Final Submission : Eastlink (Intervenor 280)

Document Name: 2015-134.223999.2614233.Final Submission (1k15l01!).html

Please find attached the Final Submission filed by Bragg Communications Inc., operating as Eastlink in TNC 2015-134.

Final Submission : Eastlink (Intervenor 280)

Document Name: 2015-134.223999.2614234.Final Submission (1k15m01!).pdf

6080 **** Street 8th Floor Halifax, Nova Scotia *** *** E ******@***.com File No.: 8663-C12-201503186

May 25, 2016
FILED VIA: GCKEY
Ms. **** May-Cuconato
Secretary General
Canadian Radio–television and
Telecommunications Commission
Ottawa, Ontario
*** ***
**** Ms. May-Cuconato:

Re: TNC 2015-134 - Review of basic telecommunications services 1. Pursuant to the revised deadlines set out in the Commission’s letter dated 11 **** 2016, Eastlink hereby provides our final submissions in relation to this proceeding. This submission focuses on issues raised during the proceeding which are of primary concern to Eastlink, certain additional issues raised during the proceeding to which Eastlink has not previously addressed and Eastlink’s views on a national broadband strategy for Canada. Our failure to address other issues should not be interpreted in a manner contrary to or prejudicial to Eastlink’s interest.

Data Caps

2. As Eastlink submitted throughout this proceeding, it is important that internet service providers retain the right to establish data caps for their internet service offerings (or, as Eastlink describes our service, “included usage” since a specified amount of data is included in the rate, with additional data being charged beyond that amount included in the rate). Eastlink disagrees with the notion put forward by some interveners that data caps are being used as a pricing tool rather than for network management purposes. Although, we submit that in competitive markets, even if certain ISPs did use data caps as pricing tools, pricing of services and setting parameters for those services in competitive markets does not necessarily mean that the practice is inappropriate, since one would expect it to reflect a business response to competitive markets or a business need. ISPs are motivated to retain and expand their customer bases and so any pricing and service offers must reflect a careful balance between what a customer is willing to pay and the need to maximize profit in order to sustain, and grow the business.

2

3. It is important to recognize that internet capacity is not unlimited – major investments into networks, and ongoing augmentations must be performed in order to provide high quality, high speed services to consumers. In Eastlink’s case included usage is necessary to manage our networks due to the increased bandwidth consumption by consumers. In fact, managing data by establishing service parameters such as included usage will become increasingly relevant or necessary in the future as user behaviour and high capacity applications continues to increase. Data usage has been increasing exponentially year over year, requiring ISPs like Eastlink to make annual network investments to respond to capacity increases of 40-60%. For instance, based on our network usage reports, the average usage of our customers today is 40 times the average usage in 2004. This trend is expected to continue.

4. Canada’s broadband success in providing some of the highest quality and fastest broadband services in the world, notwithstanding the vast size of our country, is indicative that the existing regime and market forces are working well. But in order to remain successful and to ensure that networks can continue to respond and expand to keep up with increasing capacity demands, ISPs need to be able to recover network costs and make some profit to re-invest into our networks. This will not happen if service providers are prevented from managing their networks and pricing their services accordingly. The fact that most Canadian markets are already very competitive highlights that ISPs will do everything they can to provide high quality service, win the customer, keep the customer and gain new customers every day.

5. As Eastlink stated during the hearing, our approach to data caps in our fixed wireless Rural Connect serving areas, an area limited in terms of available network capacity, is to sell our 1.5Mbps service with 15GB of included usage. The 15GB was established based on a number of factors including a recognition that the intended purpose of this service in 2007 when we began to build the network was web browsing, emails, banking etc. – not high definition video usage; and it was critical that we try to manage the extreme users on our network who were impairing the internet experience of most of our other subscribers. As noted during the hearing, Eastlink has some customers on our 1.5Mbps service using over 300GB of data per month in capacity (in fact, we even had customers using up to a terabyte); these customers are, in effect, streaming a minimum of 25 hours of high definition content per week and that is simply not sustainable for this type of service. However, even in this serving area, where there may only be one other provider to some households, (certainly not what we would describe as a competitive area), Eastlink attempted to establish a reasonable pricing approach. The base price for our internet service in this area ($46.95) has not changed since it was first offered in 2008; for customers who use more than the included 15GB data, they pay $2 for each additional gigabit over the 15GB to a maximum of $20 in additional charges (thus, providing 25GB+ for $62.95). Thereafter no additional charges are imposed. We have made our policies known to our customers by providing notice, and including details of the pricing and included usage online; we also have a clear Acceptable Usage Policy for our Rural Connect Service which describes how we attempt to manage excessive usage.

3

6. In our higher speed fixed wireline serving areas, where we offer speeds of 50Mbps, 100Mbps and other tiers up to 940Mbps, these services also generally include a set amount of usage for the service price. The amount of included usage for these services is very generous (in the range of 150GB to 400GB) such that customers who use our services typically fall within the included usage. The very fact that we include high data usage for these services shows that the usage policy is not intended to be a tool to charge more to our customers – rather, it is intended to manage expectations and usage of the service for the small percentage of customers who may use a disproportionate share of bandwidth. While our robust networks may be able to sustain the excessive usage of a small percentage of customers today, if we do not begin to consider methods of managing excessive usage, we may face increased challenges managing our networks in the future. Specifying an amount of include usage in the service offer is a common practice among a number of ISPs and as consumers begin to use more capacity, it may become increasingly necessary for other service providers to do the same.

7. Managing usage will become increasingly important as consumer behaviour switches from purchasing both internet and TV services, to purchasing only internet or downgrading TV service with the intent to stream more video content online. It is this online streaming replacing traditional TV services which results in the extensive bandwidth consumption. This is evidenced by the usage statistics we have observed which illustrates that customers in bundles are typically using well below their included usage; whereas usage is significantly higher for customers taking only internet service.

Including caps and/or charging for higher usage beyond included usage merely reflects a practice of a customer paying more when they use a service more – this is a reasonable model for most products and services such as water, gasoline, groceries or power. Given the importance of ISPs being able to maintain and invest in their networks and the relevance to high quality internet service for Canadians, business flexibility in this regard is critical.

8. As Eastlink stated during the hearing, for ISPs like us who invest 100% of our profits back into our business, being able to sell customers 2 or 3 services has been a core factor in our decisions to make investments into the hundreds of rural communities where we provide high quality service. Some of these investments were only made within the past few years, and some are ongoing. In some cases, customers who have downgraded their TV and/or telephone service and only subscribe to internet, assume that the use of one product to replace three services should not result in a higher cost.

This increased reliance on internet service will result in higher network costs for internet services, and reduced revenues from other lines of business. This new reality will need to be reflected in the pricing and data policies employed by these providers.

9. Minimum data caps. The issue of whether a minimum cap should be established was raised numerous times throughout this proceeding. Eastlink’s position is that the Commission should not regulate data caps for ISPs, as they require the flexibility to manage their business as they deem necessary; if their services are not attractive to consumers (due to quality of service or price), consumers will choose other 4

providers. However, should the Commission decide that in certain cases data caps may be warranted, our position is as follows:

 In competitive areas, data caps should not be regulated at all; to do so would deter innovation, investment and impair the ability of ISPs to manage their networks to innovate and respond to consumer and competitive demand.

 In non-competitive areas, where there may only be one service provider, the Commission should not impose specific regulation by establishing minimum caps or pricing; in such areas, where only one provider exists, it is likely reflective of higher costs to serve, lower population and other characteristics that make establishing a set of rules to apply to all such providers a risky move.

Mandating a minimum data usage on an existing ISP may not be possible given the limitations of that ISP’s network and its unique characteristics. The evidence at the hearing showed that service providers in rural, remote or hard to serve areas may experience different sets of challenges, such that the same rules may not work for all. Instead, the Commission could rely on policy objectives of the Telecommunications Act which require a balanced consideration of all objectives, and then rely on s.27 of the Act to address concerns brought to it on a case-by-case basis. As an example, Eastlink refers to our experience in the Rural Connect serving areas. In our case, a mandated minimum obligation to include data usage at a higher level than currently provided would severely strain our network such that we would have to make other decisions about how to manage it, which may include terminating service for a number of subscribers in order to meet the minimums, or simply providing a much lower quality service to all thereby increasing consumer frustration with the service (or lack of it). In our case, our practices have been established out of a necessity to try to manage our network.

 In unserved or underserved areas, where market forces are not sufficient to encourage investment, and where subsidy models or other funding regimes become necessary to encourage such investment, establishing parameters for the service, including whether a minimum data allowance be included, may be reasonable – provided that would-be ISPs are willing to build based on those conditions. This would become part of the negotiated solution whereby a service provider chooses to offer the service in response to an RFP process and commits to meeting the basic service requirements established through such process.

 As to what a minimum data cap would be – again, noting we do not endorse any regulation of data allowances, other than in exchange for funding under a subsidized regime, Eastlink submits that the minimum should include no more than what a reasonable data usage would be for basic service. In Eastlink’s experience, our Rural Connect included usage was set at 15GB for this purpose, noting that uses falling within the Commission’s Exhibit 1 would, based on our analysis, be up to 12GB per month and we allowed for an additional 3GB of 5

usage beyond that. In fact, even at present day, with so many consumers streaming video on the Rural Connect service almost half of these customers used less than the 15GB per month (the average being about 5.6GB per month) and most of the customers used less than 20GB (noting those who went over would likely have been using the additional capacity for video streaming and gaming). Given technology limitations and other characteristics (number of customers etc.) that may exist in unserved or underserved areas, Eastlink submits in light of this actual example, a minimum included usage should not exceed 20GB per month for a wireline service (noting again that some wireless technologies or other technologies may have challenges in even including 20GB). Again, we do not endorse establishing minimum usage in competitive areas or in areas currently underserved by limited technologies.

Internet pricing – the Commission should not mandate a “skinny internet” 10. Over the course of the three week hearing, it became clear that while there is a poverty issue in our country faced by a number of Canadians’ who have difficulty paying for even basic needs, those issues are the primary responsibility of our governments – local, municipal and federal, as those entities are better equipped for addressing the special needs and concerns of these Canadians. The issue of where affordability of internet service fits within this broader poverty issue will need to be considered. This could occur in a broader review to take place among the various stakeholders – governments, band councils, consumer and social welfare groups and industry, as part of the National Broadband Strategy, which we discuss later in this submission.

11. Pricing. With poverty issues being addressed as a separate and important issue, Eastlink submits that pricing of internet services must also be approached in the same manner as we submit data usage be approached. That is, most of the markets in Canada, some 96% of them, are competitive. In competitive markets, there is no need, and in fact it would be unwise, to regulate the price of internet. The market will take care of this. Eastlink noted various comments made throughout the hearing regarding the price of internet service, as well as suggestions that the price point for internet was perhaps high. We strongly disagree with this assumption, particularly given the increasing trend by consumers of reducing their two or three communications services to one, while using the one internet service for all communications functions.

12. As noted above, networks are built based on a need to recover investment plus a reasonable profit in order to maintain them, improve service quality and to continue to expand them year over year to handle the 40-60% internet capacity increases being experienced. Although consumers are increasingly downgrading to one service, the reality is those investments still need to be recovered if we are to remain in the markets, expand and sustain our business. When customers expect to drop their services but receive the same functionality through one service, service providers must also be entitled to recover from that increased usage.

6

13. Service providers need to justify their investment and sustain their business by charging appropriately for the services they sell, as consumers downgrade the services but use the network more. Eastlink disputes any suggestion that price is high relative to the prices that consumers pay for all kinds of other services today, and even in light of the pricing that we charged for our own communications services when we began offering them in 1999. For instance, when we first launched internet service in 1999 we offered a 5Mps broadband service at $42.95 and our competitor offered a 1.5Mbps DSL service for the same price. Today, we offer a 50Mbps standalone internet service at about $80.001. Our direct competitor offers a 7Mbps DSL service at a similar price.

When one considers the investments made to our network since then, and that average usage in 2016 is over 40 times greater than it was when we launched the service, the stand-alone price point is more than reasonable. And, as noted previously, bundling multiple services is a core element to being able to invest in our networks and as such we offer incentives for our customers to bundle. A comparison of our bundled rate in the year 2000 compared to two of our most popular plans in 2016 illustrates that pricing today is actually quite attractive now in 2016, given the major network advancements, along with the number and quality of TV services, internet speeds and capacity available to consumers:

2000 2016
Bundle
price
$99.95 Starter: $99.95 - 3 month promotion;
thereafter $139.95
Essentials: $109.95 - 3 month promotion;
thereafter $159.95

TV Full tier TV service Starter - Entry level basic TV – 30 channels HD included

Essentials - 135+ channels HD,On
Demand, and HD DVR included

Phone Full featured home phone Full featured home phone Internet 5Mbps internet service 50Mbps internet and Wifi for all devices 14. When one compares the price charged for bundled services in 2000 compared to a bundles today, 16 years later, the customer is getting far more today for a rate which is very reasonable compared to that charged in 2000. Eastlink acknowledges that consumers will often, when asked, agree they prefer to pay less than they are – this is true of most things, including food, shelter, clothing, entertainment, gasoline and communications services. But the simple fact is that pricing today for communications services is quite reasonable and when one considers the value that communications services now bring to consumers – they are doing far more in terms of managing their finances, research, study, work, socializing, communicating and entertainment, than these services would have been used for in the late 1990s or early 2000s. Our bundles are offered at generous discounts and customers taking bundles get the value of more services in the bundle at the discounted price.

1 This price varies between $79 – $82 in our various serving areas.

7

Mandating a standalone lower speed minimum service is not advisable.

15. Eastlink submits that mandating that ISPs offer a lower speed service (such as a 5-10 Mbps service) at an entry level rate is not appropriate or warranted, given the business consequences of such a requirement. Reducing revenues on standalone internet, in an environment where more and more consumers are moving from multiple services to standalone internet will force us to accept less revenue for one service, while the users of that service will likely consume much more data than those taking our multiple services. During the hearing a number of interveners also commented that those who have no affordability concerns may choose to take the basic internet service when they would otherwise choose internet at current market rates, creating an artificial subsidy from ISPs and an unsustainable business model.

A holistic approach to communications policy is important 16. When the Commission establishes a telecommunications policy, it is acting on the Telecom side of the business, but the Commission’s overriding responsibility to the entire industry pursuant to all applicable legislation means it cannot ignore the impacts to the communication system as a whole when issuing decisions. Enabling communications companies in competitive markets to encourage subscription to TV services via traditional TV, by offering bundling discounts and by charging more for standalone service (noting that on a standalone basis it may justify a higher price to recover investment) also encourages and sustains the competitiveness of the broadcasting system. Historically, the Commission has been very concerned with ensuring BDUs and the broadcasters encourage Canadians to stay within the traditional broadcasting system. While we note that there is a migration of some customers to OTT viewing of content, the traditional system is still extremely important to Canadians and competition within that system, at least in near term, remains important. A regulatory regime that would force communications companies to encourage churn out of their other services, by mandating a low priced internet that will replace multiple services while not enabling the service provider to recover proper investment and profits to build the business will be detrimental to the competitive success we have achieved to date on both the internet/ telecom side of the industry and the broadcasting side.

Obligation to serve – internet build outs should not be mandated 17. On May 5, 2016 Eastlink filed a joint submission with Rogers, Québecor and Cogeco, regarding the Commission’s legal jurisdiction regarding a number of issues including whether the Commission has jurisdiction to mandate the provision of broadband internet access at minimum speeds in underserved or unserved areas and its authority to set a price ceiling for an entry level broadband internet package.

18. Eastlink submits that regardless of whether the Commission has the legal authority to mandate build-outs, we do not support a Commission-mandated directive that would force service providers to build out services or extend services to areas 8

where they are currently underserved or unserved. If there is a business case to build out, someone will either have already done so or it will likely occur in the near future.

The few remaining gaps in service coverage (whether unserved or underserved) in Canada exist because the business case does not exist. Mandating build-outs would either result in a service provider withdrawing its service, resulting in a greater number of consumers without access, or being forced to provide its services at a higher cost with no ability to recover its investment – eventually facing either a failed business (and again, all consumers losing out), or unreasonable price increases for all subscribers served by that company – again likely resulting in further subscriber losses and/or business failure. Moreover, there are a number of other challenges with mandating build-outs including determining who is mandated to build, particularly given that there are no internet incumbents.

19. It is for this reason, that Eastlink, along with most of the other interveners in this proceeding, have supported a model for broadband expansion and upgrades that is based on an auction approach – whereby service providers can bid on the opportunity to build in certain areas and in exchange for the funding they may accept a commitment to provide the service to the area on specific terms and conditions.

Quality of Service Standards (QoS)

20. Eastlink submits there is sufficient evidence before the Commission arising from this proceeding to support that there is neither a need nor a benefit from mandating QoS standards for the provision of internet service in areas where internet service is competitive. The recent publication of the SamKnows study illustrates that the vast majority of Canadians are well served by high quality, robust internet networks. In keeping with the Policy Direction there is no need to regulate where a problem does not exist.

21. In areas that are currently underserved, mandating QoS standard would likewise be problematic, since the service is likely already limited by the technology and the other characteristics of the area. Mandating service standards in such areas may result in imposing higher costs and burdens on a provider which are simply not possible to meet without significant investments.

22. The only area where QoS standards could be considered is in underserved or unserved target areas where subsidies will be provided to service providers in exchange for their commitment to build-out broadband. In those areas, the parameters established for providing funding could include some commitments toward QoS.

Again, the specific characteristics of such QoS would need to be determined depending on the solution to be identified and as such, providing an arbitrary set of criteria for all communities may not be appropriate since some technologies may already be limited in the standards that could be achieved. A determination of appropriate QoS could be made on a case-by-case basis based on the technology chosen or other factors when the RFP is established for each area.

9
National Broadband Strategy

23. The Commission has also sought views on a National Broadband Strategy, which we address herein. At the same time, ISED has also begun a process for determining the framework for allocating $500 Million in broadband infrastructure funding which was recently announced by the Federal Government. If this assessment occurs separate from and in advance of the development of a National Broadband Strategy, then in keeping with the objective of efficient processes, it would make sense to await the outcome of that strategy to ensure there is no duplication of efforts. Our comments below regarding how a National Broadband Strategy would be implemented is subject to our submission that no duplication of efforts should occur and if ISED’s review relating to the $500M of funding occurs first, it may avoid the need for a lengthy or detailed National Broadband Strategy or it may result in a modification to such a strategy.

24. Participants to National Broadband Strategy. A successful strategy would include input from various parties. As to the role that governments, band councils, the Commission, ISED, industry and consumer groups and other associations play, it makes sense that the nature of involvement be relevant to each party’s expertise. Participants can target their knowledge and resources to the issues they know best resulting in a more efficient process and the likelihood of a better outcome. The Commission’s expertise lies in its regulation and oversight over the communications industry, analysis and reporting, management of telecom subsidy regimes and analysis of communications implementation and competition issues associated with communications. Governments at all levels have a role to play in relation to broadband rollout and the provision of sustainable services for Canadians – evidence indicates that various levels of government have contributed funding toward broadband programs at various times and so they have taken on responsibility in terms of funding (as illustrated by ISED’s Connecting Canadians Program and the Federal Government’s announcement of $500M over 5 years toward broadband infrastructure, as well as $225M over 2 years to the First Nations Infrastructure Fund). In relation to the funding and broadband expansion, all levels of government are able to contribute knowledge and expertise.

25. Governments also play an essential role and responsibility in terms of social welfare policies, affordability and digital literacy. A National Broadband Strategy will consider various issues including transportation and infrastructure (i.e. broadband rollout), education (in relation to digital literacy issues) and poverty (in terms of ability to purchase broadband services. In this regard various levels of government would be looked upon for their expertise to help define the issues, prioritize them and consider the types of solutions that may address some of these issues. The communications industry has significant expertise in building high quality robust networks, providing services, and operating our businesses. Industry’s contribution to the strategy would be appropriately focused on offering expertise on opportunities that exist for developing or upgrading internet service to the remaining areas in Canada where it is needed, providing information and insight into programs that worked and those that did not, and implementing the build-outs to provide service once a plan is established. We also play an important role in bringing competition to Canadian communities, which encourages 10

innovation, investment and which plays an important role in making Canada successful in bringing broadband connectivity to Canadians.

26. While our submission is not intended to oversimplify the process, (as we recognize such a process will involve significant time, coordination and effort) we provide as Attachment A to this submission, a proposal as to how a National Broadband Strategy could be developed and we also offer comments on work that can be undertaken immediately in parallel to the development of the Strategy.

Subsidy regime

27. As Eastlink stated during the hearing, an industry-funded subsidy regime for broadband expansion should be the last resort, considered only for those few remaining areas where private market and/or government programs will not fill the service gaps. In such case, we generally agree that an auction process is appropriate, however we do not agree that the lowest cost bidder should necessarily be the selected candidate in all cases. While any industry-based subsidy regime should have as an objective keeping subsidies to a minimum and short term over long term reliance on them, we also submit that sustainable solutions should, where feasible, be selected in favour of short term solutions. Eastlink believes the Canadians will only be disappointed if the solution cannot be sustained long-term. The National Broadband Strategy process will need to consider how to prioritize those remaining target areas where a solution could involve multiple options, some which may cost a little more upfront, but may prove to rely less on subsidies long-term.

28. Eastlink notes that there are a number of proposals put before the Commission regarding how to subsidize broadband, including creating an additional fund for broadband, using existing wireline telephony subsidies to fund broadband, and terminating voice subsidies in band E and F and directing the subsides to fund broadband in bands G and H. Eastlink submits that the right solution cannot be determined arbitrarily without further assessment, while noting that we do not necessarily think this requires a long, detailed process.

29. Simply put, the objective is to ensure that Canadians have access to a basic broadband service and basic voice service (whether via traditional technology or otherwise). In areas where basic broadband service can also provide functionality for a traditional voice service (e.g. through a VOIP or otherwise), then it may make sense to transition away from the provision of voice subsidies in those areas. Each area already served by basic broadband should be carefully assessed to ensure that the residents in those areas are generally able to transition to a broadband based voice service and that the quality and access to it is reasonable. A review of existing communities currently receiving contribution subsidies for basic wireline telephone service should be undertaken to assess the presence of competitive options and other replacement services to traditional subsidized voice. A show cause hearing or other proceeding could then be undertaken for incumbents currently receiving subsidies in those areas to comment on 11

the impact of losing their subsidies. While some incumbents may receive subsidies where other alternatives exist, it is still worth considering the impact to those incumbents’ wireline or other business should they lose such subsidies.

30. Eastlink submits that we do not necessarily accept Bell’s view that only bands G and H be subsidized for broadband. As these bands were established with regard to the availability of voice services, and not broadband, they may fail to consider gaps in broadband coverage in communities and small areas throughout Canada that do not fall within bands G or H but which are completely lacking in broadband access, or where no service provider has been able to justify a business case to build. Again, our proposal in Attachment A would result in a list of all target areas (regardless of band) where broadband investment would ideally occur, and that should be the guide to where subsidies may be necessary.

31. Finally, Eastlink strongly disagrees with the proposal put forward by certain parties, such as Teksavvy that the threshold for ISPs to pay into a subsidy regime for broadband should be $10 million but that the amount of contribution should only apply to that amount of revenue exceeding the first $10 Million. This would be inappropriate and would simply result in a longer delay for making those ISPs who would otherwise be responsible to pay the subsidy. Eastlink at one time fell below the $10M threshold and when we did finally meet the threshold we did not get such a payment holiday. It would be unfair to give such a holiday to other ISPs now.

Summary

32. Eastlink understands that the issues before the Commission in this proceeding are broad and that resolving some of these issues will take time, work and efforts by various parties. However, we should be proud of Canada’s current state of broadband availability, quality and competition; in an effort to address those remaining gaps in the hard to reach areas of our country, it will be important not to intervene by regulating markets where success has been achieved.

33. It is important to ensure ISPs have the flexibility to establish service parameters and pricing in competitive markets so that we can continue to compete and to invest in our networks. In this regard, we do not support any regulation over data caps or the establishment of minimum data thresholds or pricing. For similar reasons, there is no need to mandate QoS criteria or a basic internet service. When one considers the significant increased bandwidth usage by consumers, which is taking the place of multiple communications services, the pricing for internet services is not unreasonable – particularly as consumers use the service for more applications and drop other services it is only logical that costs for one service will increase if the usage of networks is increasing.

34. As to a National Broadband Strategy, we offer a proposal that we submit would serve as a starting point to develop a strategy as well as offering our views on the 12

objectives of such a strategy. Our proposal focuses on the objective of filling the broadband gaps remaining in Canada, while doing so efficiently and in such a manner as to rely on subsidies to the minimum extent possible while providing, where possible, sustainable solutions. We do not, however, believe that engaging in long, detailed reviews or establishing such a strategy in parallel to other frameworks which may already be underway by other government bodies. For instance, to the extent that ISED is already assessing such a framework for allocation of the Federal Government’s $500M toward broadband deployment, we submit that a National Broadband Strategy should first consider the outcome of that project.

35. We reserve the right to provide our reply comments after reviewing other final submissions in this proceeding.

Respectfully Submitted,
**** MacDonald
Vice President, Regulatory
Eastlink
[Attachment A follows]
13
Attachment A
Proposed approach to National Broadband Strategy

(This proposal is subject to our submission that no duplication of efforts should occur and if ISED’s review relating to the $500M of funding occurs first, it may avoid the need for a lengthy or detailed National Broadband Strategy, or it may result in a modification to such a strategy.)

Core areas of focus

1. As the Commission noted during the proceeding, a National Broadband Strategy should likely consider the following key issues associated with the availability and adoption of broadband services in Canada: (a) filling the remaining broadband coverage gaps - broadband buildout/expansion to provide basic broadband service to the remaining 4% of Canada that is currently unserved or underserved; (b) poverty issues –the impact of poverty on access to broadband; this will involve consideration of government and other social welfare programs and assessing where broadband fits in relation to basic needs such as food, shelter, power, etc. and responsibility to provide opportunities for access to Canadians living in poverty; and (c) digital literacy issues – which involves analysis and consideration of whether digital literacy issues contributes to the reduced adoption of broadband by Canadians.

Responsibility for the three core areas

2. As Eastlink noted in our submission, a successful strategy involves parties contributing to the issues about which they have relevant knowledge and expertise. For instance, those levels of governments responsible for social welfare and support and programs/funding are the most appropriate to assess issues relating to poverty and the availability of programs for supporting broadband service (or whether their programs need review to re-prioritize such issues). The provinces are responsible for education and as such the issues of digital literacy, availability of programs and success of those programs is within their area of expertise – this also may be coordinated with consumer groups focused on similar issues. Industry has expertise in building and operating high quality networks and assessing the technical issues/challenges associated with serving the remaining broadband gaps in Canada.

3. For the purpose of this submission, given that we as industry members have the expertise in building networks, we offer input on that aspect of establishing a national policy intended to fill the remaining broadband coverage gaps in Canada. We submit that filling coverage gaps should be the first objective; while issues of poverty and digital literacy are also important, they can be assessed in parallel or while the broadband gaps are being targeted. As such, our proposal below focuses on how a strategy could be developed to fill the broadband gaps to underserved and unserved communities.

Filling the broadband coverage gaps – CORE OBJECTIVES 4. Eastlink submits that the following are the core objectives of the broadband strategy associated with filling the broadband coverage gaps in Canada:

14

(a) Build out broadband service to unserved and underserved communities in Canada;

(b) Rely on market forces and private/government partnerships to greatest extent possible, industry subsidies used only as last resort.

(c) Where possible, choose a solution that:

(i) **** be sustainable long term (technology can expand as capacity/needs increase);

(ii) Prefers one-time funding over ongoing reliance on subsidy (i.e. market forces can operate and invest once appropriate support for upgrade is provided);

(iii) Results in minimum reliance on subsidies.

5. Establishing priorities for build-outs. In our view, only where a sustainable solution is too costly compared to a short term gap-fill should the latter be chosen (the National Broadband Strategy process could establish how this objective is assessed). In fact, during the process, a number of issues will need to be determined in order to establish a plan for building out target areas and how to prioritize them. Issues to be considered include, but are not limited to: whether to focus on unserved before underserved areas; areas that are easier or faster to build out over the more complicated ones; areas with higher populations first; areas where the specific technology solution is already defined (i.e. target those where only one solution will work while assessing those with multiple solutions) or areas where a more sustainable solution could be built before those where the solution may only be short term (thereby directing funding to the sustainable solutions first).

6. Filling the broadband coverage gaps involves multiple steps, and we offer an approach below, noting that at the implementation stage, determinations about how to prioritize target areas for the build-outs, as noted above, will need to be made:

Step A: IDENTIFY TARGET AREAS
1. CRTC:
 CRTC to identify potentially
unserved & underserved
communities;
 This will involve updating
maps and publishing a list of
communities that industry
can review and provide
feedback on;
2. Service Providers:
 Review CRTC lists and
provide feedback on areas
already served;
 Identify areas planned for
builds and/or upgrades,
including where builds
and/or upgrades are
planned via gov’t funding or
other private or public
funding arrangements;
3. CRTC:
 Finalize list of unserved and
underserved communities
after removing all areas
where builds are planned
per #2;
15
Step B: PROFILE TARGET AREAS
1. Profile target areas:
 This includes gathering
statistics on number of
homes, population,
population density, service
providers already present &
services offered, facilities
present, services in adjacent
communities and distance
from target area;
 Profiling target areas will
help determine where they
fit in the priorities which will
need to be established for
build-outs
2. Categorize target areas:
 Separate communities into
those where only one
solution is available to
provide broadband (e.g.
satellite) and those where
multiple solutions may be
possible;
3.1 Areas with one solution:
 Establish parameters (i.e.
speed, QoS, etc) for single
solution service – this will
form basis of RFP for
auction;
3.2 Areas with multiple
solutions:
 Rely on the priorities
established by National
Broadband Strategy (as per
paragraph 5 above) to
assess preferred solution at
most reasonable cost per
above objectives;
 Parameters for service to be
established based on the
preferred solution.
Step C: IMPLEMENTATION - BUILD OUT OF TARGET AREAS
1. Establish Auction
process:
 Establish the auction
process, include process for
RFP and bids, selection
committee, scoring, funding
mechanism (combined gov’t
funds and/or subsidy);
2. Finalize list of target
communities for build-outs:
 Re-assess target areas to
ensure no builds planned
before auction process
starts – could be done via a
Commission issued Notice
for comments on whether
any parties have since
decided to build to area;
3. Auction:
 Proceed with auction
process for applicable target
areas
*** End of Document ***