policy Direction. Many of the services being considered in this proceeding, most notably retail Internet, have been forborne from regulation because the Commission determined that these services are subject to competition sufficient to protect the interests of users.24 In the vast majority of regions across Canada, competition and market forces have effectively fostered consumer choice, forcing competitors to continuously invest and innovate in order to better serve and remain relevant to their customers.

21

CRTC, Communications Monitoring Report 2014, page 159.

22

Obligation to serve and other matters, Telecom Regulatory Policy 2011-291, para. 55.

23
Ibid, para. 83.
24

Forbearance from retail Internet services, Telecom Order CRTC 99-592.

http://www.crtc.gc.ca/eng/archive/1999/O99-592.HTM10

28. In short, relying on market forces to the maximum extent feasible is the most effective means of fulfilling the policy objectives set out in section 7 of the Telecommunications Act (the “Act”) and of delivering the benefits of competition to consumers, such as increased customer choice, lower prices, greater supplier responsiveness and higher levels of product and service innovation.

29. At the same time, however, Shaw acknowledges that it may not be possible to rely on market forces in all instances as a means of ensuring the same quality and level of service throughout the country. Indeed, there are some areas of the country, particularly in the ****, that lack reliable or affordable access to broadband Internet services.

30. As discussed more fully in our responses to the questions posed in TNC 2015-134, closing these service gaps is best accomplished through focused solutions. The federal government’s recently announced Connecting Canadians program will provide funding for eligible broadband projects that can deliver minimum broadband speeds of 3 Mbps down / 512 Kbps up in northern Canada and 5 Mbps down / 1 Mbps up in rural Canada. One of the original objectives of this program was to increase the number of Canadians with access to broadband services of 5 Mbps down / 1 Mbps up from 95% to 98%. Recently, however, the federal government announced that the number of households that will be covered under the new funding program is greater than originally estimated, bringing the total number of households close to 99%.25

31. A focused effort will ensure efficient regulation and avoid disproportionate intervention that could undermine the competitive forces at play in most markets and impose an unnecessary and unfair subsidy burden on Canadian consumers.

Aspirational **** Targets

32. In TRP 2011-291, the Commission established a five year target for the deployment of broadband Internet service in Canada of 5 Mbps downstream and 1 Mbps upstream. In the words of the Commission, these speeds “should be available to all Canadians, through a variety of technologies, by the end of 2015.”26 25

Supra, note 3.
26
TRP 2011-291, para. 68.
11

33. Shaw believes that the target broadband speeds established by the Commission in TRP 2011-291 sent an appropriate signal to the market, and, four years later, they are now serving as an effective means to monitor the evolution of the market, as well as industry and government efforts in achieving that target.

34. In fact, in 2010, the year before the Commission’s target broadband speed was established, roughly 83% of Canadians had access to speeds of 5 Mbps download /1 Mbps upload. 27 In 2013, 95.5% of Canadians enjoyed access to these speeds, representing a 15% increase in service penetration in three years.28 Likewise, in 2010, approximately 72% of Canadians have access to broadband services at download speeds of 5 Mbps or more from two or more providers.29 Today, these speeds are available to 87% of Canadians on more than two platforms, not including satellite. These numbers illustrate the rapid growth in the availability of the target broadband speed in Canada and multi-modal competition as the key driver of this growth.

35. In addition, Internet services at much higher speeds, such as 100+ Mbps, are now available to 60% of Canadian households. However, only 5% of households subscribed to service speeds in excess of 50 Mbps in 2013, which is a modest increase from 3.6% in 2012. Subscriptions in the 5-9 Mbps category remained the most popular in the 2009 to 2013 time period, with 32.8% of households subscribing to Internet services in this category.30

36. One of the issues under consideration in this proceeding is whether a new target broadband speed should be established by the Commission. In our view, a new aspirational target speed could send a fresh signal to the market and help to achieve results similar to those achieved by the targets established in 2011. However, any new target must be set in accordance with our understanding and expectations of consumer demand.

37. After all, this is about consumers. The goal should not be to drive markets to exceed what consumers require, demand or are willing to pay for, or put an excessive emphasis on speed above other factors that consumers value in their broadband experience. Our own experience indicates that, beyond a threshold speed that provides the functionality 27

CRTC, Broadband Report, November 2011.
28

CRTC, Communications Monitoring Report 2014, Table 5.3.12.

29

CRTC, Communications Monitoring Report 2011, Figure 5.3.16.

30

CRTC, Communications Monitoring Report 2014, Table 5.2.10.

12

desired, most consumers see little reason to pay for higher speeds. The Commission’s most recent Communications Monitoring Report notes that 5 Mbps average available bandwidth is sufficient for the performance consistency of a large range of popular internet applications that facilitate work, education and entertainment (including file-sharing, streaming and real-time applications).31 Indeed, the 2014 Monitoring Report indicates that 68.7% of Canadians subscribe to services with speeds of 15 Mbps or lower32 and the same can be said of over half of Shaw’s customer base, many of whom use our lower speed services (including speeds at and lower than 3 Mbps download) for diverse uses, including streaming media, file sharing, VoIP, messaging and video conferencing.

38. It is also critical to keep in mind that consumers are demonstrating that broadband is a multi-dimensional service, which people experience in a wide variety of ways. Connection speed is not the only characteristic relevant to broadband performance. The various uses to which broadband services are put by consumers is equally, if not more, important than speed.

39. Finally, we must be careful not to confuse “aspirational targets” on the one hand with the basic service objective and any associated broadband speed requirements on the other hand. These are two different concepts. Aspirational targets allow the Commission to establish a target broadband speed to which all network operators can aspire, which can then be tracked and monitored by the Commission in order to determine the progress made by network operators in achieving these speeds over a given period of time.

Establishing aspirational targets for advanced broadband services sends a signal to the industry and the market generally that there is a new goal to achieve; however, they should not be considered “hard” requirements, nor should they be subsidized through the national contribution regime. This would run the risk of interfering with market forces, given the inherent challenge of correctly selecting a single, fixed speed in today’s dynamic marketplace that perfectly aligns with consumer demand.

Focused Funding

40. Shaw acknowledges that additional measures may be required in order to increase the availability of reliable and affordable broadband services in certain areas of the country 31

CRTC, Communications Monitoring Report 2014, Figures 5.3.8 and 5.3.9.

32
Ibid, Table 5.3.10.
13

where competitive forces may not be sufficient. However, we should be wary of using disproportionate regulatory intervention as a means of addressing gaps in service coverage and availability. Indeed, the evidence suggests that there are now, or will soon be, technologies capable of delivering broadband Internet services at speeds of 25 Mbps to every inhabited region of the country, including north of the 60th parallel. 33 These technological developments will go a long way toward eliminating the “speed divide” that currently exists between Canada’s remote and northern communities on the one hand and communities located in southern Canada on the other.

41. This is why Shaw favours reliance on market forces as the principal means of addressing gaps in broadband service coverage and accessibility in Canada. This approach is consistent with the forbearance regime established by the Commission,34 as well as the Policy Direction, which requires reliance on market forces as the optimal means of fulfilling the policy objectives set out in section 7 of the Act. It also allows for the establishment of any aspirational targets that may be created as a result of this proceeding.

42. With that being said, Shaw acknowledges that there are some markets in Canada where market forces cannot be relied on to meet the needs of consumers. In these instances, Shaw favours the use of precisely defined government funding programs, rather than the national contribution fund, as a means of closing service or coverage gaps for broadband Internet services. As discussed more fully in Appendix A, using funds from general government revenues is a more efficient, transparent and equitable means of subsidizing broadband services in those areas of the country where these gaps may exist.

43. Funding broadband Internet services through the existing contribution regime would introduce a huge cost burden on consumers, distort prices for contribution eligible services and unfairly benefit service providers that receive subsidies under the regime. It was for reasons such as these that the Telecommunications Policy Review Panel explicitly recommended in its 2006 Report that broadband service expansion programs be funded from general tax revenues and not be made part of the existing local subsidy and contribution regime. Among the concerns raised by the Review Panel was the risk of significantly expanding the financial burden of the contribution regime to “an unacceptable 33

Supra, note 15.
34
Supra, note 24.
14

level” and that it “would distort markets and result in an inefficient allocation of resources.”35

44. The Review Panel’s Report also noted that contribution-based funding would impose a regressive burden on consumers, particularly those in low income households:

Internal cross-subsidies are also undesirable from the viewpoint of social equity. Since the cost of providing subsidies is passed onto consumers, and since all consumers contribute at the same rate regardless of income, internal cross-subsidies effectively impose a regressive tax on the customers of telecommunications service providers.36 45. Regarding the use of contribution funds to subsidize other telecommunications services, Shaw believes that there may be an ongoing requirement for subsidies in certain instances. However, there is a pressing need to modernize and reform the existing contribution regime in order to make it more suitable for the 21st century requirements of Canadians. At present, the existing regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice service, which is being rapidly substituted and replaced by other services and technologies (e.g., broadband Internet access services, fixed and mobile wireless, etc.).

46. Furthermore, while Shaw does not discount the possibility that subsidies may continue to be required for residential primary exchange services in certain areas of the country, we ask the Commission to critically examine on the record of this proceeding whether contribution funding is required in ILEC Rate Bands E and F, where there are a number of examples of funds being disbursed notwithstanding the presence of competitors in the market, the availability of lower priced substitutes and the overbuilding of copper networks with fibre-to-the-premise facilities. In Shaw’s view, the Commission should consider whether the existing fund is properly maximizing returns for Canadians in these circumstances. Removing unnecessary subsidy requirements will ensure that contribution funding is directed only to services or projects for which there is a true lack of competitive alternatives and a demonstrated need for funding.

47. If the Commission determines that contribution funds should be used to subsidize other telecommunications services or projects, such as modernizing telecommunications 35

Telecommunications Policy Review Panel Final Report, 2006 (“TPRP Report”), pages 8-9.

36
See TPRP Report.
15

transport networks, this funding should be capped at the amount that is currently used to subsidize services that no longer warrant that funding, which may include residential primary exchange services in Rate Bands E and F. This will minimize the contribution burden ultimately borne by Canadian telecommunications users. In addition, recipients of contribution funding should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. The funding process should also be technology agnostic so that the widest range of networks and delivery technologies is eligible for subsidy, provided they meet the relevant service requirements.

This will further ensure that the lowest cost, most efficient option is selected, while preserving technological and competitive neutrality.

48. Finally, consistent with the Commission’s decision in Video Relay Service, Telecom Regulatory Policy CRTC 2014-187 (“TRP 2014”), the contribution fund should continue to be used to subsidize video relay service using the annual funding cap of $30 million established by the Commission in TRP 2014 for all VRS-related costs.37 49. Set out in Appendix A of this intervention are Shaw’s responses to the questions set forth in TNC 2015-134, along with further details on how the contribution fund can be modernized and reformed.

Conclusion

50. As a customer-centric network and content experience company, Shaw is acutely aware of the critical importance of telecommunications, particularly the Internet, in the day-to-day lives of Canadians. The Internet fuels the digital economy, and if Canada is to prosper in this digital age, robust and reliable Internet services are required nationwide. Our network, with Shaw Go WiFi being a case in point, breaks down the barriers to the digital economy – Shaw Go WiFi extends the reach of our premium Internet service beyond the home, giving our customers on-the-go access using whatever device they choose.

51. Competition and market forces are the key drivers behind customer-friendly, value-enhancing innovations like Shaw Go WiFi. They also promote network investment, as operators strive to provide the highest quality, most reliable and best value broadband experience to as many customers as possible. As the digital economy grows, so will 37

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

16

usage. Since tremendous network investment is required to support that growth, it is imperative that the regulatory framework support the cycle of network investment.

52. Nevertheless, barriers to the digital economy still exist for some Canadians in rural and remote parts of the country, who do not have access to reliable and affordable Internet services. In these instances, where high costs prevent market forces from breaking down those barriers, government intervention is appropriate. The challenge for policymakers is to find a way to connect those citizens, mainly located in the far ****, in the most fair and efficient way possible. Focused government funding programs based on technology agnostic competitive bidding processes are the best way to close the service gaps that remain, enabling full participation in the digital economy by all Canadians.

53. Shaw thanks the Commission for the opportunity to participate in this important proceeding and looks forward to the next stage of this proceeding.

APPENDIX A
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Appendix A: Responses to Questions Posed in TNC 2015-134 Canadians’ evolving needs for telecommunications services 1. Canadians are using telecommunications services to fulfill many social, economic, and cultural needs in today’s digital economy.

a. Explain how telecommunications services are used to meet these needs. For example, uses may include e-commerce (i.e. the online purchase and trade of products or services), e-banking and/or telephone banking, e-health or telehealth services, telework, and distance education. Which of these uses of telecommunications services are the most important to ensure that Canadians meaningfully participate in the digital economy?

A1. There is no one service, application or platform that is most important in today’s digital economy. It depends on the consumer, the situation, the location and the need.38 Unlike the telecommunications market of the past, which was characterized by the monopoly provision of local and long distance voice services, today we see millions of different devices connecting Canadians to thousands upon thousands of products, services and features delivered over an ever-expanding set of technology platforms and networks.39 Everything from conventional telephones, smartphones, tablets and personal computers to appliances, thermostats and wearable devices, play a role in our use of today’s telecommunications services.

A2. In broad terms, Canadians are using telecommunications services for an entire range of needs, including:

 Voice communications – these services are delivered over copper, cable, fibre, satellite and mobile wireless networks providing reliable, secure and affordable voice connectivity to business, social/family interaction, emergency response (911), health services, medical monitoring, home security, international long distance, low-speed Internet access and faxing services. Voice and video communications capabilities can also be provided over a pure IP connection in combination with an application, such as Skype or Apple Facetime;

 Electronic mail and other forms of text-based communications – these capabilities are delivered over wireline and wireless networks using both circuit and packet switched technologies;

 Accessing the Internet – whether over copper, cable, fibre, satellite and mobile wireless networks or WiFi:

38
Supra, note 4.
39

Cisco Virtual Networking Index (“Cisco VNI”): Global Mobile Data Traffic Forecast Update: 2014-2019.

APPENDIX A
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o for informational purposes, whether planning holidays, staying informed, researching products, or education;

o for business, e-banking, and e-commerce;

o for entertainment purposes, such as streaming music and videos; and o to use specialized applications.40

A3. Although consumers are increasingly reliant on broadband networks, wireline voice services remain relevant, and some consumers may prefer the affordability and reliability of a landline voice service to support home monitoring systems or health monitoring systems.41

b. Explain which telecommunications services are most important to support these needs and uses. What characteristics (e.g. capacity, mobility, high speed, and low latency) should these telecommunications services have?

A4. In today’s diverse market, there is no one “right” or optimal telecommunications service for every Canadian in every circumstance. Each telecommunications service – whether it is local, long distance, mobile wireless or broadband access – has separate and distinct characteristics, and the usefulness of that service for a particular consumer will depend on his or her particular circumstances and needs.

A5. For example, voice landline services will not be useful to a consumer that desires mobility.

In the most recent Canada-wide telephone data from 2012, 17.8% of households are wireline only and 15.7% are mobile wireless only; however, in the space of one year, the number of wireless only households had grown to 20.4% in 2013.42 However, a voice landline is secure, highly reliable and not impacted by coverage areas, network congestion, weather, power outages, etc. These characteristics may hold more value than mobility for certain Canadians. This illustrates that the valued characteristics of telecommunications services are driven by a range of consumer preferences.

c. Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.

A6. Given the abundance of choice and dynamic technological change in virtually every region of Canada, as explained above, the vast majority of Canadians have access to the networks and services that they need in order to meaningfully participate in the digital 40

CRTC, 2014 Communications Monitoring Report, Table 5.3.8. See also 2015 Digital Future in Focus by ComScore.

41

See Statistics Canada, Residential Telephone Service Survey, 2013. See also 2014 Communications Monitoring Report, Table 5.2.4.

42

Statistics Canada, Survey of Household Spending, supra, note 5.

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economy. As noted, over 99% of Canadians have access to local phone service and high speed mobile wireless services and, by 2017, almost 99% of Canadians will have access to broadband Internet services at the Commission’s aspirational target speeds of 5 Mbps download and 1 Mbps upload.43

A7. At the same time, there are two broadly based stakeholder groups that face barriers to accessing the networks and services that they need in order to meaningfully participate in the digital economy. The first of these groups is composed of individuals with auditory or visual impairments. For individuals that have visual impairments, the Commission has established rules requiring all telecommunications service providers to make their billing statements and other documents available in alternative format, such as Braille, large print, accessible electronic formats including HTML, or as mutually agreed. 44 These alternative formats must be provided, on request, in relation to a wide range of information, including rates, terms, and conditions of service,45 the National Do Not Call ****, **** Management Tools, retail quality of service and information on dialing plan changes.46

A8. The Commission also has a long standing policy of ensuring accessibility to phone services through requiring carriers to provide Message Relay service, IP Relay service and, more recently, Video Relay service, ensuring that the deaf and hard of hearing community has equal access to modern communications services. In fact, in TRP 2014-187, the Commission determined that the costs of Video Relay services should be subsidized using funds from the national contribution fund. These accessibility measures have had a significant impact on minimizing and/or eliminating barriers to the digital economy.

A9. The second, broadly based stakeholder group that currently faces barriers to accessing the networks and services that they need in order to participate meaningfully in the digital economy are Canadians living in remote areas where geographic challenges and technological limitations inhibit the market forces that lead to reliable and affordable services, particularly residential Internet access services.

A10. As discussed in the response to Question 4 below, various levels of government in Canada are addressing these gaps in broadband coverage by introducing targeted funding programs that are designed to expand the availability of broadband Internet services in many of these communities.

43
Supra, note 3.
44

Extending the availability of alternative formats to consumers who are blind, Telecom Decision CRTC 2002-13.

45

Accessibility of telecommunications and broadcasting services, Broadcasting and Telecom Regulatory Policy CRTC 2009-430.

46

Follow-up to Broadcasting and Telecom Regulatory Policy 2009-430 – Requirements for telecommunications service providers to communicate certain information in alternative formats, Telecom Regulatory Policy CRTC 2010-132.

APPENDIX A
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A11. Therefore, in many respects, the barriers currently faced by Canadians in accessing broadband Internet services are being removed through targeted government funding and technological advances.

d. Identify and explain any enablers that allow Canadians to meaningfully participate in the digital economy (e.g. connected devices and applications).

A12. New technologies and devices enable Canadians to connect across different networks and platforms seamlessly. Smartphones and other mobile devices are quickly becoming ubiquitous and are widely supported by mobile and Wi-Fi networks.47 Desktop Internet access is estimated at 45% of total Internet access with the remaining 55% distributed between smartphones (43%) and tablets (12%).48 A13. A variety of apps are available to consumers based on their particular needs and circumstances. This enables access to a range of information and entertainment, while also allowing devices to become everything from personal health monitors to mobile point-of-sale systems for small businesses.

A14. These devices also generally contain a number of embedded features designed to improve accessibility for users with low vision or hearing loss. Smartphones and tablets should also enable users to access Video Relay Service when the service becomes available.

A15. In addition, fierce competition to meet consumer demand for these connected devices and applications has resulted in tremendous network investments that not only enhance capacity and reliability, but also deliver a range of customer friendly innovations, ultimately adding value. Shaw Go WiFi, which allows nomadic access to the Internet through over 65,000 access points, is a leading example of this innovation.

e. As Canada’s digital economy continues to grow and evolve during the next 5 to 10 years, which telecommunications services are Canadians expected to need to participate meaningfully? Specify how your responses to parts a) through d) above would change based on your answer.

A16. Given the rapid growth and change in the telecommunications market over the past five to ten years, it is difficult to predict what new disruptive technologies will emerge over the next decade. However, based on current trends and industry forecasts we anticipate a continued decline in traditional landline voice services and dial-up Internet access. We also anticipate greater reliance on wireless technologies to address all of the information and communications needs of Canadians.49

47

Supra, note 4, Smartphone market penetration by percentage of mobile subscribers.

48

ComScore: Canadian Digital Future in Focus 2014.

49

CRTC, Communications Monitoring Report 2014, Table 5.2.0.

APPENDIX A
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A17. However, there will still be a number of Canadians that rely on landline voice as their primary means for staying connected because they are comfortable with the reliability and security of those landline voice networks. This is especially true for Canadians above the age of 55.50

A18. IP-based services will also continue to grow, placing corresponding demands on both wireline and wireless networks.51 These demands will be met through a combination of innovation and network expansion to deliver high quality, reliable and affordable services.

By 2016, more than half of all traffic from mobile-connected devices will be off-loaded to wireline networks through the use of Wi-Fi access points and femtocells.52 A19. We also anticipate that consumers will place increasingly greater value on a seamless experience, facilitated by networks becoming more and more integrated across technologies and service platforms. As networks integrate, consumers will also prioritize the security of the growing network of networks.53 2. The Commission’s current target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload, based on uses that consumers should reasonably expect to make of the Internet. Are these target speeds sufficient to meet the minimum needs of Canadians today? If not, what should the new targets be and what time frame would be reasonable to achieve these new targets?

A20. Shaw believes that the Commission’s decision in TRP 2011-291 to set aspirational targets for broadband access services sent an appropriate signal to the market, while also galvanizing industry and government efforts to achieve this objective, with the result that close to 99% of Canadian households will have access to the target speed of 5 Mbps downstream and 1 Mbps upstream by 2017.54

A21. In this proceeding, the Commission could establish new aspirational target speeds for advanced broadband services which could send a fresh signal to the market and provide a new objective for the industry, directing efforts towards achieving the advanced broadband target speed. But the aspirational speed must be grounded in our knowledge and expectations of consumer demand.

A22. It is also important to distinguish between aspirational targets for advanced broadband services on one hand, and the basic service objective and any associated broadband funding requirements under the regulatory regime, on the other. For example, the United Kingdom’s Superfast Broadband Program established targets to make “basic” broadband available to all homes by 2016 and “superfast” broadband available to 90% of homes in the same period. However, these targets, and corresponding efforts to meet the targets, 50

Statistics Canada Residential Telephone Service Survey, 2013.

51

Cisco VNI. Global Mobile Data Traffic Forecast Update, 2014-2019.

52
Ibid.
53
Ibid.
54
Supra, note 3.
APPENDIX A
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are completely separate from the universal service obligation in the UK. Only BT and one regional incumbent are subject to the universal service obligation, which at present only provides for dial-up access.55

A23. This distinction is equally apparent in the United States. The Federal Communications Commission has noted the difference between upholding universal service requirements and monitoring the deployment of advanced telecommunications capabilities.56 Taking account of these differences ensures that any targets that are set for broadband funding purposes maximize the benefits of limited resources without hindering the tremendous strides that are made by industry when inspired by higher aspirational target speeds.

A24. In Canada, it is equally important to recognize these distinctions. Setting aspirational speed targets creates an environment where competing technological platforms, spurred on by ever-evolving consumer demand, are driven to extend advanced broadband services to as many Canadian households as possible, with the Commission monitoring the rate of progress along with changing consumer preferences.

A25. In contrast, setting speed requirements for any possible national contribution or other regulatory funding program would serve a different purpose – namely achieving a basic level of broadband access service.

The Commission’s role regarding access to basic telecommunications services 3. Which services should be considered by the Commission as basic telecommunications services necessary for Canadians to be able to meaningfully participate in the digital economy? Explain why.

A26. As discussed more fully below, the regulatory category – “basic telecommunications service” – presents challenges and limitations as a tool to determine which services are necessary for Canadians to participate in the digital economy. Services that might have been considered “basic” in the past are being eclipsed by new services and applications, such as email, text messaging and even broadband Internet access services, that do not easily fit within definitions and regulatory constructs that were created over 30 years ago.

A27. It also is important to consider the historical context in which these regulatory terms first emerged. The term “basic telecommunications service” has a long history of use in Canada and, for purposes of responding to this question, should be distinguished from the term “basic service objective”. The former term (i.e., “basic telecommunications service”) was first used by the Commission in 1984 as a means of classifying a cross-section of real-time, telecommunications services which, in the words of the Commission, provide a “pure transmission capability over a communications path that is virtually transparent in 55

Ofcom, Universal Service Obligation: a review, 2005, online at stakeholders.ofcom.org.uk/consultations/uso/main/.

56

FCC, 2015 Broadband Progress Report and Notice of Inquiry on Immediate Action to Accelerate Deployment, January 29, 2015, para. 54.

http://stakeholders.ofcom.org.uk/consultations/uso/main/ APPENDIX A

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terms of its interaction with subscriber supplied information.”57 Among the services that have been classified by the Commission as “basic telecommunications services” are local and long distance voice services, private line services and various types of protocol-based data transport services.58

A28. There are a few references to the term “basic telecommunications service” in the Act, including in the definition of a “telecommunications service provider”59 in subsection 2(1), as well as in subsection 46.5, which gives the Commission the power to require “any telecommunications service provider to contribute… to a fund to support continuing access by Canadians to basic telecommunications services.”60 A29. The Commission’s original reason for creating the definition of “basic telecommunications service” was to determine whether a separate category of services, called “enhanced services”, should be accorded the same regulatory treatment as basic services, or whether a different regulatory framework should apply to enhanced services. After considering the matter, the Commission decided that services that are classified as “basic” should be subject to more detailed regulation, including unbundling obligations, whereas services that are classified as “enhanced” should be subject to lighter regulatory obligations because these services were open to a greater degree of competition.61 A30. In contrast to “basic telecommunications service”, the term “basic service objective” bears a very different meaning, referring to a minimum standard of telecommunications service that was established by the Commission in 1999 in order to ensure that Canadians in all regions of the country would have access to this standard of service at affordable rates. In its current form, the basic service objective is defined to include the following service capabilities:

 individual line local touch-tone service;

 capability to connect to the Internet via low-speed data transmission at local rates;

 access to the long distance network, operator/directory assistance services, enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and

 a printed copy of the current local telephone directory upon request.

A31. Some services, such as voicemail, email and various types of messaging services (e.g., text messaging, MMS, paging and instant messaging) do not fit within the Commission’s definition of basic telecommunications services or the current basic service objective but are used by Canadians on a day-to-day basis for participation in the digital economy.

57

See Enhanced Services, Telecom Decision CRTC 84-18, issued 12 July 1984 (“Decision 84-18”) and Identification of Enhanced Services, Telecom Decision CRTC 85-17, issued 13 **** 1985 (“Decision 85-17”).

58
Ibid.
59
Subsection 2(1) of the Act.
60
Subsection 46.5(1) of the Act.
61
Decision 84-18, supra, note 57.
APPENDIX A
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A32. All of which underscores a more fundamental point. The decades-old term “basic telecommunications service” may not be particularly helpful in determining which services are necessary for Canadians to participate in today’s digital economy.

A33. The same holds true for the term “basic service objective”. This term is essentially a holdover from a monopoly regulated era when there was a single telecommunications service, namely primary exchange service, the universal availability of which was promoted by the Commission through various regulatory measures adopted over the years, including through the establishment of the basic service objective and contribution funding for primary exchange services offered to residential customers in high cost areas of the country.

A34. It is now questionable whether we live in a world where primary exchange service is a fundamental prerequisite for participating in the digital economy. The Canadian telecommunications market is now a highly dynamic market involving myriad services delivered over an ever-expanding range of technological platforms, including fiber optic cable, copper, coaxial cable, fixed wireless networks, mobile wireless networks and satellite. There are thousands of different types of telecommunications services, applications and features available in the market, each of which has different characteristics and functionalities and serves a particular need.

A35. In today’s dynamic and technologically changeable environment, it is risky to try to rigidly identify specific services, applications or features that might qualify as a “basic service” that is necessary for Canadians to participate in the digital economy. Services or features that may be indispensible to some Canadians may be entirely irrelevant to others. For example, local voice services may be important to some Canadians, while others may place a greater importance on email and text messaging.

A36. The same holds true for the term “digital economy”. Given the highly dynamic and unpredictable marketplace of today, the term “digital economy” cannot be construed as a static concept – it, too, shifts over time and means different things to different people.

Indeed, defining this term is a very subjective and context-dependent exercise, and should be approached with that realization in mind.

A37. The same challenges arise when considering whether to include broadband access as a basic telecommunications service and how to define what that possible “basic” broadband access service would look like. Just as Canadians have varying conceptions of what it means to meaningfully participate in the digital economy, they also have varying needs and requirements when it comes to their choice of a broadband service. In fact, we know from our customers that there are several elements of the broadband experience that they value – including reliability, price, usage, innovation and value-adds – in addition to speed.

Moreover, the way consumers use broadband, and their associated preferences and needs, vary widely. For a consumer primarily engaged in social media, speed may not be as important as reliability, portability and availability. On the other hand, a gamer playing in real-time will place higher value on speed and latency.

APPENDIX A
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A38. Given the extremely broad and multifaceted range in preferences and uses of broadband services, defining a “basic” broadband Internet access service would be a daunting challenge. Assuming it is possible, in Shaw’s view, the only reasonable starting point is to delineate the relevant set of functionalities or uses of broadband access services, rather than the speed or some other technological factor. As we have emphasized throughout this submission, this is about consumer need, not technology. In this regard, we believe the following functionalities are the most important to enable meaningful participation in the digital economy: the ability to send and receive e-mails, access online shopping, banking and government resources, to stay on top of current events, participate in social media, make VoIP and videoconferencing calls and access educational, employment and health tools and information.

A39. This usage profile can be delivered through a wide array of technologies, including via cable, DSL, fibre, fixed wireless, mobile wireless, and satellite, as well as over a variety of service packages and speeds, including at speeds that are lower than the current aspirational target of the Commission. For example, a broadband Internet service offered in the range of 3 Mbps download / 512 Kbps upload, with 10 GB of data per month would accommodate all of the foregoing. In fact, many of the customers on Shaw’s speed services in this range can and do use their broadband service for all of these purposes and more, including streaming media, file sharing and gaming.

A40. Beyond broadband service, it is reasonable to consider that voice services, whether delivered over conventional wireline facilities, fixed wireless, mobile or satellite networks, constitute a service that is necessary for Canadians to participate meaningfully in the digital economy.

A41. Finally, telecommunications services that are required by Canadians with disabilities, such as Message Relay Service, IP Relay and Video Relay Service, also constitute services necessary for participation in the digital economy. Without access to these services, individuals within these communities cannot communicate effectively or participate in the online economy.

A42. The question as to whether any of the foregoing services should be included in the basic service objective or made a part of the obligation to serve is dealt with separately in the response to Questions 8 and 9 below.

a. Explain whether the underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should be a factor in defining whether a telecommunications service should be considered a basic service.

A43. The underlying technology of a given service should not be a factor in determining whether a given telecom service should be considered “basic”. The consumer’s experience and use should be the primary consideration, not the underlying technology.

APPENDIX A
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A44. For example, if the Commission decides that a given service should be included in the basic service objective, that decision should be agnostic to the technology platform over which the service is delivered. This is the approach that the Commission has taken with respect to the current definition of the basic service objective,62 and it is the only approach that can ensure equitable and competitively neutral treatment of all service providers.

b. Identify, with supporting rationale, the terms, conditions, and service characteristics under which basic telecommunications services should be provided.

Should any obligations be placed on the provider(s) of these services? If so, what obligations and on which service provider(s)?

A45. As noted above, the vast majority of real-time “basic” telecommunications services have been forborne from regulation because they have been found by the Commission to be subject to competition that is sufficient to protect users. These services include long distance voice services, private line services, various speeds and protocols of data services and mobile wireless services. 63 Residential local voice services have been forborne from regulation in over 720 local service exchanges in Canada. 64 The Commission has also forborne from regulating many other types of telecommunications services, including retail Internet access, paging and enhanced services. 65 A46. Given that so much of the market has now been forborne from regulation, it would not be appropriate to re-regulate or impose new obligations on service providers to offer these services in the absence of evidence of market failure. Not only would this be contrary to the Commission’s previous findings, it would also be contrary to the Policy Direction, which requires that the Commission fulfill the objectives of the Act by relying on “market forces to the maximum extent feasible.”66 The Policy Direction also requires that no new regulatory measures be adopted without clear and compelling evidence of a well-defined problem that can only be addressed through regulation, and where the benefits of such intervention outweigh the costs.67

A47. Where regulatory measures are required, the Policy Direction also states that these measures must be carefully designed so as to be “efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary.”68

62
TRP 2011-291, supra, note 22.
63

See Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19; Stentor Resource Centre Inc. - Forbearance From Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, Telecom Decision CRTC 98-20; Forbearance granted for telcos' wide area network services, Telecom Order CRTC 2000-55; and Regulation of mobile wireless telecommunications services, Telecom Decision CRTC 96-14.

64

CRTC, Communications Monitoring Report 2014, Appendix 3. Based on 2013 data.

65

See Forbearance from retail Internet services, Telecom Order CRTC 99-592; Review of the Regulatory Framework, Telecom Decision CRTC 94-19; and Enhanced Services, Telecom Decision CRTC 84-18.

66

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, P.C. 2006-1534 (the Policy Direction).

67
Ibid, para. 1(a)(i).
68
Ibid, para. 1(a)(ii).

http://www.crtc.gc.ca/eng/archive/1996/dt96-14.htmhttp://www.crtc.gc.ca/eng/archive/1999/O99-592.HTM APPENDIX A

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A48. Taking these considerations into account, Shaw believes an obligation to provide a particular telecommunications service should only be imposed where there is clear evidence of market failure.

c. What should be the prices for basic telecommunications services and how should these prices be determined? Provide rationale to support your answer.

A49. Market forces enable consumers to determine the optimal mix of value, quality, innovation and service; therefore, they are the most appropriate mechanism for determining the price of telecommunications services. Furthermore, market forces preserve the cycle of investment, which is significant as network operators strive to compete and differentiate themselves from their rivals, while meeting increasing demand for usage.

A50. Accordingly, where a service has been forborne from regulation (and is therefore subject to competition sufficient to protect the interests of users), rates should be determined by market forces.

4. Can market forces and government funding be relied on to ensure that all Canadians have access to basic telecommunications services? What are the roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal) in ensuring that investment in telecommunications infrastructure results in the availability of modern telecommunications services to all Canadians?

A51. In the vast majority of cases, market forces can continue to be relied upon to ensure that Canadians have access to the services that they need in order to participate meaningfully in the digital economy. Relying on market forces delivers the benefits of competition to Canadians in the form of increased customer choice, lower prices and higher levels of product and service innovation.

A52. With respect to those regions of the country where market forces may not be sufficient to ensure reliable and affordable services, additional measures may be required in order to increase the availability of these services. However, even in these instances, it is not necessary, or in the public interest, to introduce broad new regulatory requirements in order to address gaps in service coverage and availability. As described below, there is evidence that market forces, in conjunction with focused government subsidies, have been bridging the service gaps in these areas.

A53. There is also evidence that recent investments and technological developments in wireless and satellite have the potential to close the “speed divide” that currently exists between Canada’s remote and northern communities on the one hand and communities located in southern Canada on the other. For example, new satellite systems will be launched in the next few years that will have service footprints covering every remote and APPENDIX A

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underserved region of Canada.69 These systems are expected to be capable of delivering download speeds of anywhere from 16 to 25 Mbps, and, in the case of the new low earth orbit satellite systems, latency and rain fade issues will be substantially reduced.

A54. Therefore, Shaw favours focused government funding programs as a means of addressing gaps in broadband service coverage and accessibility rather than increased reliance on regressive subsidy measures such as expansion of the national contribution fund.

A55. Set out in Appendix “B” of this submission is a table of federal, territorial, provincial and municipal funding programs. Canada has a long history of success with precise funding programs that are designed to support broadband deployment:

 In just three years since the Commission’s Broadband Report was published, the footprint of households covered by broadband Internet services with download speeds in excess of the speed established in TRP 2011-291 grew by nearly 10%.70

 Today, 95.5% of Canadian households have access to broadband Internet services at speeds of 5 Mbps download or greater, and by mid-2017, new projects funded through the federal government’s Connecting Canadians program will target specific underserved households and expand the footprint to almost 99% of Canadian households.

 The Northern component of the Federal Government’s Connecting Canadians program will bring broadband at speeds of 3 to 5 Mbps to remote, satellite-dependent communities in Nunavut and the Nunavik region of northern Quebec.

 In 2010, the wireline capex expenditures of telecommunications carriers passed the $6 billion (annual) threshold for the first time and has averaged over $7 billion annually since.71

 Targeted funding in the past five years has contributed millions more to spur rollout.

A56. The success of public/private partnerships in Canada has also garnered international attention. For example, The Eastern Ontario Regional Network (EORN) was one of five organizations shortlisted for an award from the World Broadband Forum, in recognition of efforts to improve broadband deployment and penetration. EORN’s partnerships with several ISPs enhanced service for almost 90% of homes in rural Eastern Ontario, accounting for some 415,000 homes and businesses.72 EORN also collaborated with three First Nations communities to augment services, including a direct fibre link to the Alderville First Nation to improve community, health and student services.

69
Supra, notes 11 and 12.
70
From 86% in 2010 to 95.5% in 2013.
71

CRTC, Communications Monitoring Report 2014, Table 5.0.4.

72

Connecting Eastern Ontario to the World, EORN Final Report 2014, page 5.

APPENDIX A
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A57. EORN is also looking to the future. It recently released its 2015-2024 Digital Strategy, including goals to increase user uptake and assist ISPs in making submissions for projects to achieve the goals of the Government of Canada’s Connecting Canadians program.73 These and other projects are ongoing and the benefits of these public/private partnerships will continue to accrue.

A58. The success of targeted federal, territorial, provincial, and municipal funding programs is due in large part to market-driven, competitive, and technologically-neutral bidding processes. These market-driven proposals leverage existing expertise and infrastructure, but also support new infrastructure, new investments and new services that would otherwise be uneconomical. This allows for an efficient combination of service offerings provided over fibre, coaxial, copper, mobile wireless, fixed wireless, satellite, and other technologies.

A59. Using funds from general government revenues is also a more efficient, transparent and equitable means of subsidizing broadband services in those areas of the country where there may be service coverage gaps, because these funds are drawn from the widest possible revenue base, namely all taxpayers.

A60. Funding broadband deployments through the existing contribution regime would impose a regressive burden on consumers, particularly those in lower income brackets. 74 The impact on consumers of using contribution funds to subsidize broadband deployment programs was identified as a concern in the Final Report of the Telecommunications Policy Review Panel:

Internal cross-subsidies are also undesirable from the viewpoint of social equity. Since the cost of providing subsidies is passed onto consumers, and since all consumers contribute at the same rate regardless of income, internal cross-subsidies effectively impose a regressive tax on the customers of telecommunications service providers.75

A61. In addition, there is evidence that the competitive bidding process that underlies the federal government’s broadband funding programs is more efficient than the contribution regime. For example, under the federal government’s Broadband Canada – Connecting Rural Canadians program, the subsidy per household was roughly $1,000, whereas the 73

A Road Map to Digital Leadership, online at eorn.ca.

74

In this regard, Shaw notes that communications expenditures represent 8.4% of income for households in the lowest income quintile and only 1.7% for those in the highest. Indeed, as a portion of income, the communications expenditures of the lowest (first) quintile exceed those of the third, fourth and highest (fifth) combined. See Communications Monitoring Report, 2014 table 2.0.10.

75
TPRP Report, supra note 35, pages 8-9.
APPENDIX A
A-14

subsidy per household under the ILECs’ deferral account service improvement programs was approximately $5,000.76

5. What should be the Commission’s role in ensuring the availability of basic telecommunications services to all Canadians? What action, if any, should the Commission take where Canadians do not have access to telecommunications services that are considered to be basic services?

A62. The best way for the Commission to ensure the ongoing availability of basic telecommunications services to Canadians is to continue to forbear from regulating these services where they are subject to competition and market forces that are sufficient to protect the interests of users, as required by the Policy Direction and section 34 of the Act.

A63. As a case in point, the market for retail Internet access services is characterized by fierce competition between multiple service providers using no less than five different access technologies to deliver an entire range of Internet access services and service speeds.

The Commission decided more than 15 years ago to forbear from regulating this market and since that time, consumers have reaped the benefits of competition in the form of increased customer choice, higher levels of product and service innovation, more value and greater supplier responsiveness.

A64. In these circumstances, it makes no sense to regulate or mandate the provision of retail Internet services in a market that is already competitive.

A65. With respect to those areas of the country where it is currently not possible to rely on competition and market forces to meet the needs of users, a different strategy may be required. However, as noted above, there are several new technologies and services that will be launched imminently which are expected to deliver broadband Internet services at speeds of up to 25 Mbps to every region of the country, including in the far ****.77 A66. In the face of these developments, it is premature to conclude that market forces will not in fact deliver broadband Internet services to these regions at the Commission’s target speeds of 5 Mbps download / 1 Mbps upload. In those instances, focused government funding have been, and should be, used to close the gaps.

A67. This leaves only a few remaining services which may require funding, namely residential primary exchange services in high-cost, non-competitive areas, VRS and possibly telecommunications transport service improvement programs.

76

The Broadband Canada – Connecting Rural Canadians program funded up to 50% of eligible costs for projects to bring broadband Internet access of at least 1.5 Mbps to unserved and underserved areas. Under the program, broadband access was extended to roughly 220,000 households, which amounts to an average subsidy of just over $1,000 per household. The estimate of the deferral account subsidy of $5,000 per household is based on information provided in Telecom Decisions CRTC 2010-637, 638 and 639 and in The Companies(CRTC)9Mar10-507 DA, MTS Allstream(CRTC)9Mar10-502 TDC 2008-1, and TELUS (CRTC)9Mar10-503.

77
Supra, note 15.
APPENDIX A
A-15

A68. With respect to residential primary exchange services, there will likely continue to be a need to subsidize these services, but only in extremely remote, high-cost areas where there are no competitive alternatives or practical substitutes available.

A69. Insofar as Video Relay Services are concerned, consistent with the Commission’s decision in TRP 2014-187, the contribution fund should continue to be used to subsidize these services using the annual funding cap of $30 million established by the Commission for VRS-related costs.78

A70. Finally, as noted earlier, Shaw believes that focused government funding should be relied on as the principal means to subsidize efficient telecommunications infrastructure projects that will have the most impact on the broadest number of Canadians at the least possible cost. However, if the Commission determines that contribution funds should also be used to help fund these projects, then funding should be capped at the amount that is currently used to subsidize residential primary exchange service in areas where subsidy is no longer warranted. Shaw’s proposed changes to the subsidy regime are discussed further below in our answer to Question 10.

A71. In addition, any recipients of this funding should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected.

A72. This will ensure that there is no increase in the contribution burden for consumers and that any subsidy funds that are used for these programs are allocated in an efficient, fiscally responsible manner that maximizes the return of the investments made by consumers.

6. In Telecom Regulatory Policy 2011-291, the Commission stated that it would closely monitor developments in the industry regarding the achievement of its broadband Internet target speeds to determine whether regulatory intervention may be needed.

What action, if any, should the Commission take in cases where its target speeds will not be achieved by the end of 2015?

A73. In TRP 2011-291 the Commission determined that the end of 2015 was an appropriate timeframe to achieve the target speed set by the Commission. In particular, the Commission established this timeframe by taking into account plans for network expansion by several carriers.

A74. We believe that the Commission’s broadband target speeds will be substantially met during the course of this proceeding due to a combination of innovative deployments, including through the use of satellite technology and LTE-Advanced, many of which are supported through government funding. If the target is not met, Shaw believes that the Commission’s role should be to identify and monitor those areas where it is not met, allowing government funding programs to continue to close any gaps that remain. The Commission also has an ongoing role to monitor consumer preferences and deployment efforts with a view to ensuring that targets and user preferences align.

78

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

APPENDIX A
A-16

7. In Telecom Regulatory Policy 2013-711, the Commission stated its intention to establish a mechanism, as required, in Northwestel’s operating territory to support the provision of modern telecommunications services. Such a mechanism would fund capital infrastructure investment in transport facilities (e.g. fibre, microwave, and satellite), as well as the cost of maintaining and enhancing these facilities. The Commission considered that this mechanism should complement, and not replace, other investments from the private sector and governments, including public-private partnerships.

a. Explain, with supporting rationale, whether there is a need for the Commission to establish such a mechanism in Northwestel’s operating territory. As well, explain whether there is a need for such a mechanism in other regions of Canada.

b. What impact would the establishment of such a mechanism have on private sector investment and government programs to fund the provision of modern telecommunications services?

A75. Shaw agrees that it may be necessary to establish a mechanism to contribute to the modernization and maintenance of transport facilities in the ****. However, at the present time, there is insufficient information available on the costs that would be involved in such a modernization program to provide meaningful comments. In addition, new satellite technologies that will be launched in the next few years could significantly reduce current cost estimates. For example, the Satellite Inquiry Report examines certain C, Ku and Ka-band satellite services that are currently used to serve the ****, but it does not take into account the coverage characteristics and capabilities of the two high throughput satellites that will be launched next year, which will have coverage of Canada. It also appears to exclude from consideration certain FSS satellite systems that are not currently used by telecom service providers to offer services in the **** even though they are used by various end-user customers in these locations.

A76. The Report also predates the latest announcements pertaining to the launch of two more FSS satellite systems that will also offer full coverage of Canada’s ****. Because these satellites will operate in low earth orbit, they will not have any of the latency issues that are experienced with the geosynchronous satellites that currently operate in the C, Ku and Ka bands.79

A77. In the absence of a full technological assessment of the issue and the above-noted costing information, it is difficult to comment on the questions posed above. However, in order to be responsive to the Commission, Shaw submits that if it is determined that a mechanism should be established to subsidize telecommunications modernization programs in the ****, such as through the use of contribution funds, this funding should be capped by the 79

The return of the satellite constellations, Space Review, **** 23, 2015, available online at http://www.thespacereview.com/article/2716/1 http://www.thespacereview.com/article/2716/1

APPENDIX A
A-17

amount that is currently used to subsidize residential primary exchange service in areas where this subsidy is no longer required. Secondly, any recipients of funding for Northern modernization programs should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. See our response below to Question 10.

Regulatory measures for basic telecommunications services 8. What changes, if any, should be made to the obligation to serve and the basic service objective?

A78. The current definition of the basic service objective essentially captures a single service, namely basic local voice telephony service. While Shaw does not object to the ongoing inclusion of this service in the basic service objective, it is important to note that voice services can be delivered using both circuit and packet switched technologies over a variety of competing telecommunications networks, including conventional wireline facilities, fixed wireless networks, terrestrial mobile or FSS and MSS satellite networks.

Given the numerous technological changes that have taken place in the delivery of voice telephony services over the past decade, the Commission should consider whether the existing definition of the basic service objective takes proper account of these developments.

A79. With respect to applying the basic service objective to other services, Shaw cautions against applying this regulatory category – a holdover from a monopoly era with a single telecommunications service – to broadband Internet access, a multi-dimensional and highly dynamic service that has emerged and grown up in a much different competitive landscape. In today’s ever-changing technological environment, where a diversity of networks, services and technologies compete in order to meet a variety of consumer needs, the concept of a “basic service objective” is ill-suited and anachronistic. With such an abundance of choices and options, it is not clear that it is necessary or even possible to establish a “basic service objective” for broadband services.

A80. However, if the Commission decides to include broadband Internet access in the basic service objective, Shaw urges the Commission to be cautious in choosing a baseline standard of service for the reasons provided in our response to Question 3 above. In particular, there is an important distinction between aspirational speed targets that set a goal to which the telecommunications industry can aspire, versus a basic level of broadband service that allows Canadians to participate in the digital economy. The Commission should not use aspirational speed targets to define the basic service objective.

A81. Turning to the obligation to serve, Shaw notes that simply because a service has been included in the basic service objective does not mean that an obligation to serve should be imposed in relation to that service. As discussed earlier, the Commission has forborne from regulation in the vast majority of telecommunications services markets in Canada APPENDIX A

A-18

because these markets have been found to be subject to competition sufficient to protect the interests of users.

A82. In these circumstances, it would not be efficient or proportionate to impose an obligation to serve on a given service or service provider where market forces can ensure the availability of competitive alternatives and practical substitutes. The Policy Direction requires the Commission to rely on market forces to the maximum extent feasible and to remove unnecessary regulation in competitive markets. This includes the elimination of the obligation to serve in all markets that have been forborne from regulation.

A83. Taking the foregoing into account, Shaw recommends the elimination of the obligation to serve in all markets where landline primary exchange service has been forborne from regulation.

9. Should broadband Internet service be defined as a basic telecommunications service? What other services, if any, should be defined as basic telecommunications services?

A84. Please see our responses to Questions 3 and 8 above. In addition, please note that simply because a service has been classified as a “basic” service or forms part of the basic service objective, does not mean that it should be subject to an obligation to serve or be subsidized using funds from the national contribution fund. These are separate issues that should be determined by other considerations, including most significantly whether the service is provided in a market where competitive or practical substitutes exist.

10. What changes, if any, should be made to the existing local service subsidy regime?

What resulting changes, if any, would be required to the existing regulatory frameworks (e.g. price cap regimes)?

A85. As noted above, the existing national contribution regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice services, which is being rapidly substituted and replaced by other services and technologies (e.g., fixed and mobile wireless, mobile satellite, etc.). In the face of such change, the Commission should give serious consideration to reforming and updating the existing contribution regime in order to reflect the current state of the market. Specifically, in markets where there is clear evidence of competitive choice or practical substitutes to the provision of primary exchange services over legacy copper networks, the Commission should eliminate subsidies.

A86. For example, wireless voice services are available in many of the same exchanges in Rate Bands E and F where the ILECs receive subsidies to provide primary exchange voice services over copper networks. Generally, these wireless services are offered at rates that are lower than the regulated price cap for primary exchange service. For example, in Creston, British Columbia, a Rate Band F community, wireless service is available starting APPENDIX A

A-19

at $28 per month.80 Likewise, in Pouce Coupe, British Columbia, a community in Rate Band E, wireless plans start at $30 per month.81 Shaw questions whether the provision of a subsidy in these circumstances is an appropriate use of a limited resource, namely the contribution fund. The Commission should ensure that the consumers that ultimately bear the costs of contribution receive the maximum return on their investment.

A87. Further, in several exchanges in Rate Bands E and F, the ILECs are deploying fibre-to-the-home networks in the face of competition from other technologies (e.g., mobile wireless, satellite) while simultaneously collecting subsidies for the provision of primary exchange voice service delivered over legacy copper networks.82 These developments in markets that were traditionally viewed as “high cost service areas” further highlight the need for the Commission to review and reform the existing contribution regime. Canadians should not be asked to subsidize legacy copper networks that have been effectively replaced by newer technologies and services.

A88. The Commission should also critically examine whether there are any exchanges where contribution funds continue to be disbursed to the ILECs notwithstanding the presence of competitors in the market. Shaw notes in this regard that the onus is currently placed on the ILECs to submit applications to the Commission for forbearance from the regulation of primary exchange services in exchanges where they provide primary exchange services on a regulated basis. The Commission should consider on the record of this proceeding whether the ILECs are choosing to forego the filing of forbearance applications in order to continue to receive subsidies in markets where there is a competitive presence.

Unnecessary subsidies distort competitive markets and thwart the goal of ensuring that the contribution regime is both effective and efficient.

A89. With respect to the use of contribution funds to subsidize other services, Shaw notes that the Commission determined in TRP 2014-187 that the contribution fund should be used to subsidize video relay service using an annual funding cap of $30 million for all VRS-related costs.83 Shaw is not proposing any changes to this funding mechanism.

A90. Insofar as broadband access services are concerned, Shaw submits that it would be inappropriate to use contribution funds to subsidize these services. The evidence suggests that this is an inefficient use of contribution funds;84 plus policy experts, including the Telecom Policy Review Panel, note that this would unfairly burden consumers of telecommunications services, particularly those in lower income brackets. In Shaw’s view, 80

TCI’s Tariff CRTC 1005, page 108, shows a standalone residential exchange service rate for this exchange of $30.46 per month. In Telecom Decision CRTC 2014-627, the Commission set a subsidy of $7.53 per month residential local service in this exchange.

81

TCI’s Tariff CRTC 1005, page 108, shows a standalone residential exchange service rate for this exchange of $30.32 per month. In Telecom Decision CRTC 2014-627, the Commission set a subsidy of $20.66 per month residential local service in this exchange

82

For example, Beausejour, Lorette, Niverville and Stonewall, Manitoba and Creston, British Columbia.

83

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

84

Under the federal government’s Broadband Canada - Connecting Rural Canadians program, the subsidy per household was roughly $1,000, whereas the subsidy per household under the ILECs’ deferral account service improvement programs was approximately $5,000 (see: supra, note 76).

APPENDIX A
A-20

focused government funding programs which draw on general taxpayer revenues are a far more equitable and transparent source of funding for broadband expansion initiatives.

A91. Finally, if the Commission determines as a result of this proceeding that contribution funds should be used to subsidize other telecommunications services or projects, such as modernizing telecommunications transport networks in the ****, the Commission should avoid increasing the total subsidy requirement in order to fund these programs. Instead, the Commission should reform the contribution fund by re-purposing subsidy amounts that are not appropriately allocated at the present time (e.g., in ILEC rate Bands E and F) and redirecting these funds to the new projects. This will ensure that there is no increase in the contribution burden that is ultimately borne by Canadian telecommunications users and that existing funds are being disbursed in an economically efficient and effective manner.

11. What changes, if any, should be made to the contribution collection mechanism?

Your response should address, with supporting rationale, which TSPs should be required to contribute to the NCF, which revenues should be contribution-eligible and which revenues, if any, should be excluded from the calculation of contribution-eligible revenues.

A92. At this time, Shaw is not recommending any changes to the contribution collection mechanism. Shaw reserves the right to make additional submissions on the contribution collection mechanism once we have had the opportunity to review the submissions of other parties in this proceeding.

12. Should some or all services that are considered to be basic telecommunications services be subsidized? Explain, with supporting details, which services should be subsidized and under what circumstances.

If there is a need to establish a new funding mechanism to support the provision of modern telecommunications services, describe how this mechanism would operate.

Your response should address the mechanism described in Telecom Regulatory Policy 2013-711 for transport services and/or any other mechanism necessary to support modern telecommunications services across Canada. Your response should also address, but not necessarily be limited to, the following questions:

a. What types of infrastructure and/or services should be funded?

b. In which regions of Canada should funding be provided?

c. Which service providers should be eligible to receive funding, and how should eligibility for funding be determined (e.g. only one service provider per area, all service providers that meet certain conditions, wireless service providers, or service providers that win a competitive bidding process)?

APPENDIX A
A-21

d. How should the amount of funding be determined (e.g. based on costs to provide service or a competitive bidding process)?

e. What is the appropriate mechanism for distributing funding? For example, should this funding be (i) paid to the service provider based on revenues and costs, or (ii) awarded based on a competitive bidding process?

f. Should any infrastructure that is funded be available on a wholesale basis and, if so, under what terms and conditions?

g. Should the Commission set a maximum retail rate for any telecommunications service that is subsidized?

h. Should this mechanism replace the existing residential local wireline service subsidy? If so, explain how the existing subsidy should be eliminated, including details on any transition period. In addition, explain whether the small ILECs and/or Northwestel should be subject to any special considerations or modifications for this transition period.

A93. As noted earlier in this submission, Shaw believes that there is a need for the Commission to modernize and reform the existing contribution regime in order to make it more suitable for the 21st century requirements of Canadians. At present, the existing regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice services, which is being rapidly substituted and replaced by other services and technologies.

A94. Furthermore, while it may be necessary to continue subsidizing primary exchange voice services in some areas of the country, the Commission needs to examine whether contribution funding continues to be required in areas where there are competitive alternatives or lower priced substitutes for this service.

A95. In its response to the questions above, Shaw has identified some of the reforms that it believes are needed to modernize the existing local service subsidy regime. These reforms are summarized briefly below along with a set of guiding principles that should generally govern the decision to subsidize a particular project or service.

a) Subsidies should only be made available in instances of market failure: Subsidies for telecommunications projects or services should only be used in areas of the country where market forces do not exist and are not expected to materialize. This ensures consistency with subsection 7(f) of the Act and paragraph 1(a)(i) of the Policy Direction, which requires reliance on market forces to the maximum extent feasible.

b) Focused government funding programs should be used as the principal source of subsidy funding. This will ensure that subsidies are drawn from the widest possible base of revenues and will result in a more equitable and transparent approach to the APPENDIX A

A-22

use of subsidies than the national contribution fund. It is also consistent with subsection 7(a) of the Act which seeks to promote the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions c) Competitive bidding processes should be used to select subsidy recipients: Recipients of subsidies for telecommunications projects or services should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. As noted above, a competitive bidding process will promote fairness and efficiency with respect to funding, and is consistent with paragraph 1(b)(ii) of the Policy Direction which requires the Commission to use measures that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives of the Act.

d) Subsidies should be disbursed on a technology agnostic basis: As noted above, today’s telecommunications market features a diversity of networks and technologies to meet a diversity of needs. Accordingly, the decision to subsidize a particular service should be entirely agnostic to the technology platform over which the service is delivered. This is consistent with paragraph 1(b)(iii) of the Policy Direction which requires that the Commission implement its measures in a symmetrical and competitively neutral manner.

APPENDIX B
B-1
Appendix B: Broadband Funding Programs

Table 1 - Details Regarding Broadband Funding Programs in Canada Government Program Funding Structure Timeframe Focus Federal

(Industry
Canada)
SchoolNet $25-$45M
Annually
Industry
Canada's
SchoolNet
Program was
part of a larger
initiative that
included First
Nations
SchoolNet,
which was
funded
through 2009.
1995-2009 To provide internet
access across
Canada ensuring
connectivity
despite geographic
and socio-
economic barriers.
Federal Community
Access Program
$420M (over
program life)
Public
locations such
as schools,
libraries and
community
centres were
used to
provide both
access points
and training.
1994-2010 To provide
affordable public
internet access,
skills training and
access to related
services.
Federal
(Industry
Canada)
Broadband for
Rural and
Northern
Development
(BRAND)
$105M One-time
capital cost
sharing fund.
2002-2007 To support
community
deployment of
broadband
infrastructure.
Federal
(Infrastructure
Canada)
National Satellite
Initiative (NSI)
$155M $20M to
acquire
satellite
capacity and
$85M
allocated to
ground
infrastructure.
i
2003-2007 The program
extended
broadband access
to 180 unserved
communities.
Federal
(Aboriginal
Affairs and
Northern
Development
Canada)
First Nation
Infrastructure
Fund
$234M First Nations
were invited to
participate in a
call for
proposals.
2007-2013 The connectivity
portion addressed
transport, points of
presence (PoPs),
access and
satellite capacity.
APPENDIX B
B-2

Government Program Funding Structure Timeframe Focus Federal

(Industry
Canada)
Knowledge
Infrastructure
Program
$2B Separate
funding for
universities
(66%) and
colleges
(34%).
2009-2011 Infrastructure
enhancement at
universities and
colleges.
Federal
(Industry
Canada)
Broadband
Canada:
Connecting Rural
Canadians
$225M Partnership
projects
preferred.
50% general
fed. fund cap;
100% possible
for projects in
First Nation
communities,
but only 50%
from IC
2010-2013 Broadband funding
in BC and Ontario.
Federal
(Infrastructure
Canada)
Building Canada
Fund
$1B
(originally)
with $500M
top-up
(e.g. $55M
of EORN
funds).
Up to 50%
federal
contribution in
public
infrastructure.
2007-2014 The communities
component
included
connectivity and
broadband as an
eligible program
category.
Federal
(Infrastructure
Canada)
New Building
Canada Fund
$14B $1B is set
aside for a
small
communities
component.
2014-2024 Specific
Connectivity and
Broadband
objectives,
including transport,
POPs and access.
Federal
(Infrastructure
Canada)
The Federal Gas
Tax Fund
$2B
Annually
Ongoing
funding for
municipal
broadband
and
connectivity.
Permanent Broadband and
connectivity is now
an eligible
subcategory of the
Gas Tax Fund.
85
Federal
(FedNor)
Federal Economic
Initiative for
Northern Ontario
$35M- $45M
annually
Works directly
with
communities,
First Nations
and not-for
profit
organizations.
**** not
contract
directly with
Permanent Focus on backhaul
and broadband
Points of Presence
(PoPs). Fibre
builds, fixed
wireless solutions,
satellite systems.
85

http://www.infrastructure.gc.ca/plan/gtf-fte-eng.html.

APPENDIX B
B-3

Government Program Funding Structure Timeframe Focus private section

(ISPs).
Federal
(PPP Canada)
P3 Canada Fund $1.25B Public private
partnership
2008+ Focused on
provincial,
territorial,
municipal and First
Nations public
private partnership
infrastructure
projects, including
broadband.
Alberta Alberta SuperNet $193M P3, with
private sector
investments
2001-2004 Connecting
institutions across
Alberta.
Alberta Rural
Connections:
Community
Broadband
Infrastructure ****
Program
$9M Funding for
local
authorities,
First Nations,
Métis
settlements,
and certain
not-for-profit
organizations.
2009-2011 Targeted rural
communities for
projects that
enable access to
reasonable high-
speed broadband
service.
Alberta
(Agriculture and
Rural
Development)
Final Mile Rural
Community
Program
(FMRCP)
$6.6M Part of the
Final Mile
Rural
Connectivity
Initiative
(FMRCI)
2012 Funding to enable
high-speed
Internet access to
unserviced rural
locations.
Alberta Central Alberta
Satellite Solution
$0.7M In partnership
with Xplornet
2013+ Reduce costs of
installing satellite
Internet for up to
4,600 households.
British
Columbia
Community
Network
Infrastructure
**** Program
$1M Partnerships
with
community
organizations.
2005-2006 Improving local
access
infrastructure.
British
Columbia
Connecting
Citizens ****
Program
$36M P3 2008-2011 Improving local
access
infrastructure.
British
Columbia
Broadband
Satellite Initiative
$2M In partnership
with Xplornet
2013+ Reduce costs of
installing satellite
Internet for up to
10,000
households.

http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/csi14656https://www.servicealberta.ca/FMRCI.cfm

https://www.servicealberta.ca/CASS_Search.cfm
https://www.servicealberta.ca/CASS_Search.cfm

http://www2.gov.bc.ca/gov/topic.page?id=413C8530D31B49419CE42EA1F385DC4E&title=BC%20Broadband%20Satellite%20Initiativehttp://www2.gov.bc.ca/gov/topic.page?id=413C8530D31B49419CE42EA1F385DC4E&title=BC%20Broadband%20Satellite%20Initiative APPENDIX B

B-4

Government Program Funding Structure Timeframe Focus British

Columbia
Pathways to
Technology
$40.8M
(joint
fed/prov)
The money
was granted to
All Nations
Trust
Company for
the purpose of
providing
financial
stewardship
and project
management
2009+ The $40.8M is
split: $35.8M for a
Connectivity Fund
(access and
transport) and $5M
for a Capacity
Building Fund
(digital literacy and
technical skills
development to
benefit from and
maintain the
systems).
Manitoba $47M 2002-2007
New Brunswick Broadband
Access Project
$12.5M P3 2004-2006
New Brunswick $13M 2009-2010
Newfoundland
& Labrador
$5M 2003-2004
Nova Scotia Broadband for
Rural Nova Scotia
$19.6M P3 Fixed wireless 50
Mbps Internet for
$65 monthly.
Ontario Northern Ontario
Heritage Fund
Corporation
$1B P3 2003+ Various projects,
including
connectivity and
developing the
digital economy.
Ontario Connecting
Ontario –
Broadband
Regional Access
(COBRA)
$2.4M P3 2003-2005 Assisting
communities to
fund unserved
areas.
Ontario Rural Connections
Broadband
Programs
$114.9M P3 2008-2012 Strategic
investments in
broadband
infrastructure.
Ontario
(co-funding)
Broadband
Canada:
Connecting Rural
Canadians
$32.5M Applicants for
federal
funding (up to
50%) could
simultaneousl
y apply for
provincial
funding (up to
1/3), together
2010-2013 See above
(federal).

http://www.pathwaystotechnology.ca/about-the-projecthttp://www.pathwaystotechnology.ca/about-the-project APPENDIX B

B-5

Government Program Funding Structure Timeframe Focus up to 83.3% of

eligible project
costs.
Quebec Villages Branchés
du Québec
$150M Partnership
with schools,
local
authorities and
not-for-profits.
2003-2005 Connecting
schools and
municipalities.
Quebec Communautés
rurales branchées
$24M P3 2009-2013 Funding programs
to provide rural
Internet at
comparable prices
to urban users.
Saskatchewan Community Net I
and II and
Northern
Broadband
Network
$117M In partnership
with Sasktel.
2001-2007 Providing
broadband access
to schools,
libraries and
provincial
institutions in rural
communities,
farms and northern
and remote areas.
Saskatchewan Rural
Infrastructure
Program
$90M In partnership
with Sasktel.
2009-2011 Upgrading rural
backbone
infrastructure.
Yukon Connect Yukon $17M Partnership
with
Northwestel
2000-2005 Connecting rural
communities.
*** END OF DOCUMENT ***
i

For full particulars, see Appendix D, page 119 of the Satellite Inquiry Report, October 2014.

Intervention: Shaw (Intervenor 237)

Document Name: 2015-134.223977.2394509.Intervention(1fbm501!).pdf
1
Comments of Shaw Cablesystems G.P. in
Review of basic telecommunications services,
Telecom Notice of Consultation CRTC 2015-134
July 14, 2015
1
Table of Contents

Introduction & Executive Summary ............................................................................................ 2 Canada’s Rapidly Evolving Telecommunications Landscape ..................................................... 3 Competition and Market Forces Drive Innovation and Change ................................................... 8 Addressing Gaps in Service Availability ..................................................................................... 9 Aspirational **** Targets .......................................................................................................10 Focused Funding ......................................................................................................................12 Conclusion ................................................................................................................................15 Appendix A: Responses to Questions Posed in TNC 2015-134 .............................................. A-1 Appendix B: Broadband Funding Programs ............................................................................ B-1 2

Introduction & Executive Summary

1. Shaw Cablesystems G.P. (“Shaw”) is pleased to provide these comments in response to Telecom Notice of Consultation CRTC 2015-134 – Review of basic telecommunications services (“TNC 2015-134”). In this proceeding the Commission will review its policies and rules regarding the provision of basic telecommunications services in Canada and examine the telecommunications services that Canadians require to participate meaningfully in the digital economy. Shaw wishes to receive intervener status in this proceeding. Shaw requests to appear at the public hearing.

2. Shaw agrees with many of the premises in the Notice of Consultation that launched this review. There is no question about the important role that telecommunications play in the lives of Canadians today. Telecommunications enable Canadians to participate in the digital economy and facilitate access to critical services, such as health care, education, government, public safety, and banking. We expect that role to only grow as our lives become increasingly digitized.1

3. At the same time, and as also noted in TNC 2015-134, the way Canadians access and use telecommunications services is rapidly evolving due to advancements in technology.

The landscape has changed drastically from the monopoly era in which the obligation to serve was critical to ensuring that Canadians had access to landline telephone services.

21st-century telecommunications are characterized by a diversity of technologies and networks that has emerged to meet a variety of consumer needs and preferences. Policy tools fashioned for a monopoly-era landline telephone environment may not be appropriate in the highly competitive, technologically diverse and constantly evolving broadband era. In particular, the concept of “basic service”, which was developed in a single service, single need era, is less useful in the current context.

4. Shaw also agrees that in certain rural and remote parts of the country, Canadians do not have reliable or affordable access to certain modern telecommunications services, which may impede their ability to participate meaningfully in the digital economy. Canada’s vast geography makes this a challenging and complex policy problem for the Commission, as well as governments at all levels. To address these gaps, a combination of market forces, 1

According to Mergent **** America IT & Technology, “the digital platform ecosystem contributes C$7.3 billion (US$8 billion) annually to Canadian GDP, and is likely to rise to C$14.8 billion (US$16.2 billion) by 2018”, December 2014, online at webreports.mergent.com.

http://webreports.mergent.com/
3

focused government funding and public-private partnerships have been relied on as the principal means of rolling out broadband services to the far reaches of our country without imposing onerous subsidy burdens on Canadian consumers. In fact, by mid-2017, close to 99% of Canadians will have access to broadband Internet Services at speeds of 5 Mbps download and 1 Mbps upload or greater.

5. This approach, along with the setting and monitoring of aspirational speed targets by the Commission, has been extremely successful. In the vast majority of regions across Canada, competition and market forces have fostered consumer choice, while driving investment and innovation. This has been spurred on by the broadband speed targets established by the Commission in 2011. In rural and remote areas, solutions that are precisely tailored to the problem, such as focused government funding programs, have proven to be efficient, effective and equitable. The funds for these programs are drawn from the widest possible base of revenues and, therefore, do not unduly burden consumers.

6. In this submission, Shaw discusses the current state of Canada’s telecommunications market, including the needs and expectations of consumers for telecommunications services, and then considers how best to address any gaps in service availability that may act as a barrier to participation in the digital economy for some Canadians. In Appendix A, Shaw answers the specific questions posed by the Commission in TNC 2015-134.

Canada’s Rapidly Evolving Telecommunications Landscape 7. The Canadian telecommunications market has changed considerably since the monopoly era in which the obligation to serve was critical to ensuring that Canadians had access to landline telephone services. Today, the market is characterized by intense competition among a number of different service providers investing in a variety of technological platforms and offering a highly diversified and ever-evolving range of products, services, applications and features.

8. The unprecedented level of competition and innovation in the telecommunications services sector has delivered tremendous benefits to Canadians, along with exceptional levels of service. In fact, service availability levels have reached record highs. By the end of 2013, local telephone service was available to over 99% of Canadian households and 4

mobile wireless service covered 99.4% households. In addition, 95.5% of Canadians had access to broadband Internet services at the Commission’s target speed of 5 Mbps download and 1 Mbps upload,2 and a new government funding program promises to bring this number close to 99% of Canadians by 2017.3 9. The number of technologies that are used to deliver the current suite of telecommunications services has also grown dramatically over the past few years. For example, in the past, voice services were delivered almost exclusively over landline access facilities consisting of twisted copper pairs. Today, these services can be delivered using wireline copper, cable and fiber facilities, or they can be delivered via wireless technologies such as mobile wireless networks, fixed wireless networks, including Wi-Fi, and FSS and MSS satellites. Many of these technologies can deliver basic voice connectivity capabilities to Canadian homes and businesses, as well as access to community and emergency response services (911), health services, medical monitoring, home security and international long distance.

10. The range of technologies used to deliver broadband Internet services is equally diverse: it includes copper, coaxial, fibre, satellite, cellular, fixed wireless and Wi-Fi. These technologies are used by Canadians for online shopping, social media, email, instant messaging, information and entertainment, VoIP and video-conferencing, health and education services, and so much more.4

11. This explosion in service delivery platforms is driving, and is driven by, corresponding shifts in consumer preferences and needs. With a vast range of services and applications available to them – each with subtly distinct functional attributes – Canadians are using a broader than ever set of services to participate in the digital economy. In a classic virtuous cycle, innovative services are emerging to meet fresh consumer needs and desires which, in turn, drive further investment and more innovative services. These services and applications are meeting needs that we were not able to predict a decade ago. In this world of diversity, there is no one service, application or platform that is “most important” to Canadians. There is no longer one single, or “basic”, telecommunications service that is 2

CRTC, Communications Monitoring Report 2014, Table 5.3.15 3

Industry Canada News Release, High-Speed Internet Coming to Rural Canada, May 20, 2015, online at news.gc.ca/web/article-en.do?nid=976709.

4

CIRA, Fact Book 2015, What Canadians are doing online, online at cira.ca/factbook/current/the-canadian-internet.html

http://news.gc.ca/web/article-en.do?nid=976709http://cira.ca/factbook/current/the-canadian-internet.htmlhttp://cira.ca/factbook/current/the-canadian-internet.html5

essential for engagement and participation in Canadian society. It depends on the consumer, the situation, the location and the need.

12. Not surprisingly, we have also witnessed a dramatic increase in service substitutability.

Consumers are increasingly focused on functionality – they care more about what the technology or platform can do for them than they do about the nature of the technology or download speed. Mobility is also becoming increasingly important to Canadians. The evidence shows that 2013 marked a milestone for wireless substitution: for the first time in Canada, mobile-only households surpassed landline-only households. In 2013, 20.4% of Canadians relied exclusively on mobile telephone service, up from 10.2% in 2010. 5 Moreover, 5% of mobile broadband subscriptions in 2013 were for data-only services.6 13. In addition to the general trend toward wireless substitution, consumers are using Internet-based services as substitutes for traditional voice and messaging services, regardless of the service platform. For example, from 2009 to 2013, residential long distance use declined by 29%.7 Within the same period, the number of Canadians making telephone calls online increased to 82%, up from 23.8% in 2010.8 14. Consumer demands for broadband services are constantly evolving, often in a manner that is hard to predict. We are learning from our customers that there are several elements of the broadband experience that they value – including reliability, price, usage, innovation and value-adds – in addition to speed. Moreover, the way consumers use broadband, and their associated preferences and needs, varies widely. For a consumer primarily engaged in social media, speed may not be as important as reliability, portability and availability. On the other hand, a gamer playing in real-time will place higher value on speed and latency.9 Even so, many of our customers on lower speed services at or under 3 Mbps download can and do use their broadband service for diverse purposes, including streaming media, web browsing, file sharing and transfer, messaging and collaboration, and even gaming.

5

Statistics Canada, Survey of Household Spending, household equipment, CANSIM Table 203-0027.

6

CRTC, Communications Monitoring Report 2014, Table 5.5.10.

7
Ibid, Tables 5.2.2 and 5.2.8.
8

Statistics Canada, Canadian Internet Use Survey, CANSIM Table 358-0153.

9

FCC, Report on Consumer Wireline Broadband, 2014, online at fcc.gov/reports/measuring-broadband-america-2020

http://www.fcc.gov/reports/measuring-broadband-america-2020http://www.fcc.gov/reports/measuring-broadband-america-20206

15. Because of this extremely broad and multifaceted range in the uses and preferences of our customers, we are constantly reviewing and refreshing our broadband offerings to satisfy ever-changing and disparate needs.

16. The Commission itself has acknowledged that broadband is about more than just speed.

Its recently-launched broadband measurement project will study a number of parameters that comprise “Internet performance” – latency, web browsing and connection speed – with a view to helping customers understand the differences that might exist between different ISPs’ service offerings and their impact on the customer’s experience.10 17. Looking ahead, a number of new technologies and service delivery platforms will be launched in the next few years that will go even further to satisfy consumer broadband needs. For example, in 2018, a constellation of 650 micro-satellites will be launched by OneWeb, a company backed by Qualcomm and the Virgin Group, which will be capable of delivering high-speed Internet services to every region of the earth, including the far ****, at download speeds of 16 Mbps.11 These satellites will operate in low earth orbit on a non-geosynchronous basis, which could eliminate or significantly reduce many of the common service quality complaints associated with geosynchronous satellite systems relating to service speed, rain fade and latency issues.12 18. This is in addition to the over 85 satellites operated by nine different satellite operators that are already authorized to provide fixed satellite services in Canada,13 including satellites in the C- and Ka-bands that have service footprints covering virtually every square kilometre of the country, including in Canada’s most northern and remote communities. Right now, these satellites can deliver broadband Internet services at speeds ranging anywhere from 3 to 10 Mbps. By mid-2016, two additional high throughput satellites will be launched, 10

Measuring Broadband Canada, online at measuringbroadbandcanada.com 11

See Motherboard, “OneWeb's Plan to Beat SpaceX to Provide Satellite Internet to Everyone on Earth” **** 17, 2015, online at motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earth and Vox Technology, “SpaceX and OneWeb are racing to build an internet in space” February 5, 2015, online at vox.com/2015/2/5/7985645/satellite-internet-spacex-oneweb 12

A separate micro-satellite project has been announced by SpaceX, which intends to launch a constellation of low earth orbit satellites by the end of the decade, see NBC News, “How SpaceX Plans to **** Its Satellite Internet Service in 2016” **** 4, 2015, online at nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n370196

13

Satellite Inquiry Report, October 2014, page 20.

http://www.measuringbroadbandcanada.com/

http://motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earthhttp://motherboard.vice.com/read/onewebs-plan-to-beat-spacex-to-provide-satellite-internet-to-everyone-on-earthhttp://www.vox.com/2015/2/5/7985645/satellite-internet-spacex-onewebhttp://www.nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n370196http://www.nbcnews.com/science/space/how-spacex-plans-test-its-satellite-internet-service-2016-n3701967

which are expected to be capable of delivering broadband Internet services to these very same communities14 at much higher download speeds of 25 Mbps.15 19. It is also widely anticipated that Industry Canada will make more mobile wireless spectrum available for auction in the 600 MHz band within the next few years. The propagation characteristics of this spectrum are superior to spectrum in the PCS, AWS and BRS spectrum bands, which will make it easier for mobile network operators to extend their service coverage areas and improve overall service speeds, particularly in rural and underserved regions of the country.

20. In the interim, HSPA+ technology reached 99.2% of households in 2013, 16 and now permits average download speeds of up to 18 Mbps.17 LTE reaches 81% of households, up from just 45% in 2011, 18 and LTE Advanced technology will permit peak mobile download speeds of over 200 Mbps and continuous speeds over 50 Mbps. Moreover, 700 MHz spectrum is subject to specific rural deployment obligations, requiring certain licensees to deploy 700 MHz networks covering at least 97% of their 2012 HSPA+ footprint.19

21. In light of the rapid pace of technological change and unprecedented level of competition, network diversity and innovation in today’s Canadian telecommunications market, the policy framework that results from this proceeding must be future-oriented and technologically neutral. As we did in the trio of major regulatory reviews that were conducted in 2014, we should review the regulatory framework for basic telecommunications services with our eyes firmly fixed on the future. We should be wary of applying outdated regulatory concepts to new, innovative and highly-competitive services such as broadband. Instead, we should focus on modernizing a framework that 14

See Viasat-2 Coverage Map, online at

viasat.com/files/assets/Broadband%20Systems/ViaSat_2_Coverage_Map_zoom_labeled_0.png 15

See Response to Request for Information Xplornet(CRTC)7July 2014-2.2, TNC 2014-44, in which Xplornet states that its new satellites, to be launched in 2016, “will make Internet packages with speeds of 25 Mbps available to all Canadians.”

16

CRTC, Communications Monitoring Report 2014, Table 5.3.11.

17

Bell and Telus both cite average download speeds of 7-14 Mbps for DC-HSPA+, while PCMag measured average speeds over 18 Mbps on Videotron’s DC-HSPA+ network. See PCMag “Fastest Mobile Networks Canada” October 13, 2013, online at pcmag.com/fastest-mobile-networks-canada/ and Bell Network Coverage, online at support.bell.ca/Mobility/Network_coverage/What_is_the_Bell_network_coverage_in_Canada and Telus Network Coverage, online at telus.com/en/ab/mobility/network/coverage-map.jsp?INTCMP=NETWORKcoveragemap.

18

CRTC, Communications Monitoring Report 2014, Table 5.3.11.

19

Industry Canada, Licensing Framework for Mobile Broadband Services (MBS) - 700 MHz Band, November 8, 2013, section 6.12, online at ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10584.html.

https://www.viasat.com/files/assets/Broadband%20Systems/ViaSat_2_Coverage_Map_zoom_labeled_0.pnghttp://www.pcmag.com/fastest-mobile-networks-canada/http://support.bell.ca/Mobility/Network_coverage/What_is_the_Bell_network_coverage_in_Canadahttp://www.telus.com/en/ab/mobility/network/coverage-map.jsp?INTCMP=NETWORKcoveragemaphttp://www.ic.gc.ca/eic/site/smt-gst.nsf/eng/sf10584.html8

was developed around the provision of a monopoly era service so that it fits with today’s dynamic market.

Competition and Market Forces Drive Innovation and Change 22. The widespread availability of broadband Internet services in Canada has largely been driven by consumer demand and market forces acting to satisfy that demand. This is evident in the rapid pace of service innovation and the introduction of more advanced and feature-rich services. Investment by facilities-based providers has been largely responsible for the expansion and improvement in broadband Internet services.

Competitive market forces have driven service providers to respond to consumer demands through innovation and investment, just as Shaw did with Shaw Go WiFi, a compelling, cost-effective and customer-friendly alternative to mobile data services. The intense, platform-based rivalry that Shaw has experienced in Western Canada is a key driver behind our investment decisions and it requires us to constantly innovate in order to differentiate ourselves and meet our customers’ ever-evolving needs and preferences.

Innovative services like Shaw Go WiFi meet those needs for on-the-go broadband access, while extending our network and the value of our customers’ broadband experience.

23. This investment and rivalry is not limited to wireline markets; it permeates the broadband market generally, as wireline, fixed wireless, satellite and mobile wireless service providers compete for broadband-hungry consumers. More than 99.4% of Canadians had access to wireless services in 2013, which they use not only as an alternative to traditional landline voice services, but also for broadband Internet access, text messaging, VoIP and IP-based video conferencing applications to name only a few.

24. Competition and innovation also remain pervasive forces in the market for traditional local telephony services, which are now delivered over wireline and wireless networks using both circuit switched and packet switched technologies. In 2001, the incumbent telephone companies accounted for more than 99% of the residential local telephone subscribers in Canada and nearly 98% of households had a home phone.20 By 2013, fewer than 79% of homes had a home phone and less than 57% of those were served by incumbent telephone companies. Together, more households are now served by new entrant wireline 20

CRTC, Report to the Governor in Council on the Status of Competition in Canadian Telecommunications Markets, December 2002, page 40.

9

providers and mobile substitution than by traditional landline service.21 These numbers illustrate the ease with which consumers can not only switch between service providers, but also between wireline and wireless technologies.

Addressing Gaps in Service Availability

25. Given the rapid growth and rate of change that we have seen in the Canadian telecommunications landscape over the past ten years, it is difficult to predict what new or disruptive technologies, services and applications will materialize over the next decade to offer new and unique customer experiences and choice. What we do know is that it is vitally important to create an environment that brings these unknown opportunities to life for consumers by encouraging innovation, investment and experimentation.

26. Four years ago, in Obligation to serve and other matters, Telecom Regulatory Policy CRTC 2011-291 (“TRP 2011-291”), the Commission determined that the rollout of broadband Internet access services across the country had been successful through a combination of market forces, focused funding programs, and public-private partnerships at all levels of government.22 In fact, it was because of the successful combination of these factors that the Commission decided that the deployment of broadband Internet access services, including deployment in rural and remote areas, should continue to rely on market forces and government funding, 23 rather than on regulatory subsidy mechanisms, such as the contribution regime.

27. In Shaw’s view, the Commission should continue to rely on market forces to the maximum extent feasible, as required by the Policy Direction. Many of the services being considered in this proceeding, most notably retail Internet, have been forborne from regulation because the Commission determined that these services are subject to competition sufficient to protect the interests of users.24 In the vast majority of regions across Canada, competition and market forces have effectively fostered consumer choice, forcing competitors to continuously invest and innovate in order to better serve and remain relevant to their customers.

21

CRTC, Communications Monitoring Report 2014, page 159.

22

Obligation to serve and other matters, Telecom Regulatory Policy 2011-291, para. 55.

23
Ibid, para. 83.
24

Forbearance from retail Internet services, Telecom Order CRTC 99-592.

http://www.crtc.gc.ca/eng/archive/1999/O99-592.HTM10

28. In short, relying on market forces to the maximum extent feasible is the most effective means of fulfilling the policy objectives set out in section 7 of the Telecommunications Act (the “Act”) and of delivering the benefits of competition to consumers, such as increased customer choice, lower prices, greater supplier responsiveness and higher levels of product and service innovation.

29. At the same time, however, Shaw acknowledges that it may not be possible to rely on market forces in all instances as a means of ensuring the same quality and level of service throughout the country. Indeed, there are some areas of the country, particularly in the ****, that lack reliable or affordable access to broadband Internet services.

30. As discussed more fully in our responses to the questions posed in TNC 2015-134, closing these service gaps is best accomplished through focused solutions. The federal government’s recently announced Connecting Canadians program will provide funding for eligible broadband projects that can deliver minimum broadband speeds of 3 Mbps down / 512 Kbps up in northern Canada and 5 Mbps down / 1 Mbps up in rural Canada. One of the original objectives of this program was to increase the number of Canadians with access to broadband services of 5 Mbps down / 1 Mbps up from 95% to 98%. Recently, however, the federal government announced that the number of households that will be covered under the new funding program is greater than originally estimated, bringing the total number of households close to 99%.25

31. A focused effort will ensure efficient regulation and avoid disproportionate intervention that could undermine the competitive forces at play in most markets and impose an unnecessary and unfair subsidy burden on Canadian consumers.

Aspirational **** Targets

32. In TRP 2011-291, the Commission established a five year target for the deployment of broadband Internet service in Canada of 5 Mbps downstream and 1 Mbps upstream. In the words of the Commission, these speeds “should be available to all Canadians, through a variety of technologies, by the end of 2015.”26 25

Supra, note 3.
26
TRP 2011-291, para. 68.
11

33. Shaw believes that the target broadband speeds established by the Commission in TRP 2011-291 sent an appropriate signal to the market, and, four years later, they are now serving as an effective means to monitor the evolution of the market, as well as industry and government efforts in achieving that target.

34. In fact, in 2010, the year before the Commission’s target broadband speed was established, roughly 83% of Canadians had access to speeds of 5 Mbps download /1 Mbps upload. 27 In 2013, 95.5% of Canadians enjoyed access to these speeds, representing a 15% increase in service penetration in three years.28 Likewise, in 2010, approximately 72% of Canadians have access to broadband services at download speeds of 5 Mbps or more from two or more providers.29 Today, these speeds are available to 87% of Canadians on more than two platforms, not including satellite. These numbers illustrate the rapid growth in the availability of the target broadband speed in Canada and multi-modal competition as the key driver of this growth.

35. In addition, Internet services at much higher speeds, such as 100+ Mbps, are now available to 60% of Canadian households. However, only 5% of households subscribed to service speeds in excess of 50 Mbps in 2013, which is a modest increase from 3.6% in 2012. Subscriptions in the 5-9 Mbps category remained the most popular in the 2009 to 2013 time period, with 32.8% of households subscribing to Internet services in this category.30

36. One of the issues under consideration in this proceeding is whether a new target broadband speed should be established by the Commission. In our view, a new aspirational target speed could send a fresh signal to the market and help to achieve results similar to those achieved by the targets established in 2011. However, any new target must be set in accordance with our understanding and expectations of consumer demand.

37. After all, this is about consumers. The goal should not be to drive markets to exceed what consumers require, demand or are willing to pay for, or put an excessive emphasis on speed above other factors that consumers value in their broadband experience. Our own experience indicates that, beyond a threshold speed that provides the functionality 27

CRTC, Broadband Report, November 2011.
28

CRTC, Communications Monitoring Report 2014, Table 5.3.12.

29

CRTC, Communications Monitoring Report 2011, Figure 5.3.16.

30

CRTC, Communications Monitoring Report 2014, Table 5.2.10.

12

desired, most consumers see little reason to pay for higher speeds. The Commission’s most recent Communications Monitoring Report notes that 5 Mbps average available bandwidth is sufficient for the performance consistency of a large range of popular internet applications that facilitate work, education and entertainment (including file-sharing, streaming and real-time applications).31 Indeed, the 2014 Monitoring Report indicates that 68.7% of Canadians subscribe to services with speeds of 15 Mbps or lower32 and the same can be said of over half of Shaw’s customer base, many of whom use our lower speed services (including speeds at and lower than 3 Mbps download) for diverse uses, including streaming media, file sharing, VoIP, messaging and video conferencing.

38. It is also critical to keep in mind that consumers are demonstrating that broadband is a multi-dimensional service, which people experience in a wide variety of ways. Connection speed is not the only characteristic relevant to broadband performance. The various uses to which broadband services are put by consumers is equally, if not more, important than speed.

39. Finally, we must be careful not to confuse “aspirational targets” on the one hand with the basic service objective and any associated broadband speed requirements on the other hand. These are two different concepts. Aspirational targets allow the Commission to establish a target broadband speed to which all network operators can aspire, which can then be tracked and monitored by the Commission in order to determine the progress made by network operators in achieving these speeds over a given period of time.

Establishing aspirational targets for advanced broadband services sends a signal to the industry and the market generally that there is a new goal to achieve; however, they should not be considered “hard” requirements, nor should they be subsidized through the national contribution regime. This would run the risk of interfering with market forces, given the inherent challenge of correctly selecting a single, fixed speed in today’s dynamic marketplace that perfectly aligns with consumer demand.

Focused Funding

40. Shaw acknowledges that additional measures may be required in order to increase the availability of reliable and affordable broadband services in certain areas of the country 31

CRTC, Communications Monitoring Report 2014, Figures 5.3.8 and 5.3.9.

32
Ibid, Table 5.3.10.
13

where competitive forces may not be sufficient. However, we should be wary of using disproportionate regulatory intervention as a means of addressing gaps in service coverage and availability. Indeed, the evidence suggests that there are now, or will soon be, technologies capable of delivering broadband Internet services at speeds of 25 Mbps to every inhabited region of the country, including north of the 60th parallel. 33 These technological developments will go a long way toward eliminating the “speed divide” that currently exists between Canada’s remote and northern communities on the one hand and communities located in southern Canada on the other.

41. This is why Shaw favours reliance on market forces as the principal means of addressing gaps in broadband service coverage and accessibility in Canada. This approach is consistent with the forbearance regime established by the Commission,34 as well as the Policy Direction, which requires reliance on market forces as the optimal means of fulfilling the policy objectives set out in section 7 of the Act. It also allows for the establishment of any aspirational targets that may be created as a result of this proceeding.

42. With that being said, Shaw acknowledges that there are some markets in Canada where market forces cannot be relied on to meet the needs of consumers. In these instances, Shaw favours the use of precisely defined government funding programs, rather than the national contribution fund, as a means of closing service or coverage gaps for broadband Internet services. As discussed more fully in Appendix A, using funds from general government revenues is a more efficient, transparent and equitable means of subsidizing broadband services in those areas of the country where these gaps may exist.

43. Funding broadband Internet services through the existing contribution regime would introduce a huge cost burden on consumers, distort prices for contribution eligible services and unfairly benefit service providers that receive subsidies under the regime. It was for reasons such as these that the Telecommunications Policy Review Panel explicitly recommended in its 2006 Report that broadband service expansion programs be funded from general tax revenues and not be made part of the existing local subsidy and contribution regime. Among the concerns raised by the Review Panel was the risk of significantly expanding the financial burden of the contribution regime to “an unacceptable 33

Supra, note 15.
34
Supra, note 24.
14

level” and that it “would distort markets and result in an inefficient allocation of resources.”35

44. The Review Panel’s Report also noted that contribution-based funding would impose a regressive burden on consumers, particularly those in low income households:

Internal cross-subsidies are also undesirable from the viewpoint of social equity. Since the cost of providing subsidies is passed onto consumers, and since all consumers contribute at the same rate regardless of income, internal cross-subsidies effectively impose a regressive tax on the customers of telecommunications service providers.36 45. Regarding the use of contribution funds to subsidize other telecommunications services, Shaw believes that there may be an ongoing requirement for subsidies in certain instances. However, there is a pressing need to modernize and reform the existing contribution regime in order to make it more suitable for the 21st century requirements of Canadians. At present, the existing regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice service, which is being rapidly substituted and replaced by other services and technologies (e.g., broadband Internet access services, fixed and mobile wireless, etc.).

46. Furthermore, while Shaw does not discount the possibility that subsidies may continue to be required for residential primary exchange services in certain areas of the country, we ask the Commission to critically examine on the record of this proceeding whether contribution funding is required in ILEC Rate Bands E and F, where there are a number of examples of funds being disbursed notwithstanding the presence of competitors in the market, the availability of lower priced substitutes and the overbuilding of copper networks with fibre-to-the-premise facilities. In Shaw’s view, the Commission should consider whether the existing fund is properly maximizing returns for Canadians in these circumstances. Removing unnecessary subsidy requirements will ensure that contribution funding is directed only to services or projects for which there is a true lack of competitive alternatives and a demonstrated need for funding.

47. If the Commission determines that contribution funds should be used to subsidize other telecommunications services or projects, such as modernizing telecommunications 35

Telecommunications Policy Review Panel Final Report, 2006 (“TPRP Report”), pages 8-9.

36
See TPRP Report.
15

transport networks, this funding should be capped at the amount that is currently used to subsidize services that no longer warrant that funding, which may include residential primary exchange services in Rate Bands E and F. This will minimize the contribution burden ultimately borne by Canadian telecommunications users. In addition, recipients of contribution funding should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. The funding process should also be technology agnostic so that the widest range of networks and delivery technologies is eligible for subsidy, provided they meet the relevant service requirements.

This will further ensure that the lowest cost, most efficient option is selected, while preserving technological and competitive neutrality.

48. Finally, consistent with the Commission’s decision in Video Relay Service, Telecom Regulatory Policy CRTC 2014-187 (“TRP 2014”), the contribution fund should continue to be used to subsidize video relay service using the annual funding cap of $30 million established by the Commission in TRP 2014 for all VRS-related costs.37 49. Set out in Appendix A of this intervention are Shaw’s responses to the questions set forth in TNC 2015-134, along with further details on how the contribution fund can be modernized and reformed.

Conclusion

50. As a customer-centric network and content experience company, Shaw is acutely aware of the critical importance of telecommunications, particularly the Internet, in the day-to-day lives of Canadians. The Internet fuels the digital economy, and if Canada is to prosper in this digital age, robust and reliable Internet services are required nationwide. Our network, with Shaw Go WiFi being a case in point, breaks down the barriers to the digital economy – Shaw Go WiFi extends the reach of our premium Internet service beyond the home, giving our customers on-the-go access using whatever device they choose.

51. Competition and market forces are the key drivers behind customer-friendly, value-enhancing innovations like Shaw Go WiFi. They also promote network investment, as operators strive to provide the highest quality, most reliable and best value broadband experience to as many customers as possible. As the digital economy grows, so will 37

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

16

usage. Since tremendous network investment is required to support that growth, it is imperative that the regulatory framework support the cycle of network investment.

52. Nevertheless, barriers to the digital economy still exist for some Canadians in rural and remote parts of the country, who do not have access to reliable and affordable Internet services. In these instances, where high costs prevent market forces from breaking down those barriers, government intervention is appropriate. The challenge for policymakers is to find a way to connect those citizens, mainly located in the far ****, in the most fair and efficient way possible. Focused government funding programs based on technology agnostic competitive bidding processes are the best way to close the service gaps that remain, enabling full participation in the digital economy by all Canadians.

53. Shaw thanks the Commission for the opportunity to participate in this important proceeding and looks forward to the next stage of this proceeding.

APPENDIX A
A-1

Appendix A: Responses to Questions Posed in TNC 2015-134 Canadians’ evolving needs for telecommunications services 1. Canadians are using telecommunications services to fulfill many social, economic, and cultural needs in today’s digital economy.

a. Explain how telecommunications services are used to meet these needs. For example, uses may include e-commerce (i.e. the online purchase and trade of products or services), e-banking and/or telephone banking, e-health or telehealth services, telework, and distance education. Which of these uses of telecommunications services are the most important to ensure that Canadians meaningfully participate in the digital economy?

A1. There is no one service, application or platform that is most important in today’s digital economy. It depends on the consumer, the situation, the location and the need.38 Unlike the telecommunications market of the past, which was characterized by the monopoly provision of local and long distance voice services, today we see millions of different devices connecting Canadians to thousands upon thousands of products, services and features delivered over an ever-expanding set of technology platforms and networks.39 Everything from conventional telephones, smartphones, tablets and personal computers to appliances, thermostats and wearable devices, play a role in our use of today’s telecommunications services.

A2. In broad terms, Canadians are using telecommunications services for an entire range of needs, including:

 Voice communications – these services are delivered over copper, cable, fibre, satellite and mobile wireless networks providing reliable, secure and affordable voice connectivity to business, social/family interaction, emergency response (911), health services, medical monitoring, home security, international long distance, low-speed Internet access and faxing services. Voice and video communications capabilities can also be provided over a pure IP connection in combination with an application, such as Skype or Apple Facetime;

 Electronic mail and other forms of text-based communications – these capabilities are delivered over wireline and wireless networks using both circuit and packet switched technologies;

 Accessing the Internet – whether over copper, cable, fibre, satellite and mobile wireless networks or WiFi:

38
Supra, note 4.
39

Cisco Virtual Networking Index (“Cisco VNI”): Global Mobile Data Traffic Forecast Update: 2014-2019.

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o for informational purposes, whether planning holidays, staying informed, researching products, or education;

o for business, e-banking, and e-commerce;

o for entertainment purposes, such as streaming music and videos; and o to use specialized applications.40

A3. Although consumers are increasingly reliant on broadband networks, wireline voice services remain relevant, and some consumers may prefer the affordability and reliability of a landline voice service to support home monitoring systems or health monitoring systems.41

b. Explain which telecommunications services are most important to support these needs and uses. What characteristics (e.g. capacity, mobility, high speed, and low latency) should these telecommunications services have?

A4. In today’s diverse market, there is no one “right” or optimal telecommunications service for every Canadian in every circumstance. Each telecommunications service – whether it is local, long distance, mobile wireless or broadband access – has separate and distinct characteristics, and the usefulness of that service for a particular consumer will depend on his or her particular circumstances and needs.

A5. For example, voice landline services will not be useful to a consumer that desires mobility.

In the most recent Canada-wide telephone data from 2012, 17.8% of households are wireline only and 15.7% are mobile wireless only; however, in the space of one year, the number of wireless only households had grown to 20.4% in 2013.42 However, a voice landline is secure, highly reliable and not impacted by coverage areas, network congestion, weather, power outages, etc. These characteristics may hold more value than mobility for certain Canadians. This illustrates that the valued characteristics of telecommunications services are driven by a range of consumer preferences.

c. Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.

A6. Given the abundance of choice and dynamic technological change in virtually every region of Canada, as explained above, the vast majority of Canadians have access to the networks and services that they need in order to meaningfully participate in the digital 40

CRTC, 2014 Communications Monitoring Report, Table 5.3.8. See also 2015 Digital Future in Focus by ComScore.

41

See Statistics Canada, Residential Telephone Service Survey, 2013. See also 2014 Communications Monitoring Report, Table 5.2.4.

42

Statistics Canada, Survey of Household Spending, supra, note 5.

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economy. As noted, over 99% of Canadians have access to local phone service and high speed mobile wireless services and, by 2017, almost 99% of Canadians will have access to broadband Internet services at the Commission’s aspirational target speeds of 5 Mbps download and 1 Mbps upload.43

A7. At the same time, there are two broadly based stakeholder groups that face barriers to accessing the networks and services that they need in order to meaningfully participate in the digital economy. The first of these groups is composed of individuals with auditory or visual impairments. For individuals that have visual impairments, the Commission has established rules requiring all telecommunications service providers to make their billing statements and other documents available in alternative format, such as Braille, large print, accessible electronic formats including HTML, or as mutually agreed. 44 These alternative formats must be provided, on request, in relation to a wide range of information, including rates, terms, and conditions of service,45 the National Do Not Call ****, **** Management Tools, retail quality of service and information on dialing plan changes.46

A8. The Commission also has a long standing policy of ensuring accessibility to phone services through requiring carriers to provide Message Relay service, IP Relay service and, more recently, Video Relay service, ensuring that the deaf and hard of hearing community has equal access to modern communications services. In fact, in TRP 2014-187, the Commission determined that the costs of Video Relay services should be subsidized using funds from the national contribution fund. These accessibility measures have had a significant impact on minimizing and/or eliminating barriers to the digital economy.

A9. The second, broadly based stakeholder group that currently faces barriers to accessing the networks and services that they need in order to participate meaningfully in the digital economy are Canadians living in remote areas where geographic challenges and technological limitations inhibit the market forces that lead to reliable and affordable services, particularly residential Internet access services.

A10. As discussed in the response to Question 4 below, various levels of government in Canada are addressing these gaps in broadband coverage by introducing targeted funding programs that are designed to expand the availability of broadband Internet services in many of these communities.

43
Supra, note 3.
44

Extending the availability of alternative formats to consumers who are blind, Telecom Decision CRTC 2002-13.

45

Accessibility of telecommunications and broadcasting services, Broadcasting and Telecom Regulatory Policy CRTC 2009-430.

46

Follow-up to Broadcasting and Telecom Regulatory Policy 2009-430 – Requirements for telecommunications service providers to communicate certain information in alternative formats, Telecom Regulatory Policy CRTC 2010-132.

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A11. Therefore, in many respects, the barriers currently faced by Canadians in accessing broadband Internet services are being removed through targeted government funding and technological advances.

d. Identify and explain any enablers that allow Canadians to meaningfully participate in the digital economy (e.g. connected devices and applications).

A12. New technologies and devices enable Canadians to connect across different networks and platforms seamlessly. Smartphones and other mobile devices are quickly becoming ubiquitous and are widely supported by mobile and Wi-Fi networks.47 Desktop Internet access is estimated at 45% of total Internet access with the remaining 55% distributed between smartphones (43%) and tablets (12%).48 A13. A variety of apps are available to consumers based on their particular needs and circumstances. This enables access to a range of information and entertainment, while also allowing devices to become everything from personal health monitors to mobile point-of-sale systems for small businesses.

A14. These devices also generally contain a number of embedded features designed to improve accessibility for users with low vision or hearing loss. Smartphones and tablets should also enable users to access Video Relay Service when the service becomes available.

A15. In addition, fierce competition to meet consumer demand for these connected devices and applications has resulted in tremendous network investments that not only enhance capacity and reliability, but also deliver a range of customer friendly innovations, ultimately adding value. Shaw Go WiFi, which allows nomadic access to the Internet through over 65,000 access points, is a leading example of this innovation.

e. As Canada’s digital economy continues to grow and evolve during the next 5 to 10 years, which telecommunications services are Canadians expected to need to participate meaningfully? Specify how your responses to parts a) through d) above would change based on your answer.

A16. Given the rapid growth and change in the telecommunications market over the past five to ten years, it is difficult to predict what new disruptive technologies will emerge over the next decade. However, based on current trends and industry forecasts we anticipate a continued decline in traditional landline voice services and dial-up Internet access. We also anticipate greater reliance on wireless technologies to address all of the information and communications needs of Canadians.49

47

Supra, note 4, Smartphone market penetration by percentage of mobile subscribers.

48

ComScore: Canadian Digital Future in Focus 2014.

49

CRTC, Communications Monitoring Report 2014, Table 5.2.0.

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A17. However, there will still be a number of Canadians that rely on landline voice as their primary means for staying connected because they are comfortable with the reliability and security of those landline voice networks. This is especially true for Canadians above the age of 55.50

A18. IP-based services will also continue to grow, placing corresponding demands on both wireline and wireless networks.51 These demands will be met through a combination of innovation and network expansion to deliver high quality, reliable and affordable services.

By 2016, more than half of all traffic from mobile-connected devices will be off-loaded to wireline networks through the use of Wi-Fi access points and femtocells.52 A19. We also anticipate that consumers will place increasingly greater value on a seamless experience, facilitated by networks becoming more and more integrated across technologies and service platforms. As networks integrate, consumers will also prioritize the security of the growing network of networks.53 2. The Commission’s current target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload, based on uses that consumers should reasonably expect to make of the Internet. Are these target speeds sufficient to meet the minimum needs of Canadians today? If not, what should the new targets be and what time frame would be reasonable to achieve these new targets?

A20. Shaw believes that the Commission’s decision in TRP 2011-291 to set aspirational targets for broadband access services sent an appropriate signal to the market, while also galvanizing industry and government efforts to achieve this objective, with the result that close to 99% of Canadian households will have access to the target speed of 5 Mbps downstream and 1 Mbps upstream by 2017.54

A21. In this proceeding, the Commission could establish new aspirational target speeds for advanced broadband services which could send a fresh signal to the market and provide a new objective for the industry, directing efforts towards achieving the advanced broadband target speed. But the aspirational speed must be grounded in our knowledge and expectations of consumer demand.

A22. It is also important to distinguish between aspirational targets for advanced broadband services on one hand, and the basic service objective and any associated broadband funding requirements under the regulatory regime, on the other. For example, the United Kingdom’s Superfast Broadband Program established targets to make “basic” broadband available to all homes by 2016 and “superfast” broadband available to 90% of homes in the same period. However, these targets, and corresponding efforts to meet the targets, 50

Statistics Canada Residential Telephone Service Survey, 2013.

51

Cisco VNI. Global Mobile Data Traffic Forecast Update, 2014-2019.

52
Ibid.
53
Ibid.
54
Supra, note 3.
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are completely separate from the universal service obligation in the UK. Only BT and one regional incumbent are subject to the universal service obligation, which at present only provides for dial-up access.55

A23. This distinction is equally apparent in the United States. The Federal Communications Commission has noted the difference between upholding universal service requirements and monitoring the deployment of advanced telecommunications capabilities.56 Taking account of these differences ensures that any targets that are set for broadband funding purposes maximize the benefits of limited resources without hindering the tremendous strides that are made by industry when inspired by higher aspirational target speeds.

A24. In Canada, it is equally important to recognize these distinctions. Setting aspirational speed targets creates an environment where competing technological platforms, spurred on by ever-evolving consumer demand, are driven to extend advanced broadband services to as many Canadian households as possible, with the Commission monitoring the rate of progress along with changing consumer preferences.

A25. In contrast, setting speed requirements for any possible national contribution or other regulatory funding program would serve a different purpose – namely achieving a basic level of broadband access service.

The Commission’s role regarding access to basic telecommunications services 3. Which services should be considered by the Commission as basic telecommunications services necessary for Canadians to be able to meaningfully participate in the digital economy? Explain why.

A26. As discussed more fully below, the regulatory category – “basic telecommunications service” – presents challenges and limitations as a tool to determine which services are necessary for Canadians to participate in the digital economy. Services that might have been considered “basic” in the past are being eclipsed by new services and applications, such as email, text messaging and even broadband Internet access services, that do not easily fit within definitions and regulatory constructs that were created over 30 years ago.

A27. It also is important to consider the historical context in which these regulatory terms first emerged. The term “basic telecommunications service” has a long history of use in Canada and, for purposes of responding to this question, should be distinguished from the term “basic service objective”. The former term (i.e., “basic telecommunications service”) was first used by the Commission in 1984 as a means of classifying a cross-section of real-time, telecommunications services which, in the words of the Commission, provide a “pure transmission capability over a communications path that is virtually transparent in 55

Ofcom, Universal Service Obligation: a review, 2005, online at stakeholders.ofcom.org.uk/consultations/uso/main/.

56

FCC, 2015 Broadband Progress Report and Notice of Inquiry on Immediate Action to Accelerate Deployment, January 29, 2015, para. 54.

http://stakeholders.ofcom.org.uk/consultations/uso/main/ APPENDIX A

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terms of its interaction with subscriber supplied information.”57 Among the services that have been classified by the Commission as “basic telecommunications services” are local and long distance voice services, private line services and various types of protocol-based data transport services.58

A28. There are a few references to the term “basic telecommunications service” in the Act, including in the definition of a “telecommunications service provider”59 in subsection 2(1), as well as in subsection 46.5, which gives the Commission the power to require “any telecommunications service provider to contribute… to a fund to support continuing access by Canadians to basic telecommunications services.”60 A29. The Commission’s original reason for creating the definition of “basic telecommunications service” was to determine whether a separate category of services, called “enhanced services”, should be accorded the same regulatory treatment as basic services, or whether a different regulatory framework should apply to enhanced services. After considering the matter, the Commission decided that services that are classified as “basic” should be subject to more detailed regulation, including unbundling obligations, whereas services that are classified as “enhanced” should be subject to lighter regulatory obligations because these services were open to a greater degree of competition.61 A30. In contrast to “basic telecommunications service”, the term “basic service objective” bears a very different meaning, referring to a minimum standard of telecommunications service that was established by the Commission in 1999 in order to ensure that Canadians in all regions of the country would have access to this standard of service at affordable rates. In its current form, the basic service objective is defined to include the following service capabilities:

 individual line local touch-tone service;

 capability to connect to the Internet via low-speed data transmission at local rates;

 access to the long distance network, operator/directory assistance services, enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and

 a printed copy of the current local telephone directory upon request.

A31. Some services, such as voicemail, email and various types of messaging services (e.g., text messaging, MMS, paging and instant messaging) do not fit within the Commission’s definition of basic telecommunications services or the current basic service objective but are used by Canadians on a day-to-day basis for participation in the digital economy.

57

See Enhanced Services, Telecom Decision CRTC 84-18, issued 12 July 1984 (“Decision 84-18”) and Identification of Enhanced Services, Telecom Decision CRTC 85-17, issued 13 **** 1985 (“Decision 85-17”).

58
Ibid.
59
Subsection 2(1) of the Act.
60
Subsection 46.5(1) of the Act.
61
Decision 84-18, supra, note 57.
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A32. All of which underscores a more fundamental point. The decades-old term “basic telecommunications service” may not be particularly helpful in determining which services are necessary for Canadians to participate in today’s digital economy.

A33. The same holds true for the term “basic service objective”. This term is essentially a holdover from a monopoly regulated era when there was a single telecommunications service, namely primary exchange service, the universal availability of which was promoted by the Commission through various regulatory measures adopted over the years, including through the establishment of the basic service objective and contribution funding for primary exchange services offered to residential customers in high cost areas of the country.

A34. It is now questionable whether we live in a world where primary exchange service is a fundamental prerequisite for participating in the digital economy. The Canadian telecommunications market is now a highly dynamic market involving myriad services delivered over an ever-expanding range of technological platforms, including fiber optic cable, copper, coaxial cable, fixed wireless networks, mobile wireless networks and satellite. There are thousands of different types of telecommunications services, applications and features available in the market, each of which has different characteristics and functionalities and serves a particular need.

A35. In today’s dynamic and technologically changeable environment, it is risky to try to rigidly identify specific services, applications or features that might qualify as a “basic service” that is necessary for Canadians to participate in the digital economy. Services or features that may be indispensible to some Canadians may be entirely irrelevant to others. For example, local voice services may be important to some Canadians, while others may place a greater importance on email and text messaging.

A36. The same holds true for the term “digital economy”. Given the highly dynamic and unpredictable marketplace of today, the term “digital economy” cannot be construed as a static concept – it, too, shifts over time and means different things to different people.

Indeed, defining this term is a very subjective and context-dependent exercise, and should be approached with that realization in mind.

A37. The same challenges arise when considering whether to include broadband access as a basic telecommunications service and how to define what that possible “basic” broadband access service would look like. Just as Canadians have varying conceptions of what it means to meaningfully participate in the digital economy, they also have varying needs and requirements when it comes to their choice of a broadband service. In fact, we know from our customers that there are several elements of the broadband experience that they value – including reliability, price, usage, innovation and value-adds – in addition to speed.

Moreover, the way consumers use broadband, and their associated preferences and needs, vary widely. For a consumer primarily engaged in social media, speed may not be as important as reliability, portability and availability. On the other hand, a gamer playing in real-time will place higher value on speed and latency.

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A38. Given the extremely broad and multifaceted range in preferences and uses of broadband services, defining a “basic” broadband Internet access service would be a daunting challenge. Assuming it is possible, in Shaw’s view, the only reasonable starting point is to delineate the relevant set of functionalities or uses of broadband access services, rather than the speed or some other technological factor. As we have emphasized throughout this submission, this is about consumer need, not technology. In this regard, we believe the following functionalities are the most important to enable meaningful participation in the digital economy: the ability to send and receive e-mails, access online shopping, banking and government resources, to stay on top of current events, participate in social media, make VoIP and videoconferencing calls and access educational, employment and health tools and information.

A39. This usage profile can be delivered through a wide array of technologies, including via cable, DSL, fibre, fixed wireless, mobile wireless, and satellite, as well as over a variety of service packages and speeds, including at speeds that are lower than the current aspirational target of the Commission. For example, a broadband Internet service offered in the range of 3 Mbps download / 512 Kbps upload, with 10 GB of data per month would accommodate all of the foregoing. In fact, many of the customers on Shaw’s speed services in this range can and do use their broadband service for all of these purposes and more, including streaming media, file sharing and gaming.

A40. Beyond broadband service, it is reasonable to consider that voice services, whether delivered over conventional wireline facilities, fixed wireless, mobile or satellite networks, constitute a service that is necessary for Canadians to participate meaningfully in the digital economy.

A41. Finally, telecommunications services that are required by Canadians with disabilities, such as Message Relay Service, IP Relay and Video Relay Service, also constitute services necessary for participation in the digital economy. Without access to these services, individuals within these communities cannot communicate effectively or participate in the online economy.

A42. The question as to whether any of the foregoing services should be included in the basic service objective or made a part of the obligation to serve is dealt with separately in the response to Questions 8 and 9 below.

a. Explain whether the underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should be a factor in defining whether a telecommunications service should be considered a basic service.

A43. The underlying technology of a given service should not be a factor in determining whether a given telecom service should be considered “basic”. The consumer’s experience and use should be the primary consideration, not the underlying technology.

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A44. For example, if the Commission decides that a given service should be included in the basic service objective, that decision should be agnostic to the technology platform over which the service is delivered. This is the approach that the Commission has taken with respect to the current definition of the basic service objective,62 and it is the only approach that can ensure equitable and competitively neutral treatment of all service providers.

b. Identify, with supporting rationale, the terms, conditions, and service characteristics under which basic telecommunications services should be provided.

Should any obligations be placed on the provider(s) of these services? If so, what obligations and on which service provider(s)?

A45. As noted above, the vast majority of real-time “basic” telecommunications services have been forborne from regulation because they have been found by the Commission to be subject to competition that is sufficient to protect users. These services include long distance voice services, private line services, various speeds and protocols of data services and mobile wireless services. 63 Residential local voice services have been forborne from regulation in over 720 local service exchanges in Canada. 64 The Commission has also forborne from regulating many other types of telecommunications services, including retail Internet access, paging and enhanced services. 65 A46. Given that so much of the market has now been forborne from regulation, it would not be appropriate to re-regulate or impose new obligations on service providers to offer these services in the absence of evidence of market failure. Not only would this be contrary to the Commission’s previous findings, it would also be contrary to the Policy Direction, which requires that the Commission fulfill the objectives of the Act by relying on “market forces to the maximum extent feasible.”66 The Policy Direction also requires that no new regulatory measures be adopted without clear and compelling evidence of a well-defined problem that can only be addressed through regulation, and where the benefits of such intervention outweigh the costs.67

A47. Where regulatory measures are required, the Policy Direction also states that these measures must be carefully designed so as to be “efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary.”68

62
TRP 2011-291, supra, note 22.
63

See Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19; Stentor Resource Centre Inc. - Forbearance From Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, Telecom Decision CRTC 98-20; Forbearance granted for telcos' wide area network services, Telecom Order CRTC 2000-55; and Regulation of mobile wireless telecommunications services, Telecom Decision CRTC 96-14.

64

CRTC, Communications Monitoring Report 2014, Appendix 3. Based on 2013 data.

65

See Forbearance from retail Internet services, Telecom Order CRTC 99-592; Review of the Regulatory Framework, Telecom Decision CRTC 94-19; and Enhanced Services, Telecom Decision CRTC 84-18.

66

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, P.C. 2006-1534 (the Policy Direction).

67
Ibid, para. 1(a)(i).
68
Ibid, para. 1(a)(ii).

http://www.crtc.gc.ca/eng/archive/1996/dt96-14.htmhttp://www.crtc.gc.ca/eng/archive/1999/O99-592.HTM APPENDIX A

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A48. Taking these considerations into account, Shaw believes an obligation to provide a particular telecommunications service should only be imposed where there is clear evidence of market failure.

c. What should be the prices for basic telecommunications services and how should these prices be determined? Provide rationale to support your answer.

A49. Market forces enable consumers to determine the optimal mix of value, quality, innovation and service; therefore, they are the most appropriate mechanism for determining the price of telecommunications services. Furthermore, market forces preserve the cycle of investment, which is significant as network operators strive to compete and differentiate themselves from their rivals, while meeting increasing demand for usage.

A50. Accordingly, where a service has been forborne from regulation (and is therefore subject to competition sufficient to protect the interests of users), rates should be determined by market forces.

4. Can market forces and government funding be relied on to ensure that all Canadians have access to basic telecommunications services? What are the roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal) in ensuring that investment in telecommunications infrastructure results in the availability of modern telecommunications services to all Canadians?

A51. In the vast majority of cases, market forces can continue to be relied upon to ensure that Canadians have access to the services that they need in order to participate meaningfully in the digital economy. Relying on market forces delivers the benefits of competition to Canadians in the form of increased customer choice, lower prices and higher levels of product and service innovation.

A52. With respect to those regions of the country where market forces may not be sufficient to ensure reliable and affordable services, additional measures may be required in order to increase the availability of these services. However, even in these instances, it is not necessary, or in the public interest, to introduce broad new regulatory requirements in order to address gaps in service coverage and availability. As described below, there is evidence that market forces, in conjunction with focused government subsidies, have been bridging the service gaps in these areas.

A53. There is also evidence that recent investments and technological developments in wireless and satellite have the potential to close the “speed divide” that currently exists between Canada’s remote and northern communities on the one hand and communities located in southern Canada on the other. For example, new satellite systems will be launched in the next few years that will have service footprints covering every remote and APPENDIX A

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underserved region of Canada.69 These systems are expected to be capable of delivering download speeds of anywhere from 16 to 25 Mbps, and, in the case of the new low earth orbit satellite systems, latency and rain fade issues will be substantially reduced.

A54. Therefore, Shaw favours focused government funding programs as a means of addressing gaps in broadband service coverage and accessibility rather than increased reliance on regressive subsidy measures such as expansion of the national contribution fund.

A55. Set out in Appendix “B” of this submission is a table of federal, territorial, provincial and municipal funding programs. Canada has a long history of success with precise funding programs that are designed to support broadband deployment:

 In just three years since the Commission’s Broadband Report was published, the footprint of households covered by broadband Internet services with download speeds in excess of the speed established in TRP 2011-291 grew by nearly 10%.70

 Today, 95.5% of Canadian households have access to broadband Internet services at speeds of 5 Mbps download or greater, and by mid-2017, new projects funded through the federal government’s Connecting Canadians program will target specific underserved households and expand the footprint to almost 99% of Canadian households.

 The Northern component of the Federal Government’s Connecting Canadians program will bring broadband at speeds of 3 to 5 Mbps to remote, satellite-dependent communities in Nunavut and the Nunavik region of northern Quebec.

 In 2010, the wireline capex expenditures of telecommunications carriers passed the $6 billion (annual) threshold for the first time and has averaged over $7 billion annually since.71

 Targeted funding in the past five years has contributed millions more to spur rollout.

A56. The success of public/private partnerships in Canada has also garnered international attention. For example, The Eastern Ontario Regional Network (EORN) was one of five organizations shortlisted for an award from the World Broadband Forum, in recognition of efforts to improve broadband deployment and penetration. EORN’s partnerships with several ISPs enhanced service for almost 90% of homes in rural Eastern Ontario, accounting for some 415,000 homes and businesses.72 EORN also collaborated with three First Nations communities to augment services, including a direct fibre link to the Alderville First Nation to improve community, health and student services.

69
Supra, notes 11 and 12.
70
From 86% in 2010 to 95.5% in 2013.
71

CRTC, Communications Monitoring Report 2014, Table 5.0.4.

72

Connecting Eastern Ontario to the World, EORN Final Report 2014, page 5.

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A57. EORN is also looking to the future. It recently released its 2015-2024 Digital Strategy, including goals to increase user uptake and assist ISPs in making submissions for projects to achieve the goals of the Government of Canada’s Connecting Canadians program.73 These and other projects are ongoing and the benefits of these public/private partnerships will continue to accrue.

A58. The success of targeted federal, territorial, provincial, and municipal funding programs is due in large part to market-driven, competitive, and technologically-neutral bidding processes. These market-driven proposals leverage existing expertise and infrastructure, but also support new infrastructure, new investments and new services that would otherwise be uneconomical. This allows for an efficient combination of service offerings provided over fibre, coaxial, copper, mobile wireless, fixed wireless, satellite, and other technologies.

A59. Using funds from general government revenues is also a more efficient, transparent and equitable means of subsidizing broadband services in those areas of the country where there may be service coverage gaps, because these funds are drawn from the widest possible revenue base, namely all taxpayers.

A60. Funding broadband deployments through the existing contribution regime would impose a regressive burden on consumers, particularly those in lower income brackets. 74 The impact on consumers of using contribution funds to subsidize broadband deployment programs was identified as a concern in the Final Report of the Telecommunications Policy Review Panel:

Internal cross-subsidies are also undesirable from the viewpoint of social equity. Since the cost of providing subsidies is passed onto consumers, and since all consumers contribute at the same rate regardless of income, internal cross-subsidies effectively impose a regressive tax on the customers of telecommunications service providers.75

A61. In addition, there is evidence that the competitive bidding process that underlies the federal government’s broadband funding programs is more efficient than the contribution regime. For example, under the federal government’s Broadband Canada – Connecting Rural Canadians program, the subsidy per household was roughly $1,000, whereas the 73

A Road Map to Digital Leadership, online at eorn.ca.

74

In this regard, Shaw notes that communications expenditures represent 8.4% of income for households in the lowest income quintile and only 1.7% for those in the highest. Indeed, as a portion of income, the communications expenditures of the lowest (first) quintile exceed those of the third, fourth and highest (fifth) combined. See Communications Monitoring Report, 2014 table 2.0.10.

75
TPRP Report, supra note 35, pages 8-9.
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subsidy per household under the ILECs’ deferral account service improvement programs was approximately $5,000.76

5. What should be the Commission’s role in ensuring the availability of basic telecommunications services to all Canadians? What action, if any, should the Commission take where Canadians do not have access to telecommunications services that are considered to be basic services?

A62. The best way for the Commission to ensure the ongoing availability of basic telecommunications services to Canadians is to continue to forbear from regulating these services where they are subject to competition and market forces that are sufficient to protect the interests of users, as required by the Policy Direction and section 34 of the Act.

A63. As a case in point, the market for retail Internet access services is characterized by fierce competition between multiple service providers using no less than five different access technologies to deliver an entire range of Internet access services and service speeds.

The Commission decided more than 15 years ago to forbear from regulating this market and since that time, consumers have reaped the benefits of competition in the form of increased customer choice, higher levels of product and service innovation, more value and greater supplier responsiveness.

A64. In these circumstances, it makes no sense to regulate or mandate the provision of retail Internet services in a market that is already competitive.

A65. With respect to those areas of the country where it is currently not possible to rely on competition and market forces to meet the needs of users, a different strategy may be required. However, as noted above, there are several new technologies and services that will be launched imminently which are expected to deliver broadband Internet services at speeds of up to 25 Mbps to every region of the country, including in the far ****.77 A66. In the face of these developments, it is premature to conclude that market forces will not in fact deliver broadband Internet services to these regions at the Commission’s target speeds of 5 Mbps download / 1 Mbps upload. In those instances, focused government funding have been, and should be, used to close the gaps.

A67. This leaves only a few remaining services which may require funding, namely residential primary exchange services in high-cost, non-competitive areas, VRS and possibly telecommunications transport service improvement programs.

76

The Broadband Canada – Connecting Rural Canadians program funded up to 50% of eligible costs for projects to bring broadband Internet access of at least 1.5 Mbps to unserved and underserved areas. Under the program, broadband access was extended to roughly 220,000 households, which amounts to an average subsidy of just over $1,000 per household. The estimate of the deferral account subsidy of $5,000 per household is based on information provided in Telecom Decisions CRTC 2010-637, 638 and 639 and in The Companies(CRTC)9Mar10-507 DA, MTS Allstream(CRTC)9Mar10-502 TDC 2008-1, and TELUS (CRTC)9Mar10-503.

77
Supra, note 15.
APPENDIX A
A-15

A68. With respect to residential primary exchange services, there will likely continue to be a need to subsidize these services, but only in extremely remote, high-cost areas where there are no competitive alternatives or practical substitutes available.

A69. Insofar as Video Relay Services are concerned, consistent with the Commission’s decision in TRP 2014-187, the contribution fund should continue to be used to subsidize these services using the annual funding cap of $30 million established by the Commission for VRS-related costs.78

A70. Finally, as noted earlier, Shaw believes that focused government funding should be relied on as the principal means to subsidize efficient telecommunications infrastructure projects that will have the most impact on the broadest number of Canadians at the least possible cost. However, if the Commission determines that contribution funds should also be used to help fund these projects, then funding should be capped at the amount that is currently used to subsidize residential primary exchange service in areas where subsidy is no longer warranted. Shaw’s proposed changes to the subsidy regime are discussed further below in our answer to Question 10.

A71. In addition, any recipients of this funding should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected.

A72. This will ensure that there is no increase in the contribution burden for consumers and that any subsidy funds that are used for these programs are allocated in an efficient, fiscally responsible manner that maximizes the return of the investments made by consumers.

6. In Telecom Regulatory Policy 2011-291, the Commission stated that it would closely monitor developments in the industry regarding the achievement of its broadband Internet target speeds to determine whether regulatory intervention may be needed.

What action, if any, should the Commission take in cases where its target speeds will not be achieved by the end of 2015?

A73. In TRP 2011-291 the Commission determined that the end of 2015 was an appropriate timeframe to achieve the target speed set by the Commission. In particular, the Commission established this timeframe by taking into account plans for network expansion by several carriers.

A74. We believe that the Commission’s broadband target speeds will be substantially met during the course of this proceeding due to a combination of innovative deployments, including through the use of satellite technology and LTE-Advanced, many of which are supported through government funding. If the target is not met, Shaw believes that the Commission’s role should be to identify and monitor those areas where it is not met, allowing government funding programs to continue to close any gaps that remain. The Commission also has an ongoing role to monitor consumer preferences and deployment efforts with a view to ensuring that targets and user preferences align.

78

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

APPENDIX A
A-16

7. In Telecom Regulatory Policy 2013-711, the Commission stated its intention to establish a mechanism, as required, in Northwestel’s operating territory to support the provision of modern telecommunications services. Such a mechanism would fund capital infrastructure investment in transport facilities (e.g. fibre, microwave, and satellite), as well as the cost of maintaining and enhancing these facilities. The Commission considered that this mechanism should complement, and not replace, other investments from the private sector and governments, including public-private partnerships.

a. Explain, with supporting rationale, whether there is a need for the Commission to establish such a mechanism in Northwestel’s operating territory. As well, explain whether there is a need for such a mechanism in other regions of Canada.

b. What impact would the establishment of such a mechanism have on private sector investment and government programs to fund the provision of modern telecommunications services?

A75. Shaw agrees that it may be necessary to establish a mechanism to contribute to the modernization and maintenance of transport facilities in the ****. However, at the present time, there is insufficient information available on the costs that would be involved in such a modernization program to provide meaningful comments. In addition, new satellite technologies that will be launched in the next few years could significantly reduce current cost estimates. For example, the Satellite Inquiry Report examines certain C, Ku and Ka-band satellite services that are currently used to serve the ****, but it does not take into account the coverage characteristics and capabilities of the two high throughput satellites that will be launched next year, which will have coverage of Canada. It also appears to exclude from consideration certain FSS satellite systems that are not currently used by telecom service providers to offer services in the **** even though they are used by various end-user customers in these locations.

A76. The Report also predates the latest announcements pertaining to the launch of two more FSS satellite systems that will also offer full coverage of Canada’s ****. Because these satellites will operate in low earth orbit, they will not have any of the latency issues that are experienced with the geosynchronous satellites that currently operate in the C, Ku and Ka bands.79

A77. In the absence of a full technological assessment of the issue and the above-noted costing information, it is difficult to comment on the questions posed above. However, in order to be responsive to the Commission, Shaw submits that if it is determined that a mechanism should be established to subsidize telecommunications modernization programs in the ****, such as through the use of contribution funds, this funding should be capped by the 79

The return of the satellite constellations, Space Review, **** 23, 2015, available online at http://www.thespacereview.com/article/2716/1 http://www.thespacereview.com/article/2716/1

APPENDIX A
A-17

amount that is currently used to subsidize residential primary exchange service in areas where this subsidy is no longer required. Secondly, any recipients of funding for Northern modernization programs should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. See our response below to Question 10.

Regulatory measures for basic telecommunications services 8. What changes, if any, should be made to the obligation to serve and the basic service objective?

A78. The current definition of the basic service objective essentially captures a single service, namely basic local voice telephony service. While Shaw does not object to the ongoing inclusion of this service in the basic service objective, it is important to note that voice services can be delivered using both circuit and packet switched technologies over a variety of competing telecommunications networks, including conventional wireline facilities, fixed wireless networks, terrestrial mobile or FSS and MSS satellite networks.

Given the numerous technological changes that have taken place in the delivery of voice telephony services over the past decade, the Commission should consider whether the existing definition of the basic service objective takes proper account of these developments.

A79. With respect to applying the basic service objective to other services, Shaw cautions against applying this regulatory category – a holdover from a monopoly era with a single telecommunications service – to broadband Internet access, a multi-dimensional and highly dynamic service that has emerged and grown up in a much different competitive landscape. In today’s ever-changing technological environment, where a diversity of networks, services and technologies compete in order to meet a variety of consumer needs, the concept of a “basic service objective” is ill-suited and anachronistic. With such an abundance of choices and options, it is not clear that it is necessary or even possible to establish a “basic service objective” for broadband services.

A80. However, if the Commission decides to include broadband Internet access in the basic service objective, Shaw urges the Commission to be cautious in choosing a baseline standard of service for the reasons provided in our response to Question 3 above. In particular, there is an important distinction between aspirational speed targets that set a goal to which the telecommunications industry can aspire, versus a basic level of broadband service that allows Canadians to participate in the digital economy. The Commission should not use aspirational speed targets to define the basic service objective.

A81. Turning to the obligation to serve, Shaw notes that simply because a service has been included in the basic service objective does not mean that an obligation to serve should be imposed in relation to that service. As discussed earlier, the Commission has forborne from regulation in the vast majority of telecommunications services markets in Canada APPENDIX A

A-18

because these markets have been found to be subject to competition sufficient to protect the interests of users.

A82. In these circumstances, it would not be efficient or proportionate to impose an obligation to serve on a given service or service provider where market forces can ensure the availability of competitive alternatives and practical substitutes. The Policy Direction requires the Commission to rely on market forces to the maximum extent feasible and to remove unnecessary regulation in competitive markets. This includes the elimination of the obligation to serve in all markets that have been forborne from regulation.

A83. Taking the foregoing into account, Shaw recommends the elimination of the obligation to serve in all markets where landline primary exchange service has been forborne from regulation.

9. Should broadband Internet service be defined as a basic telecommunications service? What other services, if any, should be defined as basic telecommunications services?

A84. Please see our responses to Questions 3 and 8 above. In addition, please note that simply because a service has been classified as a “basic” service or forms part of the basic service objective, does not mean that it should be subject to an obligation to serve or be subsidized using funds from the national contribution fund. These are separate issues that should be determined by other considerations, including most significantly whether the service is provided in a market where competitive or practical substitutes exist.

10. What changes, if any, should be made to the existing local service subsidy regime?

What resulting changes, if any, would be required to the existing regulatory frameworks (e.g. price cap regimes)?

A85. As noted above, the existing national contribution regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice services, which is being rapidly substituted and replaced by other services and technologies (e.g., fixed and mobile wireless, mobile satellite, etc.). In the face of such change, the Commission should give serious consideration to reforming and updating the existing contribution regime in order to reflect the current state of the market. Specifically, in markets where there is clear evidence of competitive choice or practical substitutes to the provision of primary exchange services over legacy copper networks, the Commission should eliminate subsidies.

A86. For example, wireless voice services are available in many of the same exchanges in Rate Bands E and F where the ILECs receive subsidies to provide primary exchange voice services over copper networks. Generally, these wireless services are offered at rates that are lower than the regulated price cap for primary exchange service. For example, in Creston, British Columbia, a Rate Band F community, wireless service is available starting APPENDIX A

A-19

at $28 per month.80 Likewise, in Pouce Coupe, British Columbia, a community in Rate Band E, wireless plans start at $30 per month.81 Shaw questions whether the provision of a subsidy in these circumstances is an appropriate use of a limited resource, namely the contribution fund. The Commission should ensure that the consumers that ultimately bear the costs of contribution receive the maximum return on their investment.

A87. Further, in several exchanges in Rate Bands E and F, the ILECs are deploying fibre-to-the-home networks in the face of competition from other technologies (e.g., mobile wireless, satellite) while simultaneously collecting subsidies for the provision of primary exchange voice service delivered over legacy copper networks.82 These developments in markets that were traditionally viewed as “high cost service areas” further highlight the need for the Commission to review and reform the existing contribution regime. Canadians should not be asked to subsidize legacy copper networks that have been effectively replaced by newer technologies and services.

A88. The Commission should also critically examine whether there are any exchanges where contribution funds continue to be disbursed to the ILECs notwithstanding the presence of competitors in the market. Shaw notes in this regard that the onus is currently placed on the ILECs to submit applications to the Commission for forbearance from the regulation of primary exchange services in exchanges where they provide primary exchange services on a regulated basis. The Commission should consider on the record of this proceeding whether the ILECs are choosing to forego the filing of forbearance applications in order to continue to receive subsidies in markets where there is a competitive presence.

Unnecessary subsidies distort competitive markets and thwart the goal of ensuring that the contribution regime is both effective and efficient.

A89. With respect to the use of contribution funds to subsidize other services, Shaw notes that the Commission determined in TRP 2014-187 that the contribution fund should be used to subsidize video relay service using an annual funding cap of $30 million for all VRS-related costs.83 Shaw is not proposing any changes to this funding mechanism.

A90. Insofar as broadband access services are concerned, Shaw submits that it would be inappropriate to use contribution funds to subsidize these services. The evidence suggests that this is an inefficient use of contribution funds;84 plus policy experts, including the Telecom Policy Review Panel, note that this would unfairly burden consumers of telecommunications services, particularly those in lower income brackets. In Shaw’s view, 80

TCI’s Tariff CRTC 1005, page 108, shows a standalone residential exchange service rate for this exchange of $30.46 per month. In Telecom Decision CRTC 2014-627, the Commission set a subsidy of $7.53 per month residential local service in this exchange.

81

TCI’s Tariff CRTC 1005, page 108, shows a standalone residential exchange service rate for this exchange of $30.32 per month. In Telecom Decision CRTC 2014-627, the Commission set a subsidy of $20.66 per month residential local service in this exchange

82

For example, Beausejour, Lorette, Niverville and Stonewall, Manitoba and Creston, British Columbia.

83

Video relay service, Telecom Regulatory Policy CRTC 2015-187, para. 73.

84

Under the federal government’s Broadband Canada - Connecting Rural Canadians program, the subsidy per household was roughly $1,000, whereas the subsidy per household under the ILECs’ deferral account service improvement programs was approximately $5,000 (see: supra, note 76).

APPENDIX A
A-20

focused government funding programs which draw on general taxpayer revenues are a far more equitable and transparent source of funding for broadband expansion initiatives.

A91. Finally, if the Commission determines as a result of this proceeding that contribution funds should be used to subsidize other telecommunications services or projects, such as modernizing telecommunications transport networks in the ****, the Commission should avoid increasing the total subsidy requirement in order to fund these programs. Instead, the Commission should reform the contribution fund by re-purposing subsidy amounts that are not appropriately allocated at the present time (e.g., in ILEC rate Bands E and F) and redirecting these funds to the new projects. This will ensure that there is no increase in the contribution burden that is ultimately borne by Canadian telecommunications users and that existing funds are being disbursed in an economically efficient and effective manner.

11. What changes, if any, should be made to the contribution collection mechanism?

Your response should address, with supporting rationale, which TSPs should be required to contribute to the NCF, which revenues should be contribution-eligible and which revenues, if any, should be excluded from the calculation of contribution-eligible revenues.

A92. At this time, Shaw is not recommending any changes to the contribution collection mechanism. Shaw reserves the right to make additional submissions on the contribution collection mechanism once we have had the opportunity to review the submissions of other parties in this proceeding.

12. Should some or all services that are considered to be basic telecommunications services be subsidized? Explain, with supporting details, which services should be subsidized and under what circumstances.

If there is a need to establish a new funding mechanism to support the provision of modern telecommunications services, describe how this mechanism would operate.

Your response should address the mechanism described in Telecom Regulatory Policy 2013-711 for transport services and/or any other mechanism necessary to support modern telecommunications services across Canada. Your response should also address, but not necessarily be limited to, the following questions:

a. What types of infrastructure and/or services should be funded?

b. In which regions of Canada should funding be provided?

c. Which service providers should be eligible to receive funding, and how should eligibility for funding be determined (e.g. only one service provider per area, all service providers that meet certain conditions, wireless service providers, or service providers that win a competitive bidding process)?

APPENDIX A
A-21

d. How should the amount of funding be determined (e.g. based on costs to provide service or a competitive bidding process)?

e. What is the appropriate mechanism for distributing funding? For example, should this funding be (i) paid to the service provider based on revenues and costs, or (ii) awarded based on a competitive bidding process?

f. Should any infrastructure that is funded be available on a wholesale basis and, if so, under what terms and conditions?

g. Should the Commission set a maximum retail rate for any telecommunications service that is subsidized?

h. Should this mechanism replace the existing residential local wireline service subsidy? If so, explain how the existing subsidy should be eliminated, including details on any transition period. In addition, explain whether the small ILECs and/or Northwestel should be subject to any special considerations or modifications for this transition period.

A93. As noted earlier in this submission, Shaw believes that there is a need for the Commission to modernize and reform the existing contribution regime in order to make it more suitable for the 21st century requirements of Canadians. At present, the existing regime is devoted almost exclusively to the funding of a monopoly era service, namely wireline primary exchange voice services, which is being rapidly substituted and replaced by other services and technologies.

A94. Furthermore, while it may be necessary to continue subsidizing primary exchange voice services in some areas of the country, the Commission needs to examine whether contribution funding continues to be required in areas where there are competitive alternatives or lower priced substitutes for this service.

A95. In its response to the questions above, Shaw has identified some of the reforms that it believes are needed to modernize the existing local service subsidy regime. These reforms are summarized briefly below along with a set of guiding principles that should generally govern the decision to subsidize a particular project or service.

a) Subsidies should only be made available in instances of market failure: Subsidies for telecommunications projects or services should only be used in areas of the country where market forces do not exist and are not expected to materialize. This ensures consistency with subsection 7(f) of the Act and paragraph 1(a)(i) of the Policy Direction, which requires reliance on market forces to the maximum extent feasible.

b) Focused government funding programs should be used as the principal source of subsidy funding. This will ensure that subsidies are drawn from the widest possible base of revenues and will result in a more equitable and transparent approach to the APPENDIX A

A-22

use of subsidies than the national contribution fund. It is also consistent with subsection 7(a) of the Act which seeks to promote the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions c) Competitive bidding processes should be used to select subsidy recipients: Recipients of subsidies for telecommunications projects or services should be required to participate in a competitive bidding process in order to ensure that the lowest cost service provider is selected. As noted above, a competitive bidding process will promote fairness and efficiency with respect to funding, and is consistent with paragraph 1(b)(ii) of the Policy Direction which requires the Commission to use measures that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives of the Act.

d) Subsidies should be disbursed on a technology agnostic basis: As noted above, today’s telecommunications market features a diversity of networks and technologies to meet a diversity of needs. Accordingly, the decision to subsidize a particular service should be entirely agnostic to the technology platform over which the service is delivered. This is consistent with paragraph 1(b)(iii) of the Policy Direction which requires that the Commission implement its measures in a symmetrical and competitively neutral manner.

APPENDIX B
B-1
Appendix B: Broadband Funding Programs

Table 1 - Details Regarding Broadband Funding Programs in Canada Government Program Funding Structure Timeframe Focus Federal

(Industry
Canada)
SchoolNet $25-$45M
Annually
Industry
Canada's
SchoolNet
Program was
part of a larger
initiative that
included First
Nations
SchoolNet,
which was
funded
through 2009.
1995-2009 To provide internet
access across
Canada ensuring
connectivity
despite geographic
and socio-
economic barriers.
Federal Community
Access Program
$420M (over
program life)
Public
locations such
as schools,
libraries and
community
centres were
used to
provide both
access points
and training.
1994-2010 To provide
affordable public
internet access,
skills training and
access to related
services.
Federal
(Industry
Canada)
Broadband for
Rural and
Northern
Development
(BRAND)
$105M One-time
capital cost
sharing fund.
2002-2007 To support
community
deployment of
broadband
infrastructure.
Federal
(Infrastructure
Canada)
National Satellite
Initiative (NSI)
$155M $20M to
acquire
satellite
capacity and
$85M
allocated to
ground
infrastructure.
i
2003-2007 The program
extended
broadband access
to 180 unserved
communities.
Federal
(Aboriginal
Affairs and
Northern
Development
Canada)
First Nation
Infrastructure
Fund
$234M First Nations
were invited to
participate in a
call for
proposals.
2007-2013 The connectivity
portion addressed
transport, points of
presence (PoPs),
access and
satellite capacity.
APPENDIX B
B-2

Government Program Funding Structure Timeframe Focus Federal

(Industry
Canada)
Knowledge
Infrastructure
Program
$2B Separate
funding for
universities
(66%) and
colleges
(34%).
2009-2011 Infrastructure
enhancement at
universities and
colleges.
Federal
(Industry
Canada)
Broadband
Canada:
Connecting Rural
Canadians
$225M Partnership
projects
preferred.
50% general
fed. fund cap;
100% possible
for projects in
First Nation
communities,
but only 50%
from IC
2010-2013 Broadband funding
in BC and Ontario.
Federal
(Infrastructure
Canada)
Building Canada
Fund
$1B
(originally)
with $500M
top-up
(e.g. $55M
of EORN
funds).
Up to 50%
federal
contribution in
public
infrastructure.
2007-2014 The communities
component
included
connectivity and
broadband as an
eligible program
category.
Federal
(Infrastructure
Canada)
New Building
Canada Fund
$14B $1B is set
aside for a
small
communities
component.
2014-2024 Specific
Connectivity and
Broadband
objectives,
including transport,
POPs and access.
Federal
(Infrastructure
Canada)
The Federal Gas
Tax Fund
$2B
Annually
Ongoing
funding for
municipal
broadband
and
connectivity.
Permanent Broadband and
connectivity is now
an eligible
subcategory of the
Gas Tax Fund.
85
Federal
(FedNor)
Federal Economic
Initiative for
Northern Ontario
$35M- $45M
annually
Works directly
with
communities,
First Nations
and not-for
profit
organizations.
**** not
contract
directly with
Permanent Focus on backhaul
and broadband
Points of Presence
(PoPs). Fibre
builds, fixed
wireless solutions,
satellite systems.
85

http://www.infrastructure.gc.ca/plan/gtf-fte-eng.html.

APPENDIX B
B-3

Government Program Funding Structure Timeframe Focus private section

(ISPs).
Federal
(PPP Canada)
P3 Canada Fund $1.25B Public private
partnership
2008+ Focused on
provincial,
territorial,
municipal and First
Nations public
private partnership
infrastructure
projects, including
broadband.
Alberta Alberta SuperNet $193M P3, with
private sector
investments
2001-2004 Connecting
institutions across
Alberta.
Alberta Rural
Connections:
Community
Broadband
Infrastructure ****
Program
$9M Funding for
local
authorities,
First Nations,
Métis
settlements,
and certain
not-for-profit
organizations.
2009-2011 Targeted rural
communities for
projects that
enable access to
reasonable high-
speed broadband
service.
Alberta
(Agriculture and
Rural
Development)
Final Mile Rural
Community
Program
(FMRCP)
$6.6M Part of the
Final Mile
Rural
Connectivity
Initiative
(FMRCI)
2012 Funding to enable
high-speed
Internet access to
unserviced rural
locations.
Alberta Central Alberta
Satellite Solution
$0.7M In partnership
with Xplornet
2013+ Reduce costs of
installing satellite
Internet for up to
4,600 households.
British
Columbia
Community
Network
Infrastructure
**** Program
$1M Partnerships
with
community
organizations.
2005-2006 Improving local
access
infrastructure.
British
Columbia
Connecting
Citizens ****
Program
$36M P3 2008-2011 Improving local
access
infrastructure.
British
Columbia
Broadband
Satellite Initiative
$2M In partnership
with Xplornet
2013+ Reduce costs of
installing satellite
Internet for up to
10,000
households.

http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/csi14656https://www.servicealberta.ca/FMRCI.cfm

https://www.servicealberta.ca/CASS_Search.cfm
https://www.servicealberta.ca/CASS_Search.cfm

http://www2.gov.bc.ca/gov/topic.page?id=413C8530D31B49419CE42EA1F385DC4E&title=BC%20Broadband%20Satellite%20Initiativehttp://www2.gov.bc.ca/gov/topic.page?id=413C8530D31B49419CE42EA1F385DC4E&title=BC%20Broadband%20Satellite%20Initiative APPENDIX B

B-4

Government Program Funding Structure Timeframe Focus British

Columbia
Pathways to
Technology
$40.8M
(joint
fed/prov)
The money
was granted to
All Nations
Trust
Company for
the purpose of
providing
financial
stewardship
and project
management
2009+ The $40.8M is
split: $35.8M for a
Connectivity Fund
(access and
transport) and $5M
for a Capacity
Building Fund
(digital literacy and
technical skills
development to
benefit from and
maintain the
systems).
Manitoba $47M 2002-2007
New Brunswick Broadband
Access Project
$12.5M P3 2004-2006
New Brunswick $13M 2009-2010
Newfoundland
& Labrador
$5M 2003-2004
Nova Scotia Broadband for
Rural Nova Scotia
$19.6M P3 Fixed wireless 50
Mbps Internet for
$65 monthly.
Ontario Northern Ontario
Heritage Fund
Corporation
$1B P3 2003+ Various projects,
including
connectivity and
developing the
digital economy.
Ontario Connecting
Ontario –
Broadband
Regional Access
(COBRA)
$2.4M P3 2003-2005 Assisting
communities to
fund unserved
areas.
Ontario Rural Connections
Broadband
Programs
$114.9M P3 2008-2012 Strategic
investments in
broadband
infrastructure.
Ontario
(co-funding)
Broadband
Canada:
Connecting Rural
Canadians
$32.5M Applicants for
federal
funding (up to
50%) could
simultaneousl
y apply for
provincial
funding (up to
1/3), together
2010-2013 See above
(federal).

http://www.pathwaystotechnology.ca/about-the-projecthttp://www.pathwaystotechnology.ca/about-the-project APPENDIX B

B-5

Government Program Funding Structure Timeframe Focus up to 83.3% of

eligible project
costs.
Quebec Villages Branchés
du Québec
$150M Partnership
with schools,
local
authorities and
not-for-profits.
2003-2005 Connecting
schools and
municipalities.
Quebec Communautés
rurales branchées
$24M P3 2009-2013 Funding programs
to provide rural
Internet at
comparable prices
to urban users.
Saskatchewan Community Net I
and II and
Northern
Broadband
Network
$117M In partnership
with Sasktel.
2001-2007 Providing
broadband access
to schools,
libraries and
provincial
institutions in rural
communities,
farms and northern
and remote areas.
Saskatchewan Rural
Infrastructure
Program
$90M In partnership
with Sasktel.
2009-2011 Upgrading rural
backbone
infrastructure.
Yukon Connect Yukon $17M Partnership
with
Northwestel
2000-2005 Connecting rural
communities.
*** END OF DOCUMENT ***
i

For full particulars, see Appendix D, page 119 of the Satellite Inquiry Report, October 2014.

Intervention: Shaw Cablesystems G.P.

Document Name: 2015-134.223977.2394510.Intervention(1fbm601!).html

Shaw herein provides its initial intervention in this proceeding.Raisons pour comparaitre / Reasons for appearanceAs a telecom service provider, Shaw has a vested interested in this proceeding.

Intervention: Shaw (Intervenor 237)

Document Name: 2015-134.223977.2394510.Intervention(1fbm601!).html

Shaw herein provides its initial intervention in this proceeding.Raisons pour comparaitre / Reasons for appearanceAs a telecom service provider, Shaw has a vested interested in this proceeding.