Intervention: TELUS Communications Company

Document Name: 2015-134.224015.2395442.Intervention(1fcc201!).pdf

CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

TELECOM NOTICE OF CONSULTATION CRTC 2015-134
REVIEW OF BASIC TELECOMMUNICATIONS SERVICES
FIRST INTERVENTION OF
TELUS COMMUNICATIONS COMPANY
July 14, 2015
i
TABLE OF CONTENTS

Executive Summary .................................................................................................................... ES1 1.0 Introduction ..........................................................................................................................1 2.0 The Three Policy Pillars for the Review of Basic Telecommunications Services – the Telecommunications Act Policy Objectives, the Policy Direction and the TELUS Public Policy Principles ..................................................................................................................4 2.1 Telecommunications Act Policy Objectives ........................................................................ 5 2.2 Policy Direction to the CRTC ............................................................................................. 7 2.3 TELUS Public Policy Principles ......................................................................................... 8 3.0 Basic Telecommunications Services: Definition and Proposed Services .........................10 3.1 No Definition of Basic Telecommunications Services in the Telecommunications Act .. 10 3.2 Application of the TELUS Public Policy Principles to Define a Basic Telecommunications Service ............................................................................................ 10 3.2.1 Principle 1. Basic Telecommunications Service (BTS) Definition .......................... 11 3.2.2 The specific technological platform for supplying a BTS is immaterial .................. 15 3.3 Basic Services: Voice Telephony .................................................................................... 15 3.4 Basic Internet Services: Broadband Internet.................................................................... 19 4.0 Availability, Affordability, Adoption: An Assessment of Basic Telecommunications Services and TELUS Recommendations ...........................................................................28 4.1 Summary of Findings in Dr. **** W. ****’s Expert Report .................................. 28 4.1.1 Canada has a high broadband adoption rate compared to other countries ................ 28 4.1.2 Canada requires greater capital and operating costs than other countries ................ 30 4.1.3 Canadian broadband prices are low to moderate by international standards ............ 31 4.1.4 Canada has strong platform competition .................................................................. 33 4.1.5 High broadband speeds are available in Canada ....................................................... 33 4.1.6 Broadband connection of 5 Mbps is sufficient ......................................................... 34ii

4.1.7 How best to design subsidies .................................................................................... 34 4.2 Availability: An Issue Being Resolved ............................................................................ 34 4.2.1 Voice and voice-related services .............................................................................. 34 4.2.2 Broadband services ................................................................................................... 35 4.2.2.1 What is the current situation? ....................................................................... 35 4.2.2.1.1 The role of market forces ............................................................................ 36 4.2.2.1.2 Increasing satellite availability .................................................................... 37 4.2.2.1.3 Other private sector initiatives .................................................................... 39 4.2.2.2 Is there a problem? ........................................................................................ 40 4.2.2.3 If there is a problem, who should fix it and how? ........................................ 40 4.2.2.3.1 The role of the Federal Government ........................................................... 40 4.2.2.3.1.1 Industry Canada’s Connecting Canadians program ............................. 41 4.2.2.3.1.2 Licensing of wireless spectrum for rural areas..................................... 42 4.2.2.3.2 The role of provincial governments ............................................................ 44 4.2.2.3.3 The role of municipal governments ............................................................ 46 4.2.3 Conclusions regarding availability and TELUS recommendations .......................... 47 4.3 The Scope of the Affordability Problem is Limited ......................................................... 49 4.3.1 Voice and voice-related services .............................................................................. 49 4.3.2 Broadband services ................................................................................................... 49 4.3.2.1 What is the current situation and is there a problem? ................................... 49 4.3.2.1.1 The first type of affordability: higher prices in high cost serving areas (HCSAs) ..................................................................................................................... 50 4.3.2.1.2 The second type of affordability: price as a deterrent to adoption ............. 53 4.3.2.1.3 The third type of affordability: low income users ...................................... 55 4.3.2.2 If there is a problem, who should fix it and how? ........................................ 58iii

4.3.3 Conclusions regarding affordability and TELUS recommendations ........................ 58 4.4 The Need to Increase Adoption ........................................................................................ 59 4.4.1 Voice and voice-related services .............................................................................. 59 4.4.2 Broadband services ................................................................................................... 59 4.4.2.1 What is the current situation? ....................................................................... 59 4.4.2.2 Is there a problem? ........................................................................................ 60 4.4.2.3 If there is a problem, who should fix it and how? ........................................ 62 4.4.2.3.1 Government’s role in addressing broadband adoption ................................ 62 4.4.2.3.2 TELUS’ commitment to encouraging greater broadband adoption ............ 63 4.4.2.4 Conclusions regarding adoption and TELUS recommendations .................. 64 5.0 There Is No Need for Additional Commission Subsidies ..................................................65 5.1 The cost of any potential subsidy should be minimized ................................................... 66 5.1.1 First-best approach: a subsidy funded out of general tax revenues ......................... 67 5.1.2 Second-best approach: a broad-based telecommunications charge ......................... 71 5.2 Conclusions Regarding Subsidies and TELUS Recommendations .................................. 73 6.0 Summary of TELUS Recommendations ...........................................................................74 Basic Telecommunications Services ........................................................................................ 74 Availability, Affordability and Adoption of Basic Telecommunications Services .................. 75 Subsidies ................................................................................................................................... 76 Appendices

Appendix A – Expert Report of Dr. **** W. **** entitled “The Performance of the Canadian Telecom Sector: A Policy Perspective.” Appendix B – Basic Telecommunications Services (BTS) Flowchart Appendix C - TELUS’ responses to the “Questions for discussion in this proceeding” listed in Appendix B to the Notice.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES1
Executive Summary

E1. Almost uniquely in the world, Canadians benefit from access to multiple, high quality, advanced networks (LTE and HSPA wireless, copper and fibre, cable and satellite) and high levels of investment, at affordable rates.

E2. With respect to voice services, wireline and wireless networks reach over 99% of Canadians.

E3. With respect to broadband, 94% of Canadian households have access to at least 5 Mbps download speeds over all technologies, 91% over terrestrial broadband and 81% over the mobile broadband network, all at affordable rates. Canadian adoption per household is among the highest in the world, exceeded in only 7 other developed countries, despite Canada’s very low population density and resulting higher costs of deployment. By 2017, all, or almost all, households will achieve the 5/1 Mbps target speed given current private section investment and government programs.

E4. This is a remarkable achievement given the challenges of building networks in a vast, sparsely populated country. This plurality of high quality, competing networks, reaching almost all Canadians, is the direct result of Commission and Federal Government policies that have encouraged robust facilities-based competition. Canadians are well served by the existing Commission and Government frameworks. As a result, only focused changes are necessary to ensure that Canadians continue to have access to affordable, world-class telecommunications services that enable them to participate meaningfully in the digital economy. These changes, and the Commission’s role in implementing them, are explained below.

E5. In this proceeding the Commission will examine the following key questions:

 What are the telecommunications services that Canadians require to participate meaningfully in the digital economy;

 What are the respective roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal), including the TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES2

Commission, in ensuring the availability of modern telecommunications services to all Canadians;

 What changes, if any, are required to the Commission’s existing rules, including the obligation to serve and the basic service objective; and  What new funding mechanism, if any, is required to support the provision of modern telecommunications services necessary for Canadians to participate meaningfully in the digital economy.

E6. The threshold question in this proceeding concerns the definition of a “basic telecommunications service” (“BTS”) in today’s digital economy. Having answered this question,

 the Commission must determine the specific services that should be considered a BTS necessary for Canadians to participate meaningfully in the digital economy;

and

 the Commission must also determine what actions must be taken, if any, and by whom, if these services are not available to all Canadians, on an affordable basis.

E7. The Commission should examine basic telecommunications services using three policy pillars: the Telecommunications Act, the Policy Direction, and a framework of seven public policy principles developed by TELUS. Based on the law, economics and relevant academic literature, TELUS has developed its framework of seven public policy principles to assist the Commission in meeting the terms of the Telecommunications Act and the Policy Direction. TELUS uses these three pillars to examine the issues of availability, affordability and adoption of basic voice and broadband services and to suggest, should any subsidies be required, how they can be minimized and efficiently funded.

What **** TELUS Recommend as a BTS?

E8. TELUS has assessed existing telecommunications services in light of the policy objectives in the Telecommunications Act, the requirements of the Policy Direction, and a framework of seven public policy principles. On the basis of this analysis, the following are BTS:

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES3

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;

 Accessibility-related services for persons with disabilities; and  Access to broadband service at the 5/1 Mbps target speed.

The Government of Canada Has Established 5 Mbps as the Target Download **** for Broadband Service

E9. The Government of Canada has determined that broadband at the 5 Mbps target speed is sufficient to participate in the digital economy. Moreover, Industry Canada’s Connecting Canadian’s program has adopted the same standard. The UK has also endorsed the 5 Mbps standard.

The Commission Must Take Into Account the Realities of Today’s Canadian Telecommunications Services Environment

E10. Today’s Canadian telecommunications services environment is markedly different than that which prevailed when the Commission initially developed policies aimed at ensuring the broad availability of affordable telephone service.

E11. Prior policies were imposed in an environment of monopoly supply of telephone service, and these polices were implemented by means of obligations borne exclusively by incumbent telephone companies providing service over copper lines.

E12. Communications services are now offered over a plurality of ubiquitous, overlapping communications platforms: cable, satellite, telephone company networks, multiple national and regional wireless providers, amongst others.

E13. The Commission’s basic service protections apply to only a minority of these networks and only to incumbent telephone companies. But more Canadians obtain their broadband services from cable companies than from incumbent telephone companies. About 40% TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES4

of Canadians now obtain their residential telephone service from a provider other than the telephone company. Wireless access lines significantly outnumber wireline access lines in Canada.

E14. The Commission’s basic services framework does not yet recognize this sea change in the marketplace and extends only to Canadians that obtain service from an incumbent telephone company offering primary exchange service.

E15. If these services are truly vital for participation in today’s digital economy, then rules concerning the definition of a BTS should be applied symmetrically across providers and platforms so that Canadians are protected regardless of their choice of platform or service provider.

E16. Yesterday’s rules must evolve if they are to protect Canadians in the multi-platform, competitive world of today’s digital telecommunications marketplace.

The Commission Must Take Into Account Canada’s Comparative International Broadband Performance

E17. TELUS has asked Dr. **** W. **** of the Brookings Institution to review Canada’s broadband performance on a comparative international basis and to make recommendations regarding the questions raised in this proceeding.

E18. Dr. **** draws the following conclusions:

 Canada’s broadband adoption is high compared to other countries.

 Canada’s broadband prices are low to moderate on an international comparison basis.

 Canada has strong platform competition and high capital spending on telecommunications infrastructure.

 A 5 Mbps download speed is adequate for Canadians to participate in the digital economy.

 Any required subsidy is best funded out of general tax revenues.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES5
Availability of BTS
What is the current situation?

E19. Voice services provided by landline or by wireless are available to 99% of the population.

E20. Broadband speeds well in excess of the Commission’s 5/1 Mbps target speed, provided on multiple platforms, are available to the vast majority of Canadians.

E21. Broadband service meeting the 5/1 Mbps target speed will be available to all, or almost all, Canadians by 2017.

 This is being accomplished by a combination of private initiatives and federal, provincial and municipal programs.

Is there a problem?

E22. Some ancillary voice services such as privacy, accessibility and emergency services, may not be available to all basic voice customers, although they are ubiquitously available to TELUS customers. This is a question of fact for the Commission to determine.

E23. It is possible that there may still be pockets of Canadians without broadband service meeting the 5/1 Mbps target speed in 2017.

If there is a problem, who should fix it and how?

E24. The Commission should ensure that ancillary voice services such as privacy, accessibility and emergency services, are available to all basic voice customers, across all platforms and providers on a symmetrical basis.

E25. If pockets of unserved or underserved areas for broadband remain in 2017, the Commission should develop a targeted plan to serve those areas or make recommendations to the Minister of Industry and other federal departments that would see further rounds of funding along the Connecting Canadians model.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES6

E26. The Commission should undertake monitoring activities to track the availability of ancillary voice and broadband services. Enhanced monitoring will inform, focus and direct subsequent Commission and broader government actions.

Affordability of BTS
What is the current situation?

E27. Prices for basic voice and ancillary services are affordable.

E28. Basic voice services are either provided at regulated (“just and reasonable”) rates, or subject to a Primary Exchange Service (“PES”) price ceiling, or on a forborne basis as a result of a Commission finding of competition sufficient to protect the interests of users.

Such rates and prices are presumptively affordable.

E29. Most ancillary voice services are included in the price of basic voice services and therefore are provided at no additional charge to the user.

E30. Prices for broadband service meeting the 5/1 Mbps target speed are affordable.

E31. For most Canadians, broadband prices are set in a competitive market and are presumptively affordable as a result of a Commission finding of competition sufficient to protect the interests of users.

E32. Dr. **** finds that Canadian broadband prices compare favorably on an international basis.

Is there a problem?

E33. Broadband prices in high-cost areas are also affordable.

 Prices in high cost areas may differ from prices in non-high cost areas for some service providers, and the Commission has previously permitted cost-based rates to be higher in high cost areas.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES7

 Prices set in competitive markets are presumptively affordable given the Commission’s finding that competition for broadband services is sufficient to protect the interests of users.

E34. Broadband prices are not a major deterrent to the adoption of broadband.

E35. Low income residential customers may have a problem paying for broadband service, just as they may have a problem paying for all other goods and services.

If there is a problem, who should fix it and how?

E36. To the extent that there may be an income problem, federal and provincial governments are in a better position to address income related issues by means of tax policy and other initiatives.

E37. The Commission has a limited ability to address income problems through price reductions for services it regulates, and such policies, if implemented, are likely to be costly and inefficient.

E38. Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area,  The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues;

and

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all telecommunications services.

Adoption of BTS
What is the current situation?

E39. Commission data show that there is a significant gap between broadband availability and broadband adoption.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES8

E40. In telecommunications markets like Canada and the U.S., with advanced platform competition across cable, wireline, wireless and satellite infrastructures, encouraging adoption represents a major opportunity to generate additional socio-economic benefits.

Is there a problem?

E41. An examination of the issue shows that educational attainment, digital literacy and other demographic considerations are the major factors influencing broadband adoption.

If there is a problem, who should fix it and how?

E42. The Government of Canada’s Digital Canada 150 strategy outlines programs that begin to address the broadband adoption issue.

E43. The Commission can play a constructive and far-reaching role in conducting and coordinating additional research in this area with other agencies addressing this issue.

E44. The Commission should develop a blueprint, based on these undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

Subsidies

E45. There does not appear to be any need for additional Commission initiated subsidies for voice or broadband services.

E46. These services are accessible to all or almost all Canadians at affordable rates. To the extent that there is an income problem for some customers, it is best addressed by other agencies. Public utility rate setting is not the right tool to address systemic income distribution problems. Such challenges need to be addressed more directly by Government.

E47. Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area, TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES9

 The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues;

and

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all telecommunications services.

TELUS Recommendations for Commission Action
E48. TELUS recommends that the Commission:

 Ensure that all voice customers have access to ancillary BTS.

 Continue to monitor broadband availability to support government initiatives by providing, through its monitoring capabilities, the information that can underpin governmental programs.

 Develop a plan to provide broadband service meeting the 5/1 Mbps target speed for any unserved or underserved areas in 2017, which is when a number of ongoing government and private initiatives currently underway will have been completed.

 Maintain a robust commitment to facilities-based competition policies by limiting mandatory unbundling of networks. This will increase network availability and broadband adoption.

 Develop a blueprint, based on its additional undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
1
1.0 Introduction

1. In accordance with section 26 of the Canadian Radio-television and Telecommunications Rules of Practice and Procedure, TELUS Communications Company (“TELUS”) is filing this first Intervention pursuant to paragraph 44 of Review of basic telecommunications services, Telecom Notice of Consultation CRTC 2015-134, dated **** 9, 2015, as amended by Telecom Notice of Consultation CRTC 2015-134-1, dated **** 3, 2015 (“TNC 2015-134” or “the Notice”).

2. Canadian telecommunications services continue to evolve rapidly. Technological advances and consumer preferences are driving competition to provide the best services possible. Basic voice and some ancillary services are currently considered to be basic telecommunications services (“BTS”) and are subsidized from the National Contribution Fund in high-cost areas. However, in light of rapid technological and social change, the issue of what now constitutes a BTS must be reconsidered.

3. Broadband services are now undeniably basic telecommunications services in today’s digital economy. Besides wireline Internet access which Canadians have long enjoyed, mobile wireless data services play an increasingly important role in meeting Canadians needs for Internet access.

4. TELUS has invested billions of dollars to extend its wireline and wireless networks to provide enhanced broadband services to Canadians. TELUS has also worked in partnership with public agencies and other private organizations to provide broadband services where it has not been economical for TELUS do so on its own. For example, TELUS’ recent broadband-related investments include:

 Extending fibre to the premises (FTTP) to over 50,000 subscribers in Alberta and British Columbia, with plans for extensive further builds including in Edmonton, Alberta.

 Extending TELUS’ world-leading long term evolution (“LTE”) wireless network across Canada.

 Launching 8,000 WiFi hotspots in Alberta and British Columbia.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
2

 Working in partnership with the Government of British Columbia to expand broadband facilities to rural and remote areas where it would not otherwise be economical to do so.

 In Quebec, TELUS participated in both the “Villages branchés du Québec”

1
and “Communautés rurales branchées"
2
programs that have

been established to expand broadband coverage to households in unserved and underserved areas.

5. The Commission’s facilities-based competition policies are working to bring world-class voice and broadband services to the vast majority of Canadians. Private sector investment has resulted in broadband deployment by the cable companies, the incumbent telephone companies, wireless carriers, fixed wireless providers, satellite providers and numerous new FTTP providers. The result is Internet access speeds that in many instances far exceed the Commission’s 5/1 Mbps target speed. Canada must continue to encourage innovation and investment going forward to ensure that Canadian broadband networks remain world-class.

6. Certain gaps remain where there are unserved or underserved areas. Market forces, new technologies and targeted government programs, including the Federal Government’s Connecting Canadians program, are working to rapidly close remaining gaps.

7. The definition of basic broadband service must be carefully considered in this context.

TELUS submits that the Commission’s current aspirational 5 Mbps target speed is sufficient for basic telecommunications service. This speed is consistent with the Federal Government’s target speed for its Connecting Canadians program and is consistent with the findings of other jurisdictions in their reviews of this issue.

1

Le Programme Villages branchés du Québec, Culture et Communications Québec, http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050 , accessed **** 25, 2015.

2

Programme Communautés rurales branchées, Portrait et perspectives, Affaires municipales, Régions et Occupation du territoir Québec, https://www.craaq.qc.ca/documents/files/03_Roberge_Daniel.pdf , accessed **** 25, 2015.

http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050https://www.craaq.qc.ca/documents/files/03_Roberge_Daniel.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
3

8. Besides being widely available, Canadian broadband services are also largely affordable.

As such, the Commission must carefully consider its role in a multi-actor environment where many initiatives are already underway to deal with the core concerns of availability and affordability. A third core concern, that of adoption, is an issue that is also being addressed by initiatives announced in the Digital Canada 150 policy, such as the Business Development Bank of Canada’s support of small and medium sized businesses with digital technology adoption, and Employment and Social Development Canada who administer Canada Job **** program.

9. TELUS’ first Intervention is organized as follows. In Section 2, TELUS reviews the three policy pillars that it submits should guide the Commission in making its decisions in this proceeding. These three policy pillars are the Telecommunications Act policy objectives, the Policy Direction to the CRTC and a set of public policy principles that have been developed by TELUS. In Section 3, TELUS considers what are basic telecommunications services in today’s digital economy. In Section 4, TELUS addresses the issues of availability, affordability and adoption of basic telecommunications services, and the roles of market forces, government programs, and Commission initiatives in addressing these issues. Section 5 explains that no further Commission subsidies are required at this time. Should the Commission determine that an additional subsidy is required, it should be funded from general tax revenues or, failing that, from a broad-based telecommunication charge. Section 6 provides a summary of TELUS’ recommendations on the key issues under consideration in this proceeding.

10. TELUS attaches three appendices to its first Intervention. TELUS has asked Dr. **** W. **** of the Brookings Institution to prepare a report entitled “The Performance of the Canadian Telecom Sector: A Policy Perspective.” This report, which is found in Appendix A, demonstrates that Canada’s broadband service and prices compare favorably on an international basis. TELUS attaches, as Appendix B, a flowchart entitled “Basic Telecommunications Services (BTS) Flowchart” that summarizes TELUS’ proposed integrated approach to addressing the various issues in this case. Appendix C includes TELUS’ responses to the Commission’s “Questions for discussion in this proceeding,” which were attached to the Notice.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
4

2.0 The Three Policy Pillars for the Review of Basic Telecommunications Services – the Telecommunications Act Policy Objectives, the Policy Direction and the TELUS Public Policy Principles 11. The following paragraphs outline TELUS’ proposed framework to assist the Commission in evaluating the issues that are being examined in this proceeding. TELUS has developed its framework of seven public policy principles derived from the law, economics and relevant academic literature to assist the Commission in meeting the terms of the Telecommunications Act and the Policy Direction.

12. In the Notice, the Commission delineates the scope of the BTS proceeding and its role in addressing issues of availability and affordability.

The Commission will examine which telecommunications services Canadians require to participate meaningfully in the digital economy and the Commission’s role in ensuring the availability of affordable basic telecommunications services to all Canadians.

3

13. The Commission has also identified the following issues to be examined.

The Commission hereby initiates a proceeding to conduct a comprehensive review of its policies regarding basic telecommunications services in Canada and of the telecommunications services that Canadians require to participate meaningfully in the digital economy. In this regard, the Commission will examine how these telecommunications services are used by Canadians, and what prices Canadians should be expected to pay for these services.

The Commission will also examine the availability of telecommunications services to determine which areas in Canada are underserved or unserved.

The Commission will consider what its role should be in ensuring the availability of basic telecommunications services, particularly in rural and remote regions of Canada.

4

14. Further, the Commission has indicated that it will consider barriers that limit or prevent Canadians from meaningfully participating in the digital economy, including digital 3

TNC 2015-134, preamble, paragraph 1.
4
Ibid., paragraph 32-33.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
5

literacy, which TELUS considers is an issue relating the adoption of basic telecommunications services.

5

15. In a manner similar to the Commission, the Federal Communications Commission (“FCC”) has initiated a parallel proceeding that addresses the question of what constitutes a basic service in terms of what is required for participation in the modern economy.

6

The FCC has recognized along with the Commission and the Canadian Government that telecommunications is the lifeblood of the modern economy. In recognition of this fact, all citizens must have telecommunications services capable of supporting a basic use of the Internet including access to applications such as e-mail, e-commerce and distance education.

7

As discussed in greater detail in Section 3 of this first Intervention, the determination of what are BTS derives from the use of services that are necessary for meaningful participation in the digital economy.

16. Before describing the TELUS public policy principles that should inform the Commission’s deliberations in this proceeding, TELUS highlights the legal frameworks that describe how the Commission should go about addressing any outstanding issues related to availability, affordability and adoption of BTS. These requirements are primarily articulated in Section 7 of the Telecommunications Act and the Policy Direction to the CRTC.

2.1 Telecommunications Act Policy Objectives

17. In the Notice, the Commission indicates that it will review the matters raised in this proceeding in light of the Canadian telecommunications policy objectives set forth in section 7 of the Telecommunications Act and will take into consideration the Policy Direction.

8
5
Ibid., Appendix B, Question 1 d).
6

Federal Communications Commission, In the Matter of Lifeline and Linkup Reform and Modernization, Second Further Notice of Proposed Rulemaking, Order on Reconsideration, Second Report and Order, and Memorandum Opinion and Order, WC Docket Nos. 1142, 09-197 and 10-90, Released **** 22, 2015.

https://www.fcc.gov/document/fcc-releases-lifeline-reform-and-modernization-item 7

Ibid.
8
TNC 2015-134, paragraph 37.

https://www.fcc.gov/document/fcc-releases-lifeline-reform-and-modernization-itemTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
6

18. For the purposes of this proceeding, TELUS submits that the most important policy objectives of section 7 of the Telecommunications Act are the following:

(a) to facilitate 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;

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;

(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;

(g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;

(h) to respond to the economic and social requirements of users of telecommunications services; and

(i) to contribute to the protection of the privacy of persons.

19. TELUS submits that in the context of the current proceeding, the section 7 policy objectives indicate that first, Canadians should have access to affordable basic telecommunications services that facilitate their participation in the Canadian economy and provides for their basic needs.

9

Second, any governmental intervention that may be required to address issues related to the availability, affordability or adoption of BTS should be efficient in their application and rely on market forces to the maximum extent possible.

10
9
Telecommunications Act, Section 7 (b).
10
Ibid., section 7 (c) and (f).
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
7
2.2 Policy Direction to the CRTC

20. For the purposes of this proceeding, TELUS submits that the most important requirements of the Policy Direction to the CRTC11

are the following:
(a) the Commission should

(i) rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and (ii) when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;

(b) the Commission, when relying on regulation, should use measures that satisfy the following criteria, namely, those that

(i) specify the telecommunications policy objective that is advanced by those measures and demonstrate their compliance with this Order,

(ii) if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry,

(iii)if they are not of an economic nature, to the greatest extent possible, are implemented in a symmetrical and competitively neutral manner, … (c) the Commission, to enable it to act in a more efficient, informed and timely manner, should adopt the following practices, namely, (i) to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible, and

(iv) to continue to explore and implement new approaches for streamlining its processes.

21. The three seminal themes of the Policy Direction most relevant to the current proceeding are the following. First, the Commission should rely upon market forces to the greatest extent possible to address issues related to the availability, affordability and adoption of 11

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR /2006-355, P.C. 2006-1534, December 14, 2006.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
8

BTS. Second, when regulation is required, it should be implemented in a manner that (i) is efficient and proportionate to the intended purpose; (ii) interferes with competitive market forces to the minimum extent necessary to achieve the desired purpose; and (iii) is symmetrical and competitively neutral to the greatest extent possible. Third, any regulatory processes that are required should be implemented in a streamlined manner that is both minimally intrusive and minimally onerous.

22. TELUS recommends that the Commission use the BTS Flowchart found in Appendix B to evaluate the three BTS dimensions of availability, affordability and adoption.

Specifically, the Commission should first inquire as to whether there is a problem to be solved. If the answer to this question is “no”, then no government intervention is required. If the answer to this question is “yes”, then the Commission’s inquiry should turn to whether the problem is self-correcting by market forces. If the answer to this question is “yes”, then no government intervention is required. If the answer to this question is “no”, then the specific details of the government or regulatory intervention in the marketplace should be specified and carefully calibrated so that it is duly aligned with the three policy pillars.

2.3 TELUS Public Policy Principles

23. The principles developed in this section along with the relevant policy objectives of Section 7 of the Telecommunications Act and the Policy Direction to the CRTC constitute the three policy pillars that TELUS respectfully submits should serve as the foundation for the Commission’s deliberations in this proceeding. As will become evident in the discussion that follows, in some cases there is a degree of overlap between the TELUS public policy principles, Section 7 policy objectives and the Policy Direction. In other cases, the principles provide more operational direction as to the precise manner in which Commission policies should be crafted to ensure the requisite alignment with Section 7 of the Telecommunications Act and the Policy Direction. The TELUS public policy principles are provided in the table below. TELUS applies these principles in addressing the issues raised in the Notice in the remainder of this first Intervention.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
9
TELUS PUBLIC POLICY PRINCIPLES

Principle 1. Basic Telecommunications Service (BTS) Definition. A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for “meaningful participation in the digital economy.” Principle 2. The market is the default for the provision of BTS absent credible evidence that market forces alone are incapable of achieving the BTS objectives for availability, affordability and adoption.

Principle 3. Responsibility for developing policies and programs governing BTS availability and affordability objectives is shared by the Government and the CRTC in order to (i) leverage relative institutional competencies; (ii) avoid unnecessary duplication and inefficiency; and (iii) minimize inter-agency conflict and the risk of contradictory regulation.

Principle 4. Should financial assistance be necessary to achieve the BTS availability,affordability and adoption objectives, the first-best (“most efficient”) approach requires that it be (i) funded out of a broad-based charge on general revenues; (ii) structured to minimize the degree to which consumer demand is altered by the imposition of the charge; (iii) transparent in application and administration and (iv) targeted to achieve maximum efficiency.

Principle 5. Any test to calibrate the assistance necessary to address affordability concerns should be “needs based” and evaluated with respect to the totality of household expenditures required for a representative basket of basic goods and services rather than on the basis of an individual service (e.g., BTS).

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

Principle 7. (Technological Neutrality) The CRTC’s BTS policy should be technologically neutral in the sense that the particular technological platform used to supply BTS is of no particular relevance provided that all performance metrics are satisfied.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
10

3.0 Basic Telecommunications Services: Definition and Proposed Services 24. This section develops TELUS’ views on what is the fundamental issue in this proceeding – what basic telecommunications services do Canadians require to participate meaningfully in the digital economy? Because there is no statutory definition of what constitutes a BTS, TELUS applies the public policy principles it has developed for this proceeding to assist the Commission in its deliberations on this important issue.

3.1 No Definition of Basic Telecommunications Services in the Telecommunications Act

25. It is critical at the outset of this discussion to define what is meant precisely by a BTS.

Notably, the Telecommunications Act does not define a basic telecommunications service despite the fact that the concept itself is referenced throughout the statute.

12
Nor can a

definition of BTS be found in past Commission proceedings. For example, in Telecom Regulatory Policy (“TRP”) 2011-291, Obligation to serve and other matters, the Commission did not state what goals were to be achieved, nor what objectives were to be met in creating basic services beyond identifying particular services. At paragraph 7 of TRP 2011-291, the Commission addresses the various types of telephony features and services that are included in the basic service objective (“BSO”), but does not provide a rationale for why they were included.

3.2 Application of the TELUS Public Policy Principles to Define a Basic Telecommunications Service

26. In the absence of a statutory definition of BTS, and for the express purpose of developing a logical process for identifying the telecommunications services that should be considered basic, TELUS has developed a comprehensive set of public policy principles.

The primary objective of these principles is to provide a sound economic and public policy framework to assist the Commission in its deliberations on the issues raised by this proceeding. The TELUS public policy principles are found in Section 2.

12

For references to “basic telecommunications services” see, for example, Telecommunications Act, ss 2 “telecommunications service provider,” 33 and 46.5 (1).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
11

27. The first TELUS public policy principle defines a basic telecommunications service in terms of a telecommunications service that is necessary or indispensable for meaningful participation in the digital economy.

Principle 1. Basic Telecommunications Service (BTS) Definition. A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for “meaningful participation in the digital economy.”13

3.2.1 Principle 1. Basic Telecommunications Service (BTS) Definition 28. A number of important observations follow directly from TELUS public policy principle 1 and each of them is discussed in turn.

29. First, it is important to recognize that the definition of a basic telecommunications service is likely to vary from one observer to another and defies absolute precision due to the normative nature of the question.

14

Based on the classic construct of Maslow’s Hierarchy of Needs,

15

we can all agree that human survival requires food, shelter and clothing. And yet, reaching agreement on the specific types and quantities of food, shelter and clothing that are required is considerably more difficult, if it is possible at all. In a similar vein, we can all agree that Canadians require telecommunications services in order to communicate and function in a modern society.

13

Essential services have been defined in the following manner. “Essential services are typically defined as services of such importance to the economic and social welfare of the citizenry that universal access to such services at affordable rates remains a key element of public policy.” **** L. Weisman ‘‘Principles of Regulation and Competition Policy for the Telecommunications Industry – A Guide for Policymakers.’’ Report 06-0525, The Center for Applied Economics, Kansas University School of Business, ****, KS, 2006, p. 6.

14

The literature has defined the universal service obligation (USO) “as the obligation of an operator to provide all users with a range of basic services of good quality at affordable rates.” H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 7. In limiting the scope of what services might be considered essential, the authors specifically reference “education, public health or public safety.” 15

This distinction between basic and more advanced telecommunications services is constructively cast in terms of Maslow’s Hierarchy of Needs. This theory is often characterized in terms of a pyramid in which basic physiological necessities of life, including food, shelter and clothing occupy the first level of the pyramid. The second level of the pyramid includes protection and security. Higher levels of the pyramid include elements of self-worth, esteem and social relationships. See **** H. Maslow, “A Theory of Human Motivation,” Psychological Review, Volume 50(4), 1943, pp. 370-96. This article was retrieved from http://psychclassics.yorku.ca/Maslow/motivation.htm.

http://psychclassics.yorku.ca/Maslow/motivation.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
12

30. Second, consistent with the Commission’s statement in the Notice,16 it is reasonable to begin the analysis by defining a basic telecommunications service in terms of a service that is necessary to support the basic functions required for meaningful participation in the digital economy.

17

Once these basic functions have been identified, the Commission’s inquiry turns to the telecommunications services that are necessary to support them. For example, if voice communication via telephone is considered a basic function, then the primary exchange service necessary to support that basic function would be a BTS. Similarly, if e-mail, online commerce and distance education are considered basic functions, the minimum broadband offering necessary to support these basic functions should be a BTS.

18

A level of telecommunications service below this threshold would render it unduly difficult for consumers to participate meaningfully in the digital economy. Conversely, a level of service above this threshold would cross the line between a need and a want in the sense that the service in question may be necessary to support discretionary (non-essential) functions, but is not absolutely required to support the basic functions. Figure 1 shows an application of Maslows Hierarchy of Needs to telecommunications.

31. In the course of the process to determine what constitutes a basic telecommunications service, the Commission may be tempted to inform its decision-making by simply observing the services that are commonly used by Canadians in their everyday lives.

Taking this approach will lead to an incorrect conclusion. For example, whereas many Canadian consumers likely spend a significant part of their disposable income on fast food and video games, it would not be reasonable to conclude on the basis of this 16

TNC 2015-134, paragraph 32.
17

“[T]he universal service system is designed to ensure that everyone, regardless of wealth, has ‘affordable’ access to whatever communications services are deemed essential to participation in modern society.” **** E. Nuechterlein and **** J. Weiser, Digital Crossroads, Telecommunications Law and Policy In The Internet Age, Cambridge MA: The MIT ****, Second Edition, 2013, p. 307.

18

This process is consistent with the approach outlined in a 2012 OECD Report. “Even when countries define universal service in terms of access, it is normally preferable to use a definition of accessibility that is determined by the type of service or services that the network is able to support as opposed to the specific technological characteristics of the network itself. This approach is consistent with the idea that what really matter are the functionalities provided to end-users.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 19.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
13

behavior that consumption of such items is essential in the sense that it is required for basic survival.

Figure 1 – Hierarchy of Telecommunications Services 32. A similar problem arises in drawing conclusions on the basis of casual empiricism as to what telecommunications services are basic in nature. The complexity arises from the fact that the determination of what constitutes a basic or essential service should be independent of the price of the service, but the price of the service invariably affects the demand for a particular service. This explains why simple observations as to what services are commonly used by consumers are necessarily of limited value in drawing reliable inferences as to what constitutes a BTS. Assessments based on such exercises are likely to be under-inclusive when the price of the service is too high and over-inclusive when the price of the service is too low. To summarize, high demand for service A does not establish that service A is basic any more than low demand for service B establishes that Service B is not.

19

It is necessary to go beyond casual empiricism with a deeper inquiry that focuses on the telecommunications services that are necessary to support the basic functions widely viewed as required for meaningful participation in the digital economy.

19

Please see the related discussion in Section 4.2 infra in connection with the proper assessment of affordability.

Basic Telecommunications Services
Discretionary (Non-Essential)
Telecommunications Services
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
14

33. In a world of rapid technological change there will inevitably be calls from some parties to greatly expand the scope of service offerings that should be considered basic. For the purpose of this proceeding it is important to recognize that these services are not costless to provide, and there are practical limits on what can reasonably be funded out of general revenues and greater limits still on what can be financed from the telecommunications industry.

20

The logical implication is that there are tradeoffs between expanding the definition of BTS on the one hand and fostering efficient competition and encouraging innovation and investment in the telecommunications sector on the other hand.

21

34. It is therefore important that the Commission’s policy design for BTS strikes the appropriate balance between affordability and high quality telecommunications services responsive to the evolving social and economic requirements of Canadians called for in Sections 7(a), 7(b) and 7(h) of the Telecommunications Act and the efficient competition, research and innovation specified in Sections 7(c), 7(f) and 7 (g) of the Act.

This

observation necessarily raises the question as to whether the Commission’s adoption objectives necessary for meaningful participation in the digital economy should vary across services and geography – from 100% adoption for primary exchange voice service nationwide to less than 100% adoption of high-speed broadband in the most remote regions of the country.

22, 23

This approach recognizes that for the most basic telecommunications services (e.g., voice telephony), universal service is the goal, 20

See also TELUS public policy principle 3 and the related discussion of funding assistance programs in Section 5 infra.

21

The FCC found, for example, that an overly broad definition of universal service might undermine the fundamental goal of the 1996 Act, namely, preserving the provision of universal service without hindering efficient competition. See H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 10.

22

“It is often recognized that universal availability of broadband services may not necessarily yield universal service-like household penetration, though the provision of affordable access is an important goal.” Telecommunications Regulation Handbook, World Bank, Washington, D.C., 2011, p. 154.

23

For example, the more remote regions of the country do not have the same infrastructure, such as highway systems and airports, as the larger Canadian cities. In point of fact, Industry Canada on behalf of the Government of Canada recently announced funding for broadband services in the **** that would provide download speeds of 3 Mbps. See http://news.gc.ca/web/article-en.do?nid=997049. A performance metric of 3 Mbps (< 5 Mbps) is considered by Industry Canada to be sufficient to support the basic Internet applications required by Canadians in this region of the country.

http://news.gc.ca/web/article-en.do?nid=997049
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
15

whereas for more advanced telecommunications services (e.g., Internet broadband) universal access may well be the goal.

24

3.2.2 The specific technological platform for supplying a BTS is immaterial 35. Once the set of basic telecommunications services has been well defined, the Commission should remain agnostic with respect to the particular technological platform (wireline, wireless or satellite) that is used to deliver these BTS to consumers. If the Commission were to do otherwise, it would violate the principle of minimally intrusive regulation called for in Section 1 (a)(ii) of the Policy Direction to the CRTC. This section of the Policy Direction states that Commission should “when relying upon regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.” The concept of technological neutrality is stated in TELUS public policy principle 7.

Principle 7. (Technological Neutrality) The CRTC’s BTS policy should be technologically neutral in the sense that the particular technological platform used to supply BTS is of no particular relevance provided that all performance metrics are satisfied.

25
3.3 Basic Services: Voice Telephony

36. In TELUS’ view, the process used to define basic telephony services represents an opportunity for the Commission to establish service and feature/functionality floors for consumers. A key theme that TELUS recognizes in its policy prescription is that technological change in combination with the ever-increasing intensity of market forces demands a dynamic BTS classification; services will necessarily be added to the list and subtracted from the list of basic telecommunication services over time. This should not 24

The literature differentiates between universal access (UA) and universal service (US). UA refers to universal access or shared access at a public place. US refers to every individual or household having service that is private in nature. Telecommunications Regulation Handbook, **** Blackman and **** **** eds., World Bank, Washington, D.C., 2011, p. 155.

25

See Telecommunications Policy Review Panel, Final Report, 2006, p. 8-18 (underscoring the need for competitive and technological neutrality).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
16

be surprising in light of the fact that subsistence levels of nutrition and shelter are markedly different today than they were a decade or two ago.

37. TELUS submits that voice telephony for residential customers should continue to be a basic service along with the vast majority of the existing telephony safeguards and features. TELUS submits that the following services are BTS:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;26 and

 Accessibility-related services for persons with disabilities.27 38. In the context of Maslow’s Hierarchy of Needs, the services listed above reside exclusively on the first level of Maslow’s hierarchical pyramid as modified for telecommunications services as shown in Figure 1. TELUS deems these services to be basic in nature for the simple reason that they are necessary for basic societal participation and/or provide important safeguards for the security and protection of Canadian consumers. It is readily apparent that Canadians cannot participate meaningfully in the digital economy without the basic telephony services identified above.

39. There are three services included in the current BTS classification that should be removed. They are:

 Access to low-speed Internet at local rates (dial-up);

 Choice of long distance Network (i.e., equal access); and 26

This was initially discussed in CRTC 2011-291 at paragraph 7.

27

While the Commission’s CRTC 2011-291 decision at paragraph 7 discusses the provision of voice message relay, it is important to note that the Commission also decided that video relay service (VRS) must be offered in Canada and that funding would come from the National Contribution Fund (NCF) in order to make this available. See CRTC, Telecom Regulatory Policy 2014-187 – Video relay service, (22 **** 2014).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
17

 Requirement of an ILEC to make a copy of a local telephone directory available upon request.

28

40. None of the above services meets the TELUS definition of a BTS. As TELUS outlines in its introduction, and the Commission makes clear in its Notice, growth in the digital economy renders broadband necessary for Canadians. In particular, as the number of online activities grows, so too will the necessary capacities and speed capabilities that consumers require. In this environment, the provision of low-speed Internet at local rates can no longer be considered a BTS. As the Commission looks to the future to define broadband as a basic telecommunications service, the mandate for ILECs to provide dial-up Internet to customers becomes increasingly superfluous. The requirement for low-speed access to the Internet (dial-up) at local rates is now obsolete. This current element of the BSO is also contrary to TELUS public policy principle 7 (Technological Neutrality) in that it is technology specific and does not recognize that access to the Internet is possible by numerous other means in today’s multi-platform, competitive environment. The classification of dial-up Internet as a BTS further violates technological neutrality in that it applies only to the ILECs that have the obligation to serve for voice services. Neither TELUS nor any other service provider should have an obligation to serve for broadband services.

41. Today, many consumers avail themselves of one-stop shopping by purchasing a bundled package of local and long distance voice services from a single provider. Customer choice as to which provider supplies these services, among TSPs, cable companies or wireless carriers, provides sufficient competitive protections for consumers.

29
Use of the

equal access functionality has declined precipitously since 2008,30

indicating that the vast

majority of consumers obtain their long distance services from their local service provider or through alternative means such as wireless VoIP or dial-around service.

Increasingly, consumers cut the cord on their wireline local service in favour of mobile 28

This is outlined in CRTC 2011-291, at paragraph 7.

29

Section (a)(i) of the Policy Direction to CRTC states that “the Commission should rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives.” 30

See sec 3.1 of the Second Intervention of TELUS in the proceeding initiated by Telecom Notice of Consultation CRTC 2013-551, Review of wholesale services and associated policies, October 15, 2013 (the “Wireline Wholesale Services Proceeding”)

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
18

wireless or VoIP, options that preclude the choice of a long distance provider. This is yet another strong indication that equal access is now largely meaningless for most consumers.

42. This recommendation also recognizes that the market is the default in a manner consistent with Section 1(a)(i) of the Policy Direction that the “Commission should rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives . . .”

31
To do otherwise would needlessly distort

the competitive process in a manner that works at cross purposes with TELUS public policy principle 6.

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

43. By similar reasoning, the type of information provided in traditional, paper-based local phone books is now readily available on the Internet in more resource-friendly formats and is therefore no longer a requirement for consumers. It is noteworthy that TELUS provides printed directories only upon request and, even though they are available free of charge, very few TELUS customers choose to receive them.

44. In summary, whereas the level of Internet services required to participate in the digital economy may be the principal focus of this proceeding, for TELUS customers, and for many Canadians, voice services remain an important basic service. And yet, the classification of BTS must of necessity be dynamic in that it changes over time as the basic needs and requirements of Canadians change.

32, 33
This implies that some services,
31

Indeed, as Professor **** Sappington has observed, “It is generally preferable to replace regulatory control with the discipline of competition when competition provides adequate protection for consumers.” **** E. M. Sappington, “Price Regulation,” Handbook of Telecommunications Economics, ed. by **** ****, **** Majumdar, and **** Vogelsang, Amsterdam: ****-Holland, 2002, Chapter 7, p. 265, note 58.

32

The Telecommunications Policy Review Panel, Final Report, 2006 observes that “The challenge of achieving ubiquitous access to telecommunications networks is ongoing and evolves anew with each new generation of technology” (p. 8-6). See also H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, pp. 8-10 (noting that the FCC has “recognized that the definition of universal service should evolve and be reconsidered in the future.” p. 10.)

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
19

such as broadband, should be added to the list of basic telecommunications services, whereas other services, such as paper directories, should be dropped from that list and for similar reasons.

3.4 Basic Internet Services: Broadband Internet 45. In 2011, the Commission adopted an aspirational target speed for broadband services of 5 Mbps downstream and 1 Mbps upstream for Internet service (“5/1 Mbps”), but did not include broadband as part of the BSO. One of the central questions posed by the Commission in this proceeding concerns whether broadband should be considered a basic telecommunications service. In TELUS’ view, broadband is undeniably a BTS in today’s digital economy.

34

In recognition of this fact, TELUS is proposing that a 5/1 Mbps target speed be established as a basic telecommunications service.

35
In addition, the 5 Mbps

download speed is the Federal Government standard endorsed by the Minister of Industry.

36

This is also the standard that has recently been proposed in the UK.

37
It is

noteworthy that the proposed UK standard of 5 Mbps is the highest standard of any country on the European continent. In addition, the FCC is currently evaluating the telecommunications services that should be considered basic and whether the universal service framework should be expanded to include a broadband offering. It is significant 33

“The services to be included in the scope of universal access and service (UAS) will change as technology and society change.” Telecommunications Regulation Handbook, World Bank, Washington, D.C., 2011, p.

158.
34

A 2012 OECD Report observes that “broadband availability is expected to become a necessity for meaningful participation in society.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 21.

35

According to the CRTC, 95% of households in Canada have access to 5 Mbps download speeds. CRTC 2014 Communications Monitoring Report 2014, p. iii and Table 5.3.12. In addition, 91% of households have access to 1 Mbps upload speeds. CRTC, Departmental Performance Report 2013-14, 2014, p. 26.

36

Digital Canada 150, Industry Canada, 2014, p. 7. This report confirms that 5 Mbps broadband is sufficient for most popular applications, including e-mail, e-commerce, high-resolution video and distance education.

See also CRTC 2014 Communications Monitoring Report, Figure 5.3.8.

37

In the context of the 2015 Budget, the UK government made the following statement: The government is committed to ensuring that every single household in the UK has access to the basic broadband needed to live and work in the modern world. So we will look to raise the Universal Service Obligation (USO) – the legal entitlement to a basic service – from dial up speeds to 5Mbps broadband. This commitment to all goes further than any other country in Europe. Once in place, a USO would mean that consumers gain a legal right to request installation of 5Mbps capable services at an affordable price.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
20

that the FCC has also found that 5 Mbps is sufficient to support a broad range of popular Internet applications.

38

46. In 2014, Industry Canada in its Digital Canada 150 document stated that the 5 Mbps download speed is “a rate that enables e-commerce, high-resolution video, employment opportunities and distance education.”

39

Industry Canada has also set a goal of achieving wide-scale availability of the 5 Mbps download speed to over 98% of households by 2017.

40

Hence, for the Government of Canada, the Commission’s 5/1 Mbps target speed is a level of performance that meets or exceeds the public policy goals of ensuring that Canadians are able to engage with online web services and participate in the digital economy.

47. Whereas TELUS believes that voice service and broadband should both be considered basic telecommunications services, the characteristics of these two services are fundamentally different. As a result, the analysis underlying the determination that these two services are basic necessarily differs as well. Voice service is binary in nature – Canadians either have access or they do not . . . full stop. In contrast, the determination of what constitutes a basic Internet service contemplates a continuum of performance metrics that depends on the online activities (use of e-mail, access to distance education, engaging in e-commerce, etc.) that are considered basic and, in turn, on the minimum broadband service requirements necessary to support these activities.

41
As a result, a

more nuanced analysis is required to answer the question of what constitutes a basic Internet service and why.

48. TELUS considers the Statistics Canada study, “Individual Internet use and e-commerce, of 2012,” a reasonable starting point to commence the process of understanding the types 38

See https://www.fcc.gov/guides/broadband-speed-guide and https://www.fcc.gov/guides/household-broadband-guide.

39

Industry Canada, Digital Canada 150, Ottawa (2014), “Connecting Canadians,” p. 7.

40
Ibid.
41

A 2012 OECD reports observes that “broadband is not a uniform service and different technologies have different features, costs, and performance characteristics.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 19. The key point is that while voice service is well-defined, broadband service frequently is not. TELUS adopts the view that a basic broadband service must be defined in terms of the basic activities that it is able to support.

https://www.fcc.gov/guides/broadband-speed-guidehttps://www.fcc.gov/guides/household-broadband-guidehttps://www.fcc.gov/guides/household-broadband-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
21
of online activities in which Canadians engage.
42
This represents the most recent study

by Statistics Canada on this important and timely issue. Reproduced as Figure 2 below, among the most popular activities for Canadians are e-mail, browsing for goods and services online, electronic banking, reading or watching the news, and using social networking websites. These observations notwithstanding, the popularity of online content or web applications cannot inform the Commission on what constitutes a basic use of the Internet any more than pervasive consumption of fast food can speak to the basic nutritional needs of Canadians. The popular web activities identified by the Statistics Canada study serve only to identify Canadians’ online behavior. It cannot and does not speak to the importance of these online activities in providing for the economic and social welfare of Canadians or their meaningful participation in the digital economy.

In other words, these data are not dispositive of the types of basic Internet activities that should be supported by basic telecommunications services.

49. It is useful to invoke the logic underlying TELUS public policy principle 1 (Definition of BTS). In particular, it is necessary to determine whether the online activities identified by Statistics Canada, or a proper subset of these activities, represent the type of basic Internet use that should be supported by the set of basic telecommunications services identified in the course of this proceeding. For example, just as a want does not equate to a need, the use of popular Internet applications does not equate to a basic use of the Internet that is necessary for the economic and social welfare of Canadian citizens or their meaningful participation in the digital economy.

42

Statistics Canada, “Individual Internet use and e-commerce, 2012,” (October 28, 2013), http://www.statcan.gc.ca/daily-quotidien/131028/dq131028a-eng.htm .

http://www.statcan.gc.ca/daily-quotidien/131028/dq131028a-eng.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
22

Figure 2 – Online activities from any location, 201243

50. A number of the popular Internet activities identified in Figure 2 are most accurately characterized as satisfying the recreational and entertainment wants of Canadians rather than representing a basic use of the Internet that meets their basic telecommunications needs to actively engage in the digital economy. For example, downloading and streaming movies, television programming and music certainly allow individuals to be entertained through online services, but these do not rise to the level of being essential to the economic or social welfare of Canadians. In still other cases, it is not abundantly clear whether the popular services identified represent an individual’s basic use of the Internet because communications needs today can be met through other online or telecommunications tools. These include accessing the Internet to make telephone calls and engaging colleagues and friends through social networking sites. In addition, while banking, interacting with government websites and communicating through e-mail enhance the economic and social welfare of Canadians, watching movies and 43

Ibid.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
23

downloading music are properly characterized as discretionary. . . a synonym for which is non-essential.

51. Having established the set of online activities that constitute a basic use of the Internet, while excluding discretionary entertainment and recreational uses, the Commission’s inquiry should next turn to the minimum performance requirements necessary to support these activities. As Dr. **** states in his expert report, “the Commission's 5/1 Mbps target speed, established in Telecom Regulatory Policy 2011-291, is likely to be sufficient for households to participate in the digital economy for the foreseeable future.”

44

Dr. **** further concludes that for most basic uses of the Internet, even in households of up to 3 simultaneous users, the 5/1 Mbps target speed is sufficient to support the majority of household uses. Dr. ****’s conclusion is based partly on the FCC’s Household Broadband Guide as shown in Figure 4. TELUS has also included the FCC’s Broadband **** Guide, reproduced in Figure 3, as additional evidence.

Activity Minimum Download **** (Mbps)
E-mail 0.5
Web browsing

Job searching, navigating government websites 0.5 Interactive pages and short educational videos 1 Streaming radio Less than 0.5

Phone Calls (VoIP) Less than 0.5
Watching video
Standard streaming videos 0.7
Streaming feature movies 1.5

HD-quality streaming movie or university lecture 4 Video Conferencing

Basic video conferencing 1
HD video conference or telelearning 4
Gaming
Game console connecting to the Internet 1
Two-way online gaming in HD 4

Source: Federal Communications Commission, Broadband **** Guide, 2014.

https://www.fcc.gov/guides/broadband-speed-guide Figure 3 – FCC Broadband **** Guide

44

Expert Report of Dr. **** W. ****, “The Performance of the Canadian Telecom Sector: A Policy Perspective,” July 14, 2015, TELUS First Intervention, Appendix A, Section F, paragraph 53.

https://www.fcc.gov/guides/broadband-speed-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
24
**** Use
(Basic functions only:
e-mail, web surfing,
basic streaming
video)
Moderate Use
(Basic functions plus
one high-demand
application: streaming
HD, video
conferencing, OR
online gaming)
High Use
(Basic functions plus
more than one high
demand application
running at the same
time)
1 user on 1 device
(e.g., laptop, tablet, or
game console)
Basic Basic Medium
2 users or devices at a
time
Basic Basic Medium/Advanced
3 users or devices at a
time
Basic Basic/Medium Advanced
4 users or devices at a
time
Basic/Medium Medium Advanced
Basic Service = 1 to 2 Mbps
Medium Service = 6 to 15 Mbps
Advanced Service = More than 15 Mbps

Source: Federal Communications Commission, Household Broadband Guide, 2014.

https://www.fcc.gov/guides/household-broadband-guide Figure 4 – FCC Household Broadband Guide

52. The available evidence therefore establishes that the 5/1 Mbps target speed is sufficient to support the needs of multiple, simultaneous users of the Internet. This standard, however, is arguably higher than it needs to be because there is another dimension of consumer behavior that must be taken into account in determining the minimum speeds that are required to support basic Internet activities. Unlike basic voice telephony, consumer demand for Internet applications can be shifted across time and location. For example, children and young adults are able to utilize schools and libraries for Internet access, while their parents can access such services at work and at public locations. What is more, not all of these Internet applications are time critical. It is possible for children and young adults to shift their demand to different times of the day, for example, such as when their parents are at work. Similarly, parents can shift their demand to times when their children are sleeping or away from home.

53. The essential point is one that has long been recognized in the economics of public utilities, such as electric power, and that is the ability of consumers to shift demand from https://www.fcc.gov/guides/household-broadband-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
25
peak to off-peak periods.
45

In fact, so-called smart appliances, including dishwashers, clothes washers and dryers, now incorporate delayed start features for precisely this reason. Similarly, modern technology enables Internet users to schedule downloads and uploads for times of low demand when their usage does not impose congestion externalities on other members of the household. The central point, which should be obvious, is that an assessment of a basic use of the Internet does not necessarily mean that all family members should be able to simultaneously engage high-bandwidth applications within their domicile, necessitating faster broadband service speeds.

46

54. A basic 5/1 Mbps target speed broadband service meets the criteria outlined in TELUS public policy principle 1 for a basic telecommunications service. Furthermore, the overwhelming weight of the evidence is that the 5/1 Mbps target speed proposed by TELUS is sufficient, arguably more than sufficient,47

to meet the basic communications

needs of Canadians. This policy prescription is consistent with a recent decision by the UK Department for Culture Media & Sport, through their digital communications infrastructure strategy, to change the UK’s Universal Service Obligation and raise the basic broadband speed for all regions from dial-up to 5 Mbps.

48
Finally, according to the

Commission’s own 2014 Communications Monitoring Report, Figure 5.3.8 reproduced as Figure 5, capacity requirements for a basic use of the Internet, including using e-mail, web surfing, audio streaming and video conferencing, require no more than the 5/1 Mbps target speed. Therefore, TELUS submits that its proposed 5/1 Mbps target speed for 45

See, for example, **** V. **** and John Tschirhart, NATURAL MONOPOLY REGULATION, New ****:

Cambridge University ****, 1988, chapters 5 and 6.

46

Another example is the use of the family car. There is no reasonable expectation that any family member should be able to travel anywhere s/he wants at any time s/he wants without coordination with other family members. Indeed carpools, ridesharing and public transportation are efficient resource-allocation mechanisms that families frequently employ to address automobile scarcity within the household. This example begs the question as to whether the requirements for basic Internet should differ markedly from the requirements for basic transportation with respect to the metric of simultaneous use.

47

On July 7, 2015, Industry Canada announced funding for broadband services in the **** that would provide download speeds of 3 Mbps. See http://news.gc.ca/web/article-en.do?nid=997049. A performance metric of 3 Mbps is considered by Industry Canada to be sufficient to support the basic Internet applications required by Canadians in this region of the country.

48

UK, Department for Culture Media & Sport and HM Treasury, “1.2 Government strategy for rural areas,” Policy paper: The digital communications infrastructure strategy, (18 **** 2015), https://www.gov.uk/government/publications/the-digital-communications-infrastructure-strategy/the-digital-communications-infrastructure-strategy.

http://news.gc.ca/web/article-en.do?nid=997049
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
26

broadband is sufficient to serve the needs of Canadians to participate meaningfully in the digital economy.

Figure 5 – Figure 5.3.8 Popular Internet applications – Bandwidth requirements49

55. The Commission’s strong commitment to facilities-based competition in Canada has given rise to a multitude of technological platforms and service providers capable of supplying the 5/1 Mbps target speed to Canadian consumers. These options include wireless, wireline and satellite. Hybrid technologies such as fixed wireless access technologies can also provide a valuable service to customers in rural and remote serving areas. What is not important, as duly recognized in TELUS public policy principle 7 (Technological Neutrality), is the particular technological platform that is used to provide this level of broadband service to consumers. In this respect, it is important that the Commission not deviate from the path of technological neutrality and not simultaneously 49

CRTC Technology Resource Centre, CRTC 2014 Communications Monitoring Report, (October 2014).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
27

violate the principle of competitive neutrality as recognized in TELUS public policy principle 6.

50

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

56. What this means, of course, is that a Commission preference for a particular technological platform logically implies a preference for a particular telecommunications service provider or class of providers that make use of that particular platform. The necessary implication is that all telecommunications service providers that are technologically capable of supplying the 5/1 Mbps target speed should have a fair and equal opportunity to compete on the merits.

51
50

See Telecommunications Policy Review Panel, Final Report, 2006, p. 8-18 (underscoring the need for competitive and technological neutrality).

51

The term “competition on the merits” refers to the basic idea that the returns that a firm enjoys should reflect its superior efficiency and business acumen in the marketplace vis-à-vis its relatively less proficient rivals. In United States v. Aluminum Co. of Am., 148 F.2d 416, 430 (2d Cir. 1945), **** Learned **** observed that “A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry. . . . The successful competitor, having been urged to compete, must not be turned upon when he wins.” For a more recent discussion of the term “competition on the merits” and its role in differentiating between competitive and exclusionary behavior in antitrust enforcement, see Antitrust Modernization Commission, Report and Recommendations, Washington D.C.

2007.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
28

4.0 Availability, Affordability, Adoption: An Assessment of Basic Telecommunications Services and TELUS Recommendations 4.1 Summary of Findings in Dr. **** W. ****’s Expert Report 57. Dr. **** W. ****’s report52 in Appendix A responds to several of the issues raised by the Commission in the Notice. These include the availability, quality and price of broadband services in Canada and how Canadian broadband service compares to broadband service in other developed countries. The report also reviews available data on the price of mobile wireless services in Canada and other countries. Dr. **** then examines the available evidence on broadband speeds that are required for Canadians to participate meaningfully in the digital economy. Finally, the report addresses important issues in the design of any subsidy program that might be required to extend service to unserved or underserved areas in Canada.

58. The main conclusion that can be drawn from the report is that market forces are working, and working well, to provide most Canadians with broadband service sufficient to participate meaningfully in the digital economy. **** wireline and wireless Canadian broadband services compare favorably in terms of availability, quality and price on an international basis. Canadian broadband adoption is also among the highest in the world.

4.1.1 Canada has a high broadband adoption rate compared to other countries 59. Dr. **** concludes that “Canadian broadband penetration [adoption] per household is among the highest in the world, exceeded in only 7 other developed countries, most of which have much greater population density than Canada.”53

Figure 6 in Dr. ****’s

report, reproduced as Figure 6, shows that Canada's broadband adoption, measured in terms of subscribers per 100 inhabitants, is well above the OECD average. By this measure, Canada ranked 12th among OECD countries in the middle of 2014.

54
In fact,
52
****, op. cit.
53
Ibid., Section B.
54

OECD Broadband Portal, available at http://www.oecd.org/internet/oecdbroadbandportal.htm.

http://www.oecd.org/internet/oecdbroadbandportal.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
29

Canada ranks much higher in broadband adoption per household and is the 8th highest in the OECD.

55

Figure 6 - Figure 6 OECD Fixed (wired) broadband subscriptions per 100 inhabitants, by technology, **** 2014

56

60. This high level of broadband adoption was achieved despite high costs of broadband deployment due to Canada’s low population density. For example, Dr. ****’s report indicates that Canada has the third lowest population density among the 34 advanced OECD countries

57

and has a much lower population density outside its urban areas than other OECD countries. Dr. **** also presents the results of a recent study finding that Canada’s rural population density is the lowest among the G-7 countries.

58

61. Canada’s broadband adoption has been further enhanced by a very competitive wireless market that has led to the widespread deployment of 4G LTE and therefore very high speed connections. According to Dr. ****’s report, 55

Estimates based on OECD broadband penetration data for **** 2014 and OECD estimates of average household size, available at http://www.oecd.org/els/family/47710686.pdf. Note that the data published by the FCC in its 2015 International Broadband Report are older and thus place Canada at a slightly lower ranking.

56
****, op. cit., Section C, Figure 6.
57
Ibid., Section C, Table 1.
58

**** Bennett, G-7 Broadband Dynamics: How Policy Affects Broadband Quality in Powerhouse Nations. American Enterprise Institute, 2014.

0
5
10
15
20
25
30
35
40
45
50
55
Source: OECD
Other Fibre/LAN (1) Cable DSL
OECD average
http://www.oecd.org/els/family/47710686.pdf
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
30

Akamai’s 2014 Q1 State of the Internet report shows that 60 percent of Canada’s wireless connections provide greater than 4 Mbps speeds.

59
In

Europe, only 6 of 24 countries had a similar or greater share of 4 Mbps connections, and in the United States only 33 percent of wireless connections provided this speed. Thus, many Canadians enjoy wireless broadband connectivity that meets the Commission’s 5/1 Mbps target speed.

60

4.1.2 Canada requires greater capital and operating costs than other countries 62. Dr. **** concludes that “the vast majority of Canadians have access to very fast broadband services despite the fact that such services must be deployed in areas of much lower population density than in most OECD countries, thereby requiring greater capital and operating costs.”

61

In fact, Canadian telecom companies’ capital expenditures have consistently been greater per dollar of revenue than expenditures by EU companies. Dr.

**** observes,

An even more dramatic difference emerges when one compares total communications sector capital spending per access path, thereby capturing the effects of spending by telecommunications companies, including wireless, cable, and satellite carriers. … Note that Canadian carriers have spent more than their U.S. counterparts and about as twice as much as EU carriers since 2007.

62, 63

This is demonstrated in Figure 5 of Dr. ****’s report, reproduced as Figure 7.

59

Akamai, State of the Internet 2014 Q1, Vol.7, No.1, p. 31.

60
****, op. cit., Section C, paragraph 13.
61
Ibid., Section B.
62

The data extend only through 2011 because the 2015 Communications Outlook has not yet been released by OECD.

63
****, op. cit., Section C, paragraph 11.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
31

Figure 7 - Figure 5 Total Telecom Capital Spending per Communication Access Path Canada, U.S., and EU-15

64

4.1.3 Canadian broadband prices are low to moderate by international standards 63. In spite of the low density and higher costs in Canada, Dr. **** concludes that “contrary to the Findings in the 2015 **** Report,65

the prices of Canadian broadband

and mobile wireless services are low to moderate by international standards despite the obvious high costs of providing such services in Canada’s low population-density environment.”

66

64. Dr. **** discusses several shortcomings of the **** Report that have led to a multitude of incorrect conclusions regarding the affordability of broadband services. The key weaknesses of the **** Report that lead to these incorrect conclusions are: 1) the pricing data collected for the 2015 **** Report uses the advertised list prices and speeds;

2) the size of the cities compared varies substantially; 3) the concentration on only large cities outside **** America; 4) the use of a “basic digital TV” package instead of standardizing the television component; 5) the lack of rural and remote area comparisons;

and 6) the disregard of retail taxes and regulatory fees.

65. In his analysis of broadband pricing, Dr. **** concludes that the measurement of broadband prices is inherently difficult. He suggests that a recent study that deals with 64

Ibid., Section C, Figure 5.
65

**** Communications, “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2015 Edition,” **** 31, 2015.

66
****, op. cit., Section B.
0
50
100
150
200
250
300
350
U
.S
.
$
/
p
at
h
EU-15 Canada U.S.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
32

many of these difficulties finds that Canadian broadband prices are lower than the average for developed countries.

67

The data from this study are reproduced in Figure 8 of Dr. ****’s report, reproduced as Figure 8.

Figure 8 - Figure 8 Quality – and Feature – Adjusted **** Relative to U.S Residential Standalone Broadband

68

66. Citing the most recent FCC International Broadband Report, Dr. **** concludes that the average price per Mbps in Canada is low compared to most other countries.

Canada's price per Mbps in 2013 was lower than the average of $4.33 per Mbps for the 37 countries for which data are reported.

69
[…] The FCC

International Broadband Report also shows the prices for standalone broadband plans with download speeds of 25 Mbps or less and usage limits, plans that should be of particular interest to Canadian consumers with modest incomes. These data show that Canada has the fourth lowest 67

**** Wallsten and **** L. Riso (2010), “Residential and Business Broadband Prices Part 2: International Comparisons, Part 2,” Technology and Policy Institute, Washington, DC.

68
****, op. cit., Section D, Figure 8.
69

FCC International Broadband Report, Appendix C, Table 5.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
33

prices for such plans among the 16 countries reporting such plans in 2012 and the third lowest among 14 countries reporting in 2013.

70, 71
4.1.4 Canada has strong platform competition

67. Dr. **** concludes that “the widespread availability of high-speed broadband in Canada is the result of strong platform competition among incumbent telecommunications carriers, cable television companies, and wireless carriers and extremely high rates of capital spending on these platforms.”72

Dr. **** states,

With strong capital investment from telecom companies and cable companies, high-speed access is available even in rural areas in Canada.

Much of the reason for this success lies in the Commission’s reliance on platform competition between cable television companies and traditional ILECs.

73

4.1.5 High broadband speeds are available in Canada 68. Because of this strong platform competition, Dr. **** notes that “(b)roadband speeds of 30 Mbps or more are available to more than 80 percent of Canadian households, but most households choose to subscribe to lower-speed services, presumably because they do not require higher speeds for the current generation of applications.”74

69. Based on a study by Akamai, Dr. **** notes that Canadian broadband services perform well on an international comparison basis even when compared to countries with greater population density like Germany, ****, Italy, Spain, Portugal, and ****. He states, “. . . in 2014 Canada ranked 17

th

in the world (among 134 ranked countries) in the share of broadband connections with speeds of 15 Mbps or greater.”75, 76

70
Ibid., Appendix C, Table 4a.
71

****, op. cit., Section D, paragraph 25 and 26.

72
Ibid., Section B.
73
Ibid., Section C, paragraph 12.
74
Ibid., Section B.
75
Akamai, op. cit., p. 23.
76
****, op. cit., Section D, paragraph 19.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
34

4.1.6 Broadband connection of 5 Mbps is sufficient 70. Having determined that Canada offers expansive coverage of broadband service at speeds in excess of 5 Mbps, Dr. **** finds that “even the most data-intensive consumer services – currently, high-definition video services – do not require subscriber connections that exceed 5 Mbps. For this reason, the Commission should not prescribe a “basic” level of service required by all Canadians to have download speeds above this level.”

77

Dr. **** also states that the Commission’s 5/1 Mbps target speed is sufficient to participate in these activities.

78
4.1.7 How best to design subsidies

71. Dr. **** concludes that “(i)f subsidies are required to extend affordable basic high-speed broadband service to the most remote areas of Canada, such subsidies should be carefully targeted to the incremental expansion of the requisite network facilities and funded from general revenues, not from explicit or implicit taxes on communications services.”

79

Dr. **** finds that should any subsidy be required, it should be funded through general tax revenues.

4.2 Availability: An Issue Being Resolved
4.2.1 Voice and voice-related services

72. The Notice recognizes that voice services are available to virtually all Canadians, stating that “. . . wireline and wireless networks reach over 99% of Canadians . . .”80

73. TELUS recommends in section 3.3 that the following services continue to be basic services:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
77
Ibid., Section B.
78
Ibid., Section F, paragraph 49.
79
Ibid., Section B.
80
TNC 2015-134, paragraph 6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
35
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services; and

 Accessibility-related services for persons with disabilities.

Each of these services is ubiquitously available in TELUS’ operating territories.

74. The Commission should continue its important monitoring role to ensure that all Canadians have access to these basic services. If some telecommunications service providers are not providing BTS, the Commission should take steps to ensure that these services are made available.

4.2.2 Broadband services
4.2.2.1 What is the current situation?

75. In TRP 2011-291 the Commission established an aspirational 5/1 Mbps target speed for all Canadian households. Since then, Internet service providers have been expanding and improving their services throughout Canada, including accommodating Canadians living in rural and remote areas. Broadband services well in excess of the target speed, at over 100 Mbps, are available to many Canadian households.

81
Broadband service at a 5 Mbps

download speed or faster is currently available to 94% of Canadian households over all technologies and to 81% over the mobile broadband network.

82
When also considering

upload speed, “91% of Canadian households have access to terrestrial broadband connections that can provide speeds of at least 5 Mbps download and 1 Mbps upload.”83

For the remaining pockets of households that do not have broadband service or that have broadband service at less than the 5/1 Mbps target speed, Government policies and private investment will soon provide access to a 5/1 Mbps target speed in all, or almost all, of these locations.

81

CRTC 2014 Communications Monitoring Report, p. 197, Fig 5.3.17.

82
Ibid., p. 194, Fig 5.3.15.
83

Satellite Inquiry Report, October 2014, p. 62, paragraph 134.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
36

76. In TELUS’ operating territories, broadband services with 5 Mbps or greater download speed are readily available to 95% of households in British Colombia, 97% in Alberta, and 94% in Quebec.

84

In addition, wireless broadband services cover a large area.

HSPA+

services cover 99% of Canadian households, and LTE covers 81%.

85
The

average expected download speed is 4-6 Mbps for HSPA+ and 12-45 Mbps for LTE.

86

77. The small pockets of households unable to connect to broadband are mostly in rural areas with very small populations. According to the CRTC 2014 Communications Monitoring Report, urban centres with populations greater than 30,000 people offer 100% availability of broadband at a 5 Mbps download speed, and there is 98% availability in centres with 1,000 to 29,000 people. Even for rural centres of less than 1,000 people, or less than 400 people per square kilometer, there is 72% availability of broadband service at 5 Mbps download speed with an additional 4% from HSPA+

and LTE.
87
Government programs

and private sector investment, however, are already in place that will achieve the 5/1 Mbps target speed by 2017 for all, or almost all, households.

4.2.2.1.1 The role of market forces

78. The data cited above confirm that the market is working very well to provide basic telecommunications services to the vast majority of Canadians, including broadband services that are required to participate meaningfully in the digital economy. This success is a direct result of the facilities-based competition policies that the Commission has embraced. Dr. ****’s report states that “(s)trong platform competition among incumbent telecommunications carriers, cable television companies, and wireless carriers and extremely high rates of capital spending on these platforms has ensured the widespread availability of high-speed broadband in Canada.”88

79. As a result of this competition, Canadian broadband adoption per household is among the highest in the world, exceeded in only 7 other developed countries, most of which have 84

CRTC 2014 Communications Monitoring Report, p. 196, Table 5.3.13.

85
Ibid., p.193, table 5.3.11.
86

TELUS coverage map, http://www.telus.com/en/qc/mobility/network/coverage-map.jsp , accessed **** 25, 2015.

87

CRTC 2014 Communications Monitoring Report, p. 197, Table 5.3.17.

88
****, op. cit., Section B.

http://www.telus.com/en/qc/mobility/network/coverage-map.jspTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
37
much greater population density than Canada.
89
Dr. ****’s report states that “(t)he

vast majority of Canadians have access to very fast broadband services despite the fact that such services must be deployed in areas of much lower population density and therefore at a much higher cost per subscriber than in most OECD countries…”90

The

inescapable conclusion is that the Commission’s facilities-based competition policies are working and working well. It should stay the course and not mandate any unbundling of broadband networks.

4.2.2.1.2 Increasing satellite availability

80. Insofar as satellite availability is concerned, there is sufficient C-band and Ka-band capacity to cover all of Canada. According to the Satellite Inquiry Report, produced under the direction of Commissioner ****, C-band frequencies can be used for broadband, and there is a “significant portion of C-band capacity” that remains unused on satellites currently deployed, without considering upcoming satellite launches.

91

Xplornet has leased capacity from ViaSat, which is scheduled to launch the ViaSat-2 satellite in 2016, that will offer additional bandwidth, coast-to-coast coverage (including the ****) and faster speeds to “meet the future Internet needs of our rural customers throughout the country.”

92

Xplornet also announced a partnership with **** Network Systems for a “lifetime lease for all of the Canadian satellite broadband capacity on ****’ EchoStar XIX, a next-generation high throughput satellite due for launch in mid-2016.”

93
89
Ibid., Section B.
90
Ibid., Section B.
91

Satellite Inquiry Report, p. 30, also p. 38-39. The Report indicates that there will be additional costs (i.e., equipment costs for earth station operators) and possibly scheduled downtime upon conversion, but all potential transport solutions will present either or both of these issues.

92

Xplornet news release, “Xplornet acquires Canadian capacity on viaSat-2 satellite.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/ , accessed **** 30, 2015. The news release claims that ViaSat-2 is designed to offer speeds comparable to fiber-to-the-node networks. This is consistent with the conclusions of the Satellite Inquiry Report (p. 37 paragraph 55) that new high throughput satellite (HTS) technology on Ka-band can “deliver Internet speeds in excess of the Commission’s target download speed of 5 Mbps”.

93

Xplornet news release, “Xplornet and **** sign agreement for Echostar XIX satellite.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/ , accessed **** 30, 2015.

http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
38

81. Existing C-band satellite service covers all of Canada94 and existing Ka-band satellites covers “. . . close to all communities that are presently served with C-band. . .”95

Images

of C-band and Ka-band coverage are reproduced as Figures 9 and 10. It is also important to note that new high throughput satellite (HTS) technology can be deployed on any frequency band and HTS on Ka-band can deliver “. . . Internet speeds in excess of the Commission’s target download speed of 5 Mbps.”

96
The announcement of new satellites

with additional capacity and broad coverage indicate that market forces can be expected to resolve any remaining availability issues in Canada.

82. Further private sector investment and the introduction of new technologies, such as Xplornet’s satellite service, will help to bridge the small availability gap currently experienced in Canada. Xplornet recently acquired 42 blocks of 2500 MHz spectrum to extend their service to more rural areas of Canada.

97
This year it also announced the

launch of high-speed (LTE) Internet in rural Alberta that now offers 25 Mbps broadband services to rural households that were previously unserved.

98
These fixed wireless

services, used in conjunction with satellite backhaul, will provide broadband service in rural and remote areas. Xplornet anticipates that it will offer 25 Mbps broadband service everywhere in Canada by 2017,

99

which is also the year when the Connecting Canadians program is expected to be completed.

94

Satellite Inquiry Report, p. 34, paragraph 51.

95
Ibid., p. 35, paragraph 54.
96
Ibid., p. 37, paragraph 55.
97

Xplornet news release, “Xplornet communications announces successful acquisition of 42 blocks of 2500 MHz spectrum.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/ , accessed **** 24, 2015.

98

Xplornet news release, “Xplornet launches fast 25 Mbps high-speed Internet in rural Alberta.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/ , accessed **** 25, 2015.

99

Xplornet news release, “Xplornet announces plan to deliver 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/ , accessed **** 24, 2015.

http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
39
Source: Telesat

Figure 9 – Figure 5.4: Telesat’s Anik F2 C-band coverage100

4.2.2.1.3 Other private sector initiatives

83. There are also private sector initiatives that are working to enhance broadband service in rural and remote communities and that will meet the 5/1 Mbps broadband target speed set out in TRP 2011-291. For example, TELUS is upgrading its broadband service in rural communities such as Drayton Valley, Alberta

101
and urban areas such as Edmonton,
Alberta.
102

TELUS has also invested $712 million in 2014 to expand the 4G LTE network, which meets the broadband target speed of 5/1 Mbps.

103
Bell Canada has also

announced the launch of a 1 Gbps fibre-to-the-home (FTTH) service for “50,000 homes and businesses in Toronto during summer 2015” and, in the future, the expansion of this service to other cities.

104

These are prime examples of telecommunications companies continuing to improve and extend service.

100
Satellite Inquiry Report, p. 34, Figure 5.4.
101

TELUS Fibre, Drayton Valley. https://fibre.telus.com/draytonvalley, accessed **** 29, 2015.

102

TELUS media release, “New TELUS fibre optic network will help spur the next wave of social and economic opportunity for Edmonton.”

http://about.telus.com/community/english/news_centre/news_releases/blog/2015/06/19/test , accessed **** 20, 2015.

103

TELUS team advocacy site, “Network 101 and Industry Facts.” https://advocacy.telus.com/fastFacts/3 accessed **** 29, 2015.

104

TeleGeography, “Bell begins gigabit broadband rollout.” https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029, accessed **** 29, 2015.

file:///C:/Users/T908488/Documents/TELUS%20Fibre,%20Drayton%20Valley.%20https:/fibre.telus.com/draytonvalleyhttp://about.telus.com/community/english/news_centre/news_releases/blog/2015/06/19/testhttps://advocacy.telus.com/fastFacts/3

https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
40

Figure 10 – Figure 5.6: Non-HTS Ka-band satellite coverage and satellite–dependent communities

105
4.2.2.2 Is there a problem?

84. Broadband service to the few small areas without 5/1 Mbps service will be provided by a combination of market forces and Government programs. There does not seem to be a problem with availability.

4.2.2.3 If there is a problem, who should fix it and how?

4.2.2.3.1 The role of the Federal Government

85. If the Commission determines that market forces alone will not ensure the 5/1 Mbps target speed is available to all Canadians, then there are extensive program initiatives now underway by the federal and various provincial and municipal governments to address any residual problems of availability of basic broadband services for Canadians.

105
Satellite Inquiry Report, p. 36, Figure 5.6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
41

86. The Federal Government, especially Industry Canada, is playing a significant role in extending broadband availability through several initiatives. These include the public benefit obligation for some satellite licences, the National Satellite Initiative, the former Broadband for Rural and Northern Development program, the Eastern Ontario Regional Network,

106

and, in particular, the current Connecting Canadians program in which Industry Canada has committed to spend $305 million by 2017 to bring high speed Internet at the 5 Mbps download speed initially to 280,000 Canadians.

107

4.2.2.3.1.1 Industry Canada’s Connecting Canadians program 87. Industry Canada’s Connecting Canadians program anticipates providing “. . . 218,000 households in rural and remote areas of Canada with access to broadband Internet services.”

108

By 2017, the program anticipates that “(o)ver 98% of all Canadians will have access to high-speed Internet at 5 Mbps – a rate that enables e-commerce, high-resolution video, employment opportunities and distance education – providing rural and remote communities with faster, more reliable online services.”109

With Connecting
Canadians announcements now underway,
110, 111
and providers for approved projects

expected to begin building required infrastructure in 2015,112, 113

federal programs are

effectively addressing the few remaining availability gaps in Canada. Notably, a more recent news release from Industry Canada indicates that “(t)he Government has exceeded its Economic Action Plan 2014 target by over 75,000 households in the first round of 106

Eastern Ontario Regional Network: $55 million federal contribution derived from the **** Infrastructure Component of the Building Canada Fund. http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1.

107

Digital Canada 150, p. 8, See also the Commission’s recent report by its Inquiry ****, Commissioner ****, entitled “Satellite Inquiry Report” (October 2014), provides detailed information on governmental programs at the federal, provincial and municipal levels, providing support and subsidies toward the availability of basic telecommunications services via satellite.

108
Digital Canada 150, p. 9.
109
Ibid., p. 7.
110

“High-Speed Internet Coming to Scugog,” Recent Connecting Canadians announcement in Scugog, ON., http://news.gc.ca/web/article-en.do?nid=991709 , accessed July 7, 2015.

111

“High-Speed Internet Coming to Kenora District,” Recent Connecting Canadians announcement in Kenora district, ON., http://news.gc.ca/web/article-en.do?nid=991789 , accessed July 7, 2015.

112

Digital Canada 150, FAQs for ISPs, http://www.ic.gc.ca/eic/site/028.nsf/eng/50009.html , accessed **** 25, 2015.

113

“Improved High-Speed Internet Coming to Nunavut,” Recent Connecting Canadians announcement in Nunavut, http://news.gc.ca/web/article-en.do?nid=997049 , accessed July 9, 2015.

http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1https://www.ic.gc.ca/eic/site/028.nsf/eng/home

http://news.gc.ca/web/article-en.do?nid=991709
http://news.gc.ca/web/article-en.do?nid=991789

http://www.ic.gc.ca/eic/site/028.nsf/eng/50009.htmlhttp://news.gc.ca/web/article-en.do?nid=997049

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
42

project approvals bringing high-speed Internet access to more than 356,000 homes across Canada and nearly 40 percent under budget.”

114

88. Industry Canada’s Connecting Canadians program is expanding high-speed access and extending satellite coverage to all provinces and territories, as shown in Figure 11. These are the areas where Internet performance will be upgraded to 5 Mbps download speed for the first time.

Figure 11: Connecting Canadians Expanding/Extending Coverage Map115

4.2.2.3.1.2 Licensing of wireless spectrum for rural areas 89. In addition, at the federal level Industry Canada spectrum policy supports the availability of spectrum in rural and remote areas for the provision of wireless broadband services and promotes the deployment of wireless broadband infrastructure through strict conditions of licence. Industry Canada has already spearheaded various initiatives to 114

“Improved High-speed Internet Coming to the Kootenays,” Recent Connecting Canadians announcement in the Kootenays, British Columbia, http://news.gc.ca/web/article-en.do?nid=997839 , accessed July 9, 2015.

115

Digital Canada 150, Map showing Internet coverage across Canada to be offered by Industry Canada’s Connecting Canadians program, http://www.ic.gc.ca/eic/site/028.nsf/eng/h_00587.html , accessed July 7, 2015.

http://news.gc.ca/web/article-en.do?nid=997839

http://www.ic.gc.ca/eic/site/028.nsf/eng/h_00587.htmlTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
43

extend broadband services by auctioning off spectrum licences to serve rural and remote areas currently without the 5/1 Mbps target speed.

90. Recently, Industry Canada completed a spectrum licence auction specifically tailored to put valuable 2500 MHz spectrum in the hands of wireless service providers in all areas of Canada, “especially those in rural areas,” recognizing that certain spectrum is “ideal for providing broadband services in rural areas”.

116
Similarly, spectrum in the 700 MHz and

AWS-3 bands left unallocated in previous licensing processes is to be made available later in 2015 in smaller areas in Canada’s **** and under strict deployment requirements. **** of these initiatives share the objective of making the benefits of advanced wireless broadband infrastructure available “to Canadians across the country, including those in rural areas, in a timely fashion.”117

91. These are the most recent spectrum policy initiatives that demonstrate Industry Canada’s commitment to the provision of wireless broadband services in rural and remote areas. In 2013 the Minister of Industry announced that the renewal of licences in the 2300 and 3500 MHz bands would be conducted in a manner so as to ensure that “Canadians living in rural areas benefit from greater access to high-speed Internet services” because fixed wireless access represented “the most affordable high-speed Internet access for many rural Canadians”

118

. Subsequently, Industry Canada released its decisions on policy changes and plans to implement a new licensing process for the 3500 MHz band. These changes include provisions to ensure the continued operation of these fixed wireless broadband services while permitting a transition to a new flexible use allocation.

119
Of

particular note is the inclusion in Industry Canada’s announcements of a quotation from an industry source noting that “the Minister has today affirmed his continued commitment to consumers by acknowledging that the 3500 MHz spectrum plays a 116

Auction results a win for rural Canadians, May 12, 2015 – Ottawa, Industry Canada.

117

Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands, Industry Canada, SLPB-002-15, May 2015, paragraph 4.

118

Statement by Minister of Industry **** Moore on Canada's Spectrum Licensing Framework, Ottawa, November 14, 2013.

119

Decisions Regarding Policy Changes in the 3500 MHz Band (3475-3650 MHz) and a New Licensing Process, Industry Canada, DGSO-007-14, December 2014.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
44

fundamental role in connecting rural Canadians to all the advantages of the digital world.”

120

92. Rural deployment requirements figured prominently in Industry Canada’s policy governing the 2014 auction for 700 MHz spectrum licences.

121
In its policy, Industry

Canada concluded that “700 MHz spectrum is a key enabler for provision of the latest wireless services to Canadians and a condition of licence is required to ensure that services are delivered to a high percentage of rural areas and that they are not unduly delayed.”

122

In comments following the release of the rural deployment obligations as part of the 700 MHz spectrum auction policy, the Minister of Industry remarked, “Our Government has taken action. And now we look to you, our service providers, to deliver higher speeds, extend your footprints and help close the rural–urban gap.”123

93. It is abundantly clear that Government policy considers that the provision of wireless broadband services to Canadians in high cost serving areas is essential for their participation in the benefits of the digital economy and that ongoing efforts by Industry Canada will ensure that the required spectrum is available to Canadians in these areas. In short, the Federal Government has decided that wireless services have a key role to play in remote and rural areas.

4.2.2.3.2 The role of provincial governments

94. Provincial governments have also developed programs that demonstrate the high importance they attach to high speed Internet services.

95. In Alberta, the Alberta SuperNet program is supporting access to connect public institutions across the province. The province has also developed the $5.1 million program, the “Alberta Final Mile Rural Connectivity Initiative,”124

to connect unserved
120

Unprecedented amount of mobile spectrum to be released to Canadians in 2015, December 18, 2014 – Vancouver, Industry Canada.

121

Policy and Technical Framework Mobile Broadband Services (MBS) — 700 MHz Band, Industry Canada, SMSE-002-12, **** 2012.

122
Ibid.
123

Canadian Telecom Summit, Speaking Notes, Minister of Industry, Toronto, **** 5, 2012.

124

Alberta Final Mile Rural Connectivity Initiative, https://www.servicealberta.ca/FMRCI.cfm.

https://www.servicealberta.ca/FMRCI.cfm
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
45
Alberta households. Ontario
125
and Newfoundland and Labrador
126
also have programs

to extend the availability and support the affordability of broadband service in rural areas.

96. In Quebec, TELUS participated in both the “Villages branchés du Québec”127 and “Communautés rurales branchées"

128
programs that have been established to expand

broadband coverage to households in unserved and underserved areas. In 2002, “Villages branchés du Québec” was focused on bringing Internet service to schoolboards and municipalities, while in 2009 the “Communautés rurales branchées” focused predominantly on providing broadband service to businesses and households in rural areas. In 2010, in partnership with Industry Canada and the Government of Quebec’s “Communautés rurales branchées” program, TELUS completed an innovative project to bring broadband Internet service to homes in 31 remote communities via an HSPA+ mobile network. The project is ongoing and boasts a high customer satisfaction (81% in TELUS’ 2014 Gaspé project survey). The project has developed a specific wireless network design to guarantee average speeds of 1.5 Mbps to 8 Mbps in each community and has kept prices comparable to regular TELUS wireline High **** Internet Access (HSIA) service for capacities up to 100 GB.

97. The Connecting British Columbia Agreement of 2011 provides an important example of the ongoing partnership between TELUS and provincial governments to address small regional pockets with limited access to broadband connectivity. On July 29, 2011, the Province of British Columbia signed a 10-year strategic telecommunications agreement with TELUS aimed at increasing broadband connectivity for people in rural and remote areas to 100% by 2021.

129

British Columbia, for example, developed Broadband for B.C.

(or Network B.C.)
130

to help subsidize and support the extension of high speed Internet services.

125

Northern Ontario Heritage Fund, http://nohfc.ca/en/programs/strategic-economic-infrastructure-program.

126

$4.6 million Rural Broadband Initiative, http://www.releases.gov.nl.ca/releases/2014/ibrd/0716n01.aspx.

127

Le Programme Villages branchés du Québec, op. cit.

128

Programme Communautés rurales branchées, Portrait et perspectives, op. cit.

129

Connecting British Columbia Agreement (2011 to 2021), https://news.gov.bc.ca/factsheets/factsheet-network-bc.

130

Broadband for B.C., http://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bc.

http://nohfc.ca/en/programs/strategic-economic-infrastructure-programhttp://www.releases.gov.nl.ca/releases/2014/ibrd/0716n01.aspxhttps://news.gov.bc.ca/factsheets/factsheet-network-bchttps://news.gov.bc.ca/factsheets/factsheet-network-bchttp://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bchttp://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bcTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
46

98. TELUS’ collaborative efforts with various levels of government have been widely recognized. The Premier of British Columbia, **** Clark, for example, recognized TELUS’ contributions and efforts, stating that “TELUS’ continued investment in telecommunications infrastructure across B.C. is good news for families, schools, businesses, and rural communities.”

131
4.2.2.3.3 The role of municipal governments

99. At the municipal level, there are also programs connecting additional households to broadband services. There have already been municipal fibre builds to expand wireline coverage in rural areas. For example, the goal of the FTTP project by the Olds Institute for Community and Regional Development in Olds, Alberta, is to connect residences and businesses to Alberta’s SuperNet.

132

This particular example highlights the productive collaboration between various levels of government and the private sector in a concerted effort to connect unserved or underserved Canadians to the Internet.

100. Additional examples of municipal FTTP programs include the Coquitlam Optical Network Corp. (QNet) in Coquitlam, British Columbia133

and the Kamloops Community
Network (KCN) in Kamloops, British Columbia.
134
A non-exhaustive list of competitor

FTTP deployments, including private and public initiatives, was filed by TELUS as an Annex in the recent Review of wholesale services and associated policies proceeding.

135
131
TELUS News Release,

https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018, accessed **** 23, 2015.

132

“Fibre-to-the-premises project,” http://www.olds.ca/communty/fttp.pdf , accessed **** 23, 2015.

133

“About Us, QNet, http://qnetbc.net/about-us/overview , accessed July 7, 2015.

134

“Community Network Supports Economic Development,” Kamloops community network, http://www.kamloops.ca/it/kcn.shtml , accessed July 7, 2015.

135

Telecom Notice of Consultation CRTC 2013-551, Review of Wholesale Services and Associated Policies, Reply comments of TELUS Communications Company, Appendix C, October 14, 2014.

https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018http://www.olds.ca/communty/fttp.pdf

http://qnetbc.net/about-us/overview
http://www.kamloops.ca/it/kcn.shtml
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
47

4.2.3 Conclusions regarding availability and TELUS recommendations 101. With respect to voice and voice-related services, the Commission should continue its important monitoring role to ensure that all Canadians have access to the basic services recommended by TELUS. If there are gaps in other telecommunications service provider’s territory where these services remain unavailable, the Commission should take the appropriate action.

102. Broadband availability is being addressed by market forces and Government programs at all levels. Government programs like Industry Canada’s Connecting Canadians program and private sector initiatives like TELUS’ broadband network expansion and increased satellite coverage have been successful in extending broadband service to previously unserved or underserved areas. Improvements to wireline technologies like fibre, wireless technologies like LTE and satellite high-throughput technologies like high-throughput signals are poised to provide 5/1 Mbps broadband service to Canadians nationwide. Other initiatives like the licensing of wireless spectrum to rural areas that is now being pervasively used for broadband and that comes with strict deployment conditions, and provincial government programs, such as Alberta’s SuperNet and Network B.C., are addressing current pockets without 5/1 Mbps service. Industry Canada states that 98%,

136
and Xplornet states that 100%,
137
of Canadian households will have
5/1 Mbps service by 2017.

103. The coordination between government agencies is important for efficiency and to avoid duplicative or contradictory efforts. This is consistent with TELUS’ public policy principle 3 that outlines how responsibility is shared between the Government and the Commission to manage availability and affordability issues.

136
Digital Canada 150, p. 7.
137

Xplornet news release, “Xplornet launches fast 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/.

http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
48

Principle 3. Responsibility for developing policies and programs governing BTS availability and affordability objectives is shared by the Government and the CRTC in order to (i) leverage relative institutional competencies; (ii) avoid unnecessary duplication and inefficiency; and (iii) minimize inter-agency conflict and the risk of contradictory regulation.

104. First, any failure of coordination between the Commission and other agencies or levels of government that results in unnecessary duplication and inefficiency violates the Policy Direction. These tenets also imply that the allocation of responsibilities between the Commission and other agencies or levels of government should take into account and leverage relative institutional competencies.

105. Second, the Government of Canada Digital Canada 150 policy is clear that facilitating broadband availability for Canadians transcends telecommunications policy to encompass industrial policy.

138

The affordability of such access, inclusive of the policies requisite to achieving it, constitutes an integral part of social policy. This means that efficient coordination across branches or levels of government is not only advisable, it is essential for effective policy development and implementation. Broadband has attained such an important dimension to Canadians that it transcends the reach or mandate of any individual government actor.

106. Third, in order to avoid inter-agency conflict and the risk of contradictory regulation, the Commission must take into account all existing Government programs as it considers the issues in this proceeding.

107. The Commission’s role should be to support the Government’s initiatives by providing, through its monitoring capabilities and institutional expertise, the information that can underpin governmental programs. This coordination of institutional roles yields the greatest potential to meet the needs of those few Canadians for whom the availability of basic telecommunications services remains a problem, and this coordination will provide all Canadians with access to broadband at the 5/1 Mbps target speed by 2017.

138
Digital Canada 150.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
49

108. The most significant action the Commission can take is to maintain a robust commitment to facilities-based competition policies by limiting unbundling of networks. This will increase network availability and broadband adoption. In the event that the Commission finds in 2017 that there remain pockets of customers that do not have access to broadband service at the 5/1 Mbps target speed, the Commission should take action, in consultation with the Federal Government, and provincial, and municipal governments if they are affected, to devise a plan to provide broadband service to these customers.

4.3 The Scope of the Affordability Problem is Limited 4.3.1 Voice and voice-related services

109. Voice and voice-related services are affordable for virtually all Canadians. Basic voice service is affordable, and the ancillary services that TELUS submits are also basic services and most are included with basic voice service at no additional charge.

110. Voice and voice-related services are affordable for two reasons. First, when rates for voice and voice-related services are regulated by the Commission, then, by default, they are just and reasonable and, hence, affordable. Second, rates in forborne areas are set in a competitive market and are presumptively affordable.

4.3.2 Broadband services

4.3.2.1 What is the current situation and is there a problem?

111. There are three types of affordability issues to consider: 1) high prices in high-cost serving areas (HCSAs); 2) high price as a general deterrent to adoption; and 3) low income users. After describing the current situation for each of these three types of affordability, the next step is to determine whether there is a problem and, if so, who is responsible for addressing it.

112. The first two types of affordability require no action by the Commission. First, there is no evidence that broadband prices in HCSAs are unduly high compared to broadband prices in non-HCSAs, and prices in HCSAs are set in a competitive market and are TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
50

deemed affordable. Second, the available evidence confirms that the price of broadband is not a major deterrent to the adoption of broadband service. **** is merely one of many factors, and not the most important one, deterring some people from subscribing to broadband service.

113. However, the third type of affordability regarding low income users may require some government action, but the Commission is not the agency or institution of government in the best position to address an income redistribution problem.

4.3.2.1.1 The first type of affordability: higher prices in high cost serving areas (HCSAs)

114. A potential affordability problem is that higher costs can lead to higher prices in HCSAs.

However, there is no evidence that broadband prices in HCSAs are unduly high compared to broadband prices in non-HCSAs, and for the vast majority of Canadians, including those in non-HCSAs, broadband prices are set in a competitive market and are deemed affordable. The Commission’s policy of relying on platform competition and market forces is working well to provide the requisite pricing discipline. The market has provided competitive pricing for both voice and broadband landline as well as voice and data wireless services.

115. Furthermore, in spite of its low density, Canada compares favourably on an international basis with respect to broadband service availability, quality and pricing. For example, Dr. **** concludes that “… the prices of Canadian broadband and mobile wireless services are low to moderate by international standards despite the obvious high costs of providing such services in Canada’s low population-density environment.”139

Dr.

**** also finds that Canadian broadband prices are below the OECD average.

116. The Oxford Internet Institute shows that Canadian broadband prices are among the most affordable in the world, as shown in Figure 12.

139
****, op. cit., Section B.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
51

Figure 12 – Cost of broadband subscription as percentage of average yearly income

140

117. It is important to note that in past decisions the Commission has permitted or stated that it would permit, with cost support, higher prices in high cost areas than in non-high-cost areas. In Local Competition, Telecom Decision CRTC Decision 97-9, the Commission concluded that “it is appropriate to maintain rural rates at levels which are not greater than the rates paid by urban customers, unless it can be demonstrated that circumstances warrant higher rates in rural areas.”

141
In Implementation of Regulatory Framework:

Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, the Commission stated that “the evidence in this proceeding supports previous findings that local services are priced, on average, below cost.”142

Also, the Commission determined

that “. . . in the regulated HCSAs of all large and small ILECs where subsidies have not yet been eliminated and monthly rates are below $30, these rates can be increased, as discussed below, to the lesser of $30 or the amount required to eliminate subsidy.”143

Rates approved by the Commission are just and reasonable and, therefore, presumptively 140

Oxford Internet Institute University of Oxford, “Oxford Internet Institute Map of Broadband Affordability,” http://geography.oii.ox.ac.uk/?page=broadband-affordability , accessed July 10, 2015.

141

Telecom Decision CRTC 97-9, Local Competition, paragraph 162.

142

Telecom Decision CRTC 95-21, Implementation of Regulatory Framework: Splitting of the Rate Base and Related Issues, section IV: Rate Rebalancing.

143
TRP 2011-291, paragraph 122.

http://geography.oii.ox.ac.uk/?page=broadband-affordabilityTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
52

affordable for the vast majority of Canadians. Furthermore, the following two initiatives by the Government and by the private sector will also result in affordable rates.

118. First, Industry Canada’s Connecting Canadians program put out for bid the provision of broadband service meeting the 5 Mbps download target speed in unserved and underserved areas. The projects selected by Industry Canada receive contributions of up to 50% of total eligible costs for rural and remote areas and up to 75% of total eligible costs for very remote communities and Aboriginal communities to be used towards the total cost of the ISP’s project.

144

The program states that the “government is committed to ensuring that Canadians in rural and remote regions of our country have access to affordable broadband services.”

145

In order to ensure that affordable prices are being charged to these users in remote and rural areas, Industry Canada states that “projects with a lower monthly cost for subscribers rated higher on this criterion than projects with a higher monthly cost for subscribers.”

146

In other words, even though the inhabitants in rural or remote areas might be charged higher prices than those in urban and less-remote areas, Industry Canada has determined that the prices the ISPs intend to charge are affordable.

119. Second, Internet service offered by satellite and fixed wireless and specifically by Xplornet is widely available and affordable. Xplornet recently acquired 42 blocks of 2500 MHz spectrum to extend its service to more rural areas of Canada.

147
It anticipates

that it will offer 25 Mbps broadband service everywhere in Canada by 2017, which is also the year that the Connecting Canadians program is to be completed.

148
Xplornet’s

subscription prices are comparable to the price of broadband elsewhere in Canada.

Xplornet’s 5/1 Mbps service is priced at $59.99 per month, which is comparable to the 144

Digital Canada 150, FAQs for ISPs, “How much funding dos the program provide.” 145

Ibid., “How much will this new service cost?” 146

Ibid.
147

Xplornet news release, “Xplornet communications announces successful acquisition of 42 blocks of 2500 MHz spectrum.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/ , accessed **** 24, 2015.

148

Xplornet news release, “Xplornet announces plan to deliver 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/ , accessed **** 24, 2015.

http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
53

prices offered throughout the provinces where TELUS operates.

149
For example,

according to the CRTC’s 2014 Communications Monitoring Report, the prices for 5/1 Mbps broadband service range from $37-$130 per month in British Columbia, $55-$65 per month in Alberta and $32-$65 per month in Quebec.

150

120. In summary, TELUS concludes that there is no evidence that an affordability problem exists due to high prices charged in high cost areas. Industry Canada has said that the prices for service from ISPs participating in its Connecting Canadians program are affordable. Xplornet’s prices are also affordable compared to the broadband prices of other service providers. Thus, there is no evidence to conclude that there is an affordability problem caused by the price of broadband service at the 5/1 Mbps target speed that prevents Canadians from participating meaningfully in the digital economy.

4.3.2.1.2 The second type of affordability: price as a deterrent to adoption 121. Another potential affordability problem is that the high price of broadband service may deter adoption. However, the available evidence shows that the price of broadband is not a major deterrent to the adoption of broadband service. **** is merely one of many factors, and not the most important one, deterring some people from subscribing to broadband service.

122. Three recent studies have shown that age, education, and income are the primary factors that limit broadband adoption.

151,
152,
153

However, the main reason offered by non-users of the Internet is a lack of interest or no need for the service, which is the reason given by “66.5% of Internet non-users in 2012.”

154
In this study conducted by Statistics Canada

and Industry Canada, only 7.7% of non-users indicated that the cost of service or 149

Xplornet plans and pricing, http://www.xplornet.com/plans-pricing/residential-plans-pricing/ , accessed July 2, 2015 at 10am EST.

150

CRTC 2014 Communications Monitoring Report, p. 183, Fig. 5.3.3.

151

**** Landry and Anik ****, “The Evolution of Digital Divides in Canada,” 2014 TPRC Conference Paper, **** 15, 2014, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2418462.

152

**** Zickuhr, “Who’s not online and why,” Pew Research Center, **** 25, 2013, http://www.pewinternet.org/2013/09/25/whos-not-online-and-why/.

153

“Equipement et Branchement Internet des Foyers Québécois,” Cefrio, NETendances, Vol. 5, No. 2, 2014, http://www.cefrio.qc.ca/media/uploader/NETendances2013_V4N2_Equipement_branchement.pdf 154

**** and ****, op. cit., p. 12.

http://www.xplornet.com/plans-pricing/residential-plans-pricing/http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2418462http://www.pewinternet.org/2013/09/25/whos-not-online-and-why/http://www.cefrio.qc.ca/media/uploader/NETendances2013_V4N2_Equipement_branchement.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
54

equipment was the main reason for not using the Internet. In this same study, the authors present the results of a multivariate statistical analysis and conclude that “education and age are the most discriminating factors in determining an individual’s use of the Internet.”

155

123. In a 2013 study by the Pew Research Center, 34% of Americans surveyed stated that relevance (not interested, waste of time, too busy, don’t need or want) was the principal reason that they did not subscribe to Internet service. Only 19% stated that price (too expensive, don’t have a computer) was the main factor.

156
Another subgroup of users

who use the Internet but not from their residence indicated that the main deterrent to household adoption is the total price (the combination of a lack of computer, the ability to access data another way and the price of the service).

157
None of these studies separates

the price of the broadband service itself from the cost of computers and equipment necessary to access the Internet, rendering it even more difficult to conclude that the price of broadband service itself is a major deterrent to using the Internet.

124. These studies conclude that education, age, and income remain the highest barriers to Internet use. Another recent study, “Équipement et Branchement Internet des Foyers Québécois” also confirms that there is a substantial difference in the percentage of household broadband connections among households with a primary education (44%) versus a university education (94%). Similarly, there is a difference from the oldest users (42% for 75

+

year-olds) to the youngest users (100% for 18-24 year-olds), and from the lowest income (45%) to the highest income (97%) users.

158

125. In addition, some users choose to access the Internet only via a mobile device and do not use wired broadband service. According to the Statistics Canada and Industry Canada study, Internet use with a wireless handheld device increased from 26.2% of all Internet users in 2010 to 48.6% of users in 2012.

159

In addition, the percentage of Internet users accessing the Internet from a mobile device increased over the same time period in both 155

**** and ****, op. cit., p. 14.
156
Zickuhr, op. cit., p. 2.
157
Ibid., p. 12.
158
Cefrio, op. cit., p. 5.
159
**** and ****, op. cit., p. 11, Table 2.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
55

urban (28.3% to 52.1%) and rural (18.4% to 35.4%) areas.

160
The increase in Internet use

with a wireless device is also due to the increased use of smartphones. For example, in Quebec, the number of households with smartphones increased from 42% in 2013 to 53% in 2014.

161

Since the number of mobile Internet users is increasing, some of these users must connect to the Internet using only their mobile devices.

126. As can be seen in many of these studies, the price of broadband service is never a major standalone deterrent but is typically combined with other factors, such as the cost of the necessary technology to support the broadband service (i.e., computers), and the ability to access the data another way (i.e., smartphones). While there are deterrents to adoption, price is only one of many factors, and far from the most important one, discouraging some Canadians from subscribing to broadband services.

4.3.2.1.3 The third type of affordability: low income users 127. The third potential affordability problem relates to low income users. Low income customers, no matter where they live, may have trouble paying for food, rent, broadband Internet service, etc. If low incomes require some income augmentation to make the purchase of all goods and services, including broadband Internet, more manageable, this suggests a solution that goes beyond the jurisdiction of the Commission. TELUS comments on these issues briefly below and discusses them thoroughly in section 5.0 on subsidies.

128. Issues of income and affordability are best dealt with by other government departments, for example, through GST rebates or through tax policies of the Department of Finance.

Issues of affordability arise from a nexus of complex social issues that transcend the scope of telecommunications regulations and cannot be solved with the limited tools at the disposal of a regulator. It is unfortunate, though nonetheless true, that the magnitude of this problem is such that lowering any telecommunications price by a few dollars a month will do little to address systemic, economy-wide problems of income distribution.

160
Ibid.
161
Cefrio, op. cit., p. 6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
56

129. The Commission’s central premise, that basic telecommunications services are vital to meaningful participation in the digital economy, necessarily implies that any outstanding issues of affordability be addressed on an economy-wide basis through general tax revenues rather than through narrow, industry-specific taxes.

162
Indeed, as Professors

**** and Nachbar emphasize, “If we are no longer talking about benefits that are internal to the telecommunications system, but accrue to society as a whole, is it not a little odd that we should be charging telecommunications users to provide a subsidy to telecommunications users?”

163

130. Furthermore, a distinct advantage of any economy-wide tax arises from the fact that the broad nature of the tax implies that the burden of the tax will be spread across the economy in a manner that will not cause the price for any individual good or service to rise by very much. This is significant because the welfare losses associated with a tax increase rise dramatically with the percentage change in prices induced by the tax.

164

131. As a result, direct government funding from general tax revenues should be used to pursue the social objectives underlying the Government’s digital agenda. Tax-based subsidies are not only preferable because they are the least distortionary in terms of market outcomes and incentives to innovate but also, as noted by the Consumer Groups in previous policy reviews, “(t)ax-based subsidies are preferable to service/subscriber-based subsidies insofar as they are more progressive, i.e., less burdensome on low income 162

To cite two examples, food assistance for Canadians is not funded exclusively by the food services industry nor is housing assistance funded exclusively by the housing industry. The structure of this funding is explained by the fact that there is widespread recognition that ensuring subsistence food and housing is an important societal issue, the responsibility for which transcends any one particular industry.

163

**** O. **** and **** B. Nachbar, COMMUNICATIONS REGULATION, St. **** MN: ****/West, 2008, p. 555.

164

H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 29, note 38: “For standard explicit commodity taxes, this point can be explained as follows. From standard microeconomic theory we know that the deadweight loss associated with a tax increases more than proportionally with its per-unit rate.

Consequently, the welfare loss per unit of tax increases as the tax increases. Now, this implies that for a given total tax revenue, the total welfare loss will be smaller if many goods are taxed at a low rate than if few goods are taxed at a high rate, i.e., the larger the tax base the smaller the welfare loss.” TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
57
households.”
165

Tax-based subsidies are the only ones that can successfully target low income Canadians where the subsidies are needed the most.

132. The case for action to address affordability related to geography is also weak. While some provincial and territorial governments contend that the Commission should “ensure that rates are fair and just when compared to the other regions of Canada,”166

this is

simply not realistic and is not in keeping with the prices of other goods and services provided in those areas. Food and transportation are also more expensive in the ****, for example; the prices of these goods and services are not the same as in other parts of the country. Rather, the Government recognizes the higher cost of living in the **** through the tax system and provides various subsidies and tax measures to compensate.

While not diminishing the value of broadband for these communities, TELUS reiterates that tax-based subsidies, as stated in TELUS public policy principle 5 and described in more detail in section 5, from general revenues are best suited to address the special circumstances where affordability is a concern.

133. In addition, various provincial programs are in place to subsidize equipment costs. For example, as part of the B.C. Broadband Satellite Initiative, the Government of British Columbia has partnered with Xplornet to make Internet installation more affordable. The new program offers discounts for the installation of equipment necessary to connect rural British Columbians to high-speed Internet where either wired or wireless broadband is not currently available.

167
165

Telecom Policy Review Panel, Comments of the Consumer Groups (Public Interest Advocacy Centre, the Canadian Internet Policy and Public Interest Clinic, the Consumers Association of Canada, and the National Anti-Poverty Organization), 2005, https://cippic.ca/sites/default/files/CG_TPR_final_rev.pdf, paragraph 257.

166

Telecommunication Policy Review Submissions, 2005, book 6, Government of Newfoundland Submission. See also Government of Northwest Territories Submission, paragraphs 40 and 52 which states a similar position.

167

Xplornet news release, “Community and government partnerships.” http://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=en , accessed July 7, 2015.

https://cippic.ca/sites/default/files/CG_TPR_final_rev.pdfhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
58

4.3.2.2 If there is a problem, who should fix it and how?

134. Nonetheless, if the Commission finds that it should provide rate assistance or subsidize broadband prices in order to assist low income households to meaningfully participate in the digital economy, TELUS recommends that any such program be means tested so as to be limited to low income households and be funded with a broad-based telecommunications charge as explained in Section 5.

4.3.3 Conclusions regarding affordability and TELUS recommendations 135. With regard to voice and voice-related services, the Commission should continue to monitor rates for basic services across Canada. Emergency services, privacy and access services for various disabilities should be pervasively available across Canada. Should there be gaps in areas where these basic services are not affordable, the Commission should take remedial action.

136. There are three types of affordability issues with respect to broadband services in Canada.

The first two types of affordability require no action by the Commission, which is consistent with TELUS public policy principle 2. First, although there may be higher prices in HCSAs, Industry Canada’s Connecting Canadians program as well as Xplornet’s recent initiatives offer affordable service to rural and remote areas. Second, there is no evidence that the price of broadband service is a major deterrent to household broadband adoption. The price of the service is merely one of many factors, and not the most important one, that may discourage households from purchasing broadband service.

137. The third type of affordability, regarding low income users, potentially requires some Government action, but the Commission is not suited to address an income redistribution problem. Any required action is more effectively addressed by public policies, such as direct Government funding from general tax revenues, than by the Commission, which is not equipped with the necessary tools to address issues of income and affordability in a comprehensive and effective manner. Nonetheless, if the Commission determines that it should provide rate assistance or subsidize broadband prices, such a policy should be TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
59

targeted to low income households and funded by a broad-based, non-distortionary telecommunications charge.

4.4 The Need to Increase Adoption

138. Though not explicitly referenced in the Notice, the issue of adoption is addressed by the Commission in its list of questions in Appendix B of the Notice. This is evident in its consideration of barriers to Canadians’ meaningful participation in the digital economy.

While the adoption of voice communication is extremely high in Canada, the adoption of broadband service lags behind voice service. It is therefore important to understand the factors that explain the relatively lower level of broadband adoption in Canada today.

4.4.1 Voice and voice-related services

139. From 2002 to 2012, the combined number of wireline and wireless telephony connections per 100 households rose from 98.7 to 99.2, an extremely high rate of adoption.

168
The

Commission has found that mobile wireless voice services are substitutes for wireline voice services in forborne exchanges.

169
The Canadian experience supports the

Commission’s finding. During this same period, the number of mobile-wireless only homes has grown from 1.7 homes per 100 to 15.7.

170
Among those under the age of 35,

wireless substitution is even more pronounced, as 60% of households in which inhabitants are under the age of 35 are mobile-wireless-only households.

171
The adoption

of voice telephony services is not a concern for the Commission at this time.

4.4.2 Broadband services
4.4.2.1 What is the current situation?

140. Not all Canadians who have access to broadband service have adopted it. For example, the CRTC’s 2014 Communications Monitoring Report shows the gap between 168

CRTC 2014 Communications Monitoring Report, Table 2.0.8.

169
TRP 2011-291, paragraph 48.
170

CRTC 2014 Communications Monitoring Report, Table 2.0.8.

171

Statistics Canada, “Residential Telephone Service Survey, 2013,” (June 23, 2013), http://www.statcan.gc.ca/daily-quotidien/140623/dq140623a-eng.pdf.

http://www.statcan.gc.ca/daily-quotidien/140623/dq140623a-eng.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
60

availability and adoption as being approximately 20% nationally, 14% in British Columbia, 22% in Alberta and 19% in Quebec in 2013.

172
Canadians who have not

adopted broadband at home are limited in their participation in the digital economy. Key to increasing adoption, however, is understanding the barriers that prevent households from engaging in online activities and subscribing to broadband services.

4.4.2.2 Is there a problem?

141. In their paper, “The Evolution of Digital Divides in Canada” **** and **** identify a number of trends in Canada that have contributed to the lagging adoption of Internet services.

173

Using regression analysis to examine a set of socio-economic variables, **** and **** find that age, education and income are key predictors of an individual’s Internet use.

174

Citing statistics from both the 2010 and 2012 Canada Internet Use Surveys, reproduced as Figure 13, the authors show that non-Internet users most often cite a lack of interest and a lack of skills or training as key reasons why they do not access the Internet.

175

The cost of service or equipment was cited as a reason by only 9.1% of non-Internet users in 2010 and only 7.7% of non-Internet users in 2012.

176

The authors suggest that consumer decisions to purchase an Internet subscription are “only modestly sensitive to price, thus rendering access subsidies only partially effective tools in bridging the digital divide.”

177
In another study Carare et al., surveyed

households that do not subscribe to broadband. Two-thirds of those households “indicated that they would not consider subscribing to broadband at any price.”178

172

CRTC 2014 Communications Monitoring Report, Figure 5.3.14 Broadband availability vs broadband subscriptions by province/territory (2013).

173
**** and ****, op. cit.
174
**** and ****, op. cit., p. 10.
175
Ibid., p. 13.
176
Ibid.
177

Ibid. p. 14, citing: A. Chaudhuri, K. Flamm and J. Horrigan, An Analysis of the Determinants of Internet Access, 29 (9-10) Telecommunications Policy (2005), pgs. 731-755.

178

Octavian Carare, **** McGovern, **** Noriega and Jay Schwarz, “The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey,” Information Economics and Policy 30, 2015, pp.19 – 35.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
61

142. The persistence of lagging digital skills among non-Internet adopters has been an on-going issue for ISPs and regulators. Other studies179

have identified skill deficits as

contributing to non-adoption. Notably, Hauge and Prieger challenge the notion that supply-side regulatory responses alone can stimulate broadband adoption. They underscore the importance of focusing on demand-side policies to encourage adoption, including building knowledge, such as digital skills, about new technologies among potential adopters.

180

Similarly, **** shows how different rates of Internet adoption in Japan versus **** Korea, two countries with wide-scale broadband availability, can be explained by well-funded programs targeting usability and affordability, such as digital literacy programs that target Internet population groups that lag behind in terms of Internet adoption.

181
179

For example see **** D. ****, “Policies to Increase Broadband Adoption at ****” (November 2009), http://www.itif.org/files/2009-demand-side-policies.pdf .

180

**** Hauge and **** Prieger, “Demand-Side Programs to Stimulate Adoption of Broadband: What Works?” (14 October 2009), http://ssrn.com/abstract=1492342 , p. 4. [Published in Review of Network Economics, Vol. 9, No. 3, Article 4, 2010.]

181
****, op. cit., p. 2-3.

http://www.itif.org/files/2009-demand-side-policies.pdfhttp://ssrn.com/abstract=1492342

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
62

Figure 13 – Chart 1. **** reasons for not using the Internet182

4.4.2.3 If there is a problem, who should fix it and how?

4.4.2.3.1 Government’s role in addressing broadband adoption 143. Significant barriers to adoption of broadband Internet services by Canadians exist, including a lack of interest, skills, and equipment to access the Internet. Hence, a multi-pronged approach that engages a cross section of government agencies at all levels is necessary. At the present time, this includes programs overseen by Industry Canada, Employment and Skills Development Canada, as well as by provincial Ministries of Education and Infrastructure or Technology. These agencies are funding initiatives to enhance digital literacy and address skill deficits that are significant barriers to broadband adoption.

144. The most important action the Commission can take to increase adoption is to maintain a robust commitment of facilities-based competition. Research183

has shown that

broadband adoption is greater in countries with facilities-based competition.

145. The Federal Government’s Digital Canada 150 policy identifies a number of federal departments that are working to increase Canadians’ use of the Internet and states as a goal that “Canada will rank among world leaders in adopting digital technologies.”184

In

terms of protecting Canadians, the Office of the Privacy Commissioner is involved in the administration of Personal Information Protection and Electronic Documents Act (“PIPEDA”) and education programs to ensure that the privacy of Canadians is protected when they engage in online activities.

185

This will help address the safety and privacy concerns of Canadians.

186

Employment and Social Development Canada administers the Canada Job **** skills training programs, and the Government of Canada provides 182

**** and ****, op. cit., Chart 1. **** reasons for not using the Internet.

183

**** W. ****, **** A. Eisenach and **** T. Ingraham, “The long-run effects of copper-loop unbundling and the implications for fiber,” Telecommunications Policy 37, 2013, pp. 262 – 281.

184
Digital Canada 150, p. 14.
185
Ibid., p. 12.
186
Ibid., p. 11.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
63
grants for internships in high-demand fields.
187
The Business Development Bank of

Canada supports digital technology adoption through its work with small and medium-sized businesses.

188

In addition, Industry Canada works with other government agencies and the private sector through the Computers for Schools program to provide students and interns with improved access to computer equipment and skills training.

189

146. As administrators of the education system in each province and territory, the provincial and territorial governments have the responsibility to include digital literacy in their curricula for all students. Such training will provide students with the skills to actively participate online in a safe manner, understand the benefits and challenges of Internet activities, and build the technologies of the future. In Alberta, for example, students from kindergarten through grade 12 are taught the ICT program of study that aims to provide them with “a broad perspective on the nature of technology, how to use and apply a variety of technologies, and the impact on self and society.”190

4.4.2.3.2 TELUS’ commitment to encouraging greater broadband adoption 147. TELUS works with media literacy organizations and contributes to programs to ensure that Canadians have greater access to computer equipment. Since 2002, TELUS has supported the initiatives of MediaSmarts, and its predecessor the Media Awareness Network, to provide children and teens in Canada with the digital skills they need to work online in a safe and secure manner. For over 20 years, TELUS has supported the Computers for Schools program to improve the accessibility of Canadian students to computer equipment so that they can develop at an early age the computer skills they will need in the future.

148. TELUS also created TELUS WISE (Wise Internet and Smartphone Education), an educational program focused on Internet and smartphone safety to help keep families safe from online criminal activity such as financial fraud and cyberbullying. This program is 187

Ibid., p. 15.
188
Ibid.
189
Ibid.
190

Government of Alberta, “Programs of Studies,” Information and Communication Technologies, Alberta Education, https://education.alberta.ca/teachers/program/ict/programs.aspx .

https://education.alberta.ca/teachers/program/ict/programs.aspxTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
64

available to all Canadians in a variety of ways including in-person seminars, visits to schools and online activities. TELUS WISE content was developed in partnership with leading industry experts and aims to provide timely, informative and relevant information about topics related to Internet safety. To date, TELUS has reached 750,000 Canadians with this program.

4.4.2.4 Conclusions regarding adoption and TELUS recommendations 149. While voice service is used by virtually all Canadians, broadband adoption lags. There is a need to develop policies and programs to reduce barriers to broadband adoption. A number of studies confirm that age, education and income are key barriers to broadband adoption. Overcoming these barriers will require a coordinated effort on the part of multiple government agencies. TELUS encourages the Commission to work collaboratively with Statistics Canada and other key federal departments and agencies to develop programs and policies to overcome these barriers. The Commission should develop a blueprint, based on its additional undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
65

5.0 There Is No Need for Additional Commission Subsidies 150. Based on the findings in the availability, affordability, and adoption sections of this submission, TELUS submits that there is no evidence demonstrating the need for rate assistance or for broadband subsidies at the present time. There is not a broadband availability problem in Canada as market forces and programs at all levels of government are addressing availability. Also, the price of broadband service is not a major deterrent to adoption and, to the extent that there is an income distribution problem, the Commission cannot be effective in solving this problem by adjusting broadband prices.

Although low income users present a potential affordability issue, other agencies and branches of government are better positioned than the Commission to devise solutions to what is first and foremost a socio-economic problem rather than a telecommunications problem.

151. In the event that the Commission determines that there is a need for rate assistance or for a subsidy, a bidding mechanism, either like Industry Canada has used for its Connecting Canadians program, or a reverse auction, can be implemented to minimize the size of any subsidy. Any such subsidy should be funded out of general tax revenues. Failing that, a subsidy should be funded from a broad-based telecommunications charge.

152. Dr. **** discusses a prescription for efficient subsidies in his report.

Professor Austan Goolsbee addressed some of these problems in a 2002 paper, recommending that subsidies be directed only to incremental build-out of facilities in areas that otherwise would not be built.

191
He explicitly

recommended against subsidizing broadband usage by subsidizing the operating costs of carriers or subscriber fees because the subsidy’s effectiveness would be diluted as it would be collected by carriers who would build out anyway or it would accrue to subscribers who would subscribe even without the subsidies. Goolsbee’s recommended subsidy program is also self-liquidating, thereby reducing its cost or allowing a 191

Austan Goolsbee, " Subsidies, the Value of Broadband, and the Importance of Fixed Costs," in **** Alleman and **** Crandall, Broadband: Should We Regulate High-Speed Internet Access? AEI-Brookings Joint Center for Regulatory Studies, 2002.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
66

given amount of subsidy expenditure to have a much greater impact on subscriptions.

192

5.1 The cost of any potential subsidy should be minimized 153. Should the Commission conclude that a subsidy is necessary, a bidding mechanism should be implemented to minimize the overall size of the subsidy. There are two methods to introduce such a bidding scheme: follow the method used by Industry Canada’s Connecting Canadians program or through a reverse auction. With either of these mechanisms, one-time subsidies would be offered for incremental builds by the supplier and not on an ongoing basis to end-users.

154. Industry Canada’s Connecting Canadians program has set a good precedent by putting the provision of broadband service in geographic areas out for bid. The program selects winning bids from ISPs based on various factors, one of the most important being the size of the subsidy required to serve a given region. **** is also using a bidding process to extend broadband services.

193

155. A recent news release by Industry Canada states that “[t]he Government has exceeded its Economic Action Plan 2014 target by over 75,000 households in the first round of project approvals, bringing high-speed Internet access to more than 356,000 homes across Canada, and nearly 40 percent under budget.”

194
Being 40 percent under budget

demonstrates the benefit of bidding or reverse auctions to hold down the cost of these programs.

156. A reverse auction, in which service providers are able to lower their bid to serve a designated region in successive rounds of bidding, has the potential to result in even lower subsidy amounts than a bidding process like the one that Industry Canada has employed. Reverse auctions are being used in other countries, for example in “the U.S.

192
****, op. cit., Section G, paragraph 58.
193

**** McGreevy, “Ireland’s broadband black spots,” The **** Times, http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169 , accessed July 14, 2015.

194

“High-Speed Internet Coming to the Kootenays,” Recent Connecting Canadians announcement in the Kootenays, British Columbia, http://news.gc.ca/web/article-en.do?nid=997839 , accessed July 9, 2015.

http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169http://news.gc.ca/web/article-en.do?nid=997839

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
67

for the Mobility Fund auctions for broadband mobile licences for rural and tribal regions.”

195

5.1.1 First-best approach: a subsidy funded out of general tax revenues 157. Any subsidy that the Commission ultimately deems necessary should be funded out of general tax revenues.

Principle 4. Should financial assistance be necessary to achieve the BTS availability,affordability and adoption objectives, the first-best (“most efficient”) approach requires that it be (i) funded out of a broad-based charge on general revenues; (ii) structured to minimize the degree to which consumer demand is altered by the imposition of the charge; (iii) transparent in application and administration and (iv) targeted to achieve maximum efficiency.

158. It is instructive to discuss in careful detail the underlying rationale for each of the four elements that comprise TELUS public policy principle 4 and to relate these elements to both Section 7 of the Telecommunications Act and the Policy Direction.

159. The first element of TELUS public policy principle 4 notes that a distinct advantage of any economy-wide charge arises from the fact that the broad nature of the charge implies that the burden of the charge will be spread across the economy in a manner that will not cause the price of any individual good or service to rise by very much. This is significant because the welfare losses associated with a charge increase rise dramatically with the percentage change in prices induced by the charge.

160. The second element of TELUS public policy principle 4 calls for the charge to be “structured to minimize the degree to which consumer demand is altered by the imposition of the charge.” This entails levying the charge on goods and services in a manner that induces the least amount of distortion in consumer purchasing behavior 195

CRTC Consultation CRTC 2012-669-1, Review of Northwestel Inc.’s Regulatory framework, modernization plan, and related matter, Testimony submitted on behalf of the First Mile Community Consortium, by professor **** E. ****, Institute of Social and Economic research, University of Alaska Anchorage.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
68

relative to the purchasing behavior that prevailed before the imposition of the charge.

196

The efficiency loss from the imposition of the charge derives from the avoidable nature of the charge. This means that it is optimal to levy the charge in a manner that renders the charge as unavoidable as possible, and this explains why lump-sum or head taxes are considered ideal candidates for taxation—dying is really the only way to avoid them!

197

Charges should therefore be targeted to goods and services with demand patterns that are highly insensitive to changes in price.

198

161. The third element of TELUS public policy principle 4 is that the charge be “transparent in application and administration.” For example, the Commission’s revenue-based per cent contribution charge is not currently visible on the end-user’s bill. The charge is levied on telecommunications service providers that must remit funds to the Central Fund Administrator. TELUS public policy principle 4, element (iii) advocates that this charge be clearly visible on end-users’ bills so that it is transparent and customers are fully informed that this charge is being levied and comprises part of the amount they pay for service.

162. The fourth and final element of TELUS public policy principle 4 is that the financial assistance “be targeted to achieve maximum efficiency.” This element speaks only to adoption and not to availability or affordability. In the case of subsidies for users, this means that there exists no reallocation of available assistance that would yield higher BTS adoption. Another way of stating this element of TELUS public policy principle 4 is that the increase in BTS adoption per dollar of available assistance is maximized. In 196

See, for example, **** Riordan, “Universal Residential Telephone Service,” in HANDBOOK OF TELECOMMUNICATIONS ECONOMICS, **** E. ****, **** K Majumdar and **** Vogelsang eds., Amsterdam: Elsevier, pp. 433-439. The efficiency loss from the tax used to generate subsidies is increasing in the absolute value of the price elasticity of demand, the quantity of output in the market bearing the tax, and the market power present in that market, ceteris paribus.

197

“A tax is nondistortionary if, and only if, there is nothing an individual can do to alter his tax liability.

Economists call taxes that are non-distortionary lump-sum taxes.” **** E. Stiglitz, ECONOMICS OF THE PUBLIC SECTOR, Second Edition, New ****: W.W. **** and Company, 1988, p. 392.

198

In more technical terms, the amount of a tax should vary inversely with the price elasticity of demand for the good or service. [The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.] The more inelastic the demand, the higher the tax, ceteris paribus. Hence, at the optimum in which the efficiency loss from the tax is minimized, the percentage distortion in output as a result of the tax is equal across all goods and services that are subject to the tax. See Frank A. Ramsey, “A Contribution to the Theory of Taxation,” Economic Journal, Volume 37, 1927, pp. 47-61.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
69

addition to constituting sound public policy, this element of TELUS public policy principle 4 is seemingly required by Section 7(f) of the Telecommunications Act that requires the Commission “to ensure that regulation, where required, is efficient and effective.”

163. Any subsidy could be further reduced by targeting low income households as is consistent with TELUS public policy principle 5.

Principle 5. Any test to calibrate the assistance necessary to address affordability concerns should be “needs based” and evaluated with respect to the totality of household expenditures required for a representative basket of basic goods and services rather than on the basis of an individual service (e.g., BTS).

164. This principle explains why the Government should take into account all geographic, cost-of-living differences for the entire representative basket of basic goods and services to ensure that any financial assistance is provided in an economically efficient and socially equitable manner.

199

165. A rebate on the GST based on real “inflation-adjusted” income is one avenue through which the Government could address affordability concerns in a more effective, efficient and equitable manner. It would also serve to target assistance where it is needed most.

200

166. This observation is particularly important given that the Commission is a national regulator in a country that exhibits pronounced variance in regional affordability. It also underscores the importance of TELUS public policy principle 3 and the need for the Commission to coordinate issues of affordability across other agencies or levels of 199

In Germany, the concept of affordability turns on whether the real (inflation-adjusted) price of telephone service for a rural consumer exceeds the corresponding real price for an urban consumer. See H. Cremer, F.

Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 9, note 7.

200

“The FCC has arrived at a similar conclusion with respect to the importance of taking into account regional, cost-of living differences. The FCC considers that it is appropriate to use per-capita income and the cost of living in a local or regional area when determining rate affordability.” Because of the important role of these local factors, the FCC gives primary responsibility to the states in evaluating affordability. See H.

Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 9.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
70

government. The issue here is not whether the Commission should have a role in assessing affordability; clearly it should. The Commission should recognize the importance of distributing financial assistance in a socially equitable and economically efficient manner. Statistics Canada possesses the institutional competency to collect and analyze data concerning affordability.

167. Any subsidy should not distort competition in the market, which is consistent with TELUS public policy principle 6.

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

168. TELUS public policy principle 6 is consistent with Section b(ii) of the Policy Direction that economic regulation should “neither deter economically efficient competitive entry into the market nor promote economically inefficient entry.” It is also consistent with Section b(iii) of the Policy Direction that calls for regulation to be implemented in a “symmetrical and competitively neutral manner.” Indeed, as Professor **** Kahn observes, where regulation continues to be necessary, “it should, to the greatest extent possible, be designed in such a way as to be compatible with competition rather than obstructive of it.”

201

169. TELUS public policy principle 6 also means that no telecommunications services provider should be required to bear any unfunded or under-funded asymmetric service obligation (e.g., rate subsidization, carrier-of-last resort obligation,202

etc.). To the extent

that a telecommunications service provider is required to bear an asymmetric service 201 **** E. Kahn, “Deregulation: Looking Backward and Looking ****,” **** Journal on Regulation, Volume 7, **** 1990, p. 340.

202 For a discussion of the economics underlying carrier-of-last-resort obligations in competitive telecommunication markets, see **** L. Weisman, “Default Capacity Tariffs: Smoothing The Transitional Regulatory Asymmetries In The Telecommunications Market,” **** Journal on Regulation, Vol. 5(1), **** 1988, pp. 149-178.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
71

obligation, it should not be required to do so on a non-compensatory basis, at rates below its actual cost of providing service.

203

170. For all the reasons indicated, general tax revenues would be the best avenue to fund the existing, ongoing efforts by governments at all levels to support the availability, affordability and adoption of basic broadband telecommunications services to that small portion of Canadians currently underserved or unserved.

5.1.2 Second-best approach: a broad-based telecommunications charge 171. In the event that the Commission considers that the first-best approach to generating the funds necessary to provide assistance proves infeasible, a second-best approach, so called because it is the next most efficient approach relative to the first-best approach, would entail a competitively neutral (non-distortionary) charge on all telecommunications service providers. This means that the Commission should not (i) impose under-funded, asymmetric obligations on incumbent providers,

204
(ii) engage in inefficient and

unsustainable cross-subsidization, or (iii) subsidize multiple, competing telecommunications networks that provide comparable functionality.

205
In this regard, it

is significant that Section 1(b)(iii) of the Policy Direction directs the Commission to ensure that regulation is to the greatest extent possible “implemented in a symmetrical and competitively neutral manner.”

172. There are several disadvantages to a broad-based telecommunications charge as compared to a subsidy funded out of general tax revenues. It necessarily follows from 203

It is important to be clear on this point as there will be a natural temptation by some parties in this proceeding to put forward the economically unprincipled concept of the efficient-firm cost standard in a misguided attempt to reduce the size of the subsidies required to provide the basic services in question.

The efficient-firm cost standard was thoroughly canvassed in the course of TELUS’ evidence in TNC 2013-551. See, in particular, Appendix A to the First Intervention of TELUS [Economic Principles to Inform the Scope of Mandatory Competitor Access in the Canadian Telecommunications Industry, January 31, 2014]; and Appendix B to the Reply Comments of TELUS [Determining the Scope of Mandatory Competitive Access in Canadian Telecommunications – What is the Regulator to Do?, October 24, 2014].

See also interrogatory response TELUS(CRTC)31Jul14-16 filed in TNC 2013-551.

204

**** E. M. Sappington and **** L. Weisman, “Regulating Regulators in Transitionally Competitive Markets,” Journal of Regulatory Economics, Vol. 41(1), February 2012, pp. 19-40. [Recommendation 3.

Limit under-funded asymmetric obligations on incumbent suppliers.] 205

**** E. Nuechterlein and **** J. Weiser, DIGITAL CROSSROADS, TELECOMMUNICATIONS LAW AND POLICY IN THE INTERNET AGE, Cambridge MA: The MIT ****, Second Edition, 2013, pp. 304-306.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
72

the above discussion that a narrow, telecommunications-industry based charge is inefficient because it discourages investment and the use of telecommunications services.

206, 207

Section 1(c)(ii) of the Policy Direction requires the Commission to adopt practices “with a view to increasing incentives for innovation and investment in and construction of competing telecommunications network facilities.” In addition, Section 7(g) of the Telecommunications Act states that Canadian telecommunications policy has as its objective “to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services.” The Telecommunications Act also calls upon the Commission “to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications” (Section 7(c)) and “to ensure that regulation, where required, is efficient and effective” (Section 7(f)).

173. Dr. ****’s report also concludes that should a subsidy program be necessary, it should be funded from general tax revenues, not from a charge on telecommunications services.

“Contribution” payments by telecommunications providers to fund subsidies necessarily raise the cost of services provided by theses carriers and, therefore, require higher prices for these services, thereby discouraging their use. The loss in economic value from such narrowly-targeted support regimes is much greater than the loss that results from taxes that are collected from a much wider tax base. Hausman (1998) has estimated that the taxes levied by the FCC on U.S. international and interstate carrier revenues to support universal service more than double the economic cost of providing the universal service subsidies because they substantially reduce subscribers’ use of international and interstate services.

208

If they were funded from general tax revenues, the economic welfare loss would be much lower.

209

174. Therefore, if the Commission decides to implement a subsidy for broadband service, it should consider very carefully the funding mechanism that it implements and the use of 206

**** Hausman, “Taxation by Telecommunications Regulation,” Tax Policy and the Economy, National **** of Economic Research, 1998, Vol. 12, No. 1, pp. 29-49.

207

**** Hausman and **** Shelanski, “Economic Welfare and Telecommunications Regulation: The E-Rate Policy for Universal Service Subsidies,” **** Journal on Regulation, Vol. 16, 1999, pp. 19, 30.

208
Hausman, op. cit., pp. 29-49.
209
****, op. cit., Section G, paragraph 60.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
73

the funds generated so as not to distort the market and to be certain that it is achieving its objectives in the most efficient manner.

5.2 Conclusions Regarding Subsidies and TELUS Recommendations 175. In conclusion, there does not seem to be any need for the Commission to establish a subsidy to provide rate assistance for broadband service, based on the findings in the availability, affordability, and adoption sections of this submission. However, if the Commission determines that there is a need for a subsidy, using a bidding mechanism, similar to the one already used by Industry Canada for the Connecting Canadians program, or a reverse auction, would minimize the size of the required subsidy.

Furthermore, any subsidy should be funded out of general tax revenues, and, failing that, from a broad-based telecommunications charge.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
74
6.0 Summary of TELUS Recommendations

176. The most significant action that the Commission can take is to maintain a robust commitment to facilities-based competition policies by limiting unbundling of networks.

This will increase network availability and broadband adoption.

Basic Telecommunications Services

177. TELUS recommends that a BTS be defined as follows:

 A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for meaningful participation in the digital economy.

178. Based on this definition, the Commission should classify the following services as BTS:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;

 Accessibility-related services for persons with disabilities; and  Access to broadband service at the 5/1 Mbps target speed.

179. The Commission should no longer classify the following services as BTS:

 Access to low-speed Internet at local rates (dial-up);

 Choice of long distance Network (i.e., equal access); and  Requirement of an ILEC to make a copy of a local telephone directory available upon request.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
75

Availability, Affordability and Adoption of Basic Telecommunications Services 180. TELUS recommends the following:

Availability

 The Commission should ensure that ancillary voice services including privacy, accessibility and emergency services are available to all basic voice customers, across all platforms and providers, on a symmetrical basis.

 If pockets of unserved or underserved areas for broadband remain in 2017, the Commission should develop a plan to bring broadband service to these areas, taking into account all likely sources of public programs and private investment.

 The Commission should undertake monitoring activities to track the availability of ancillary voice and broadband services. Enhanced monitoring will inform, focus and direct subsequent Commission actions.

Affordability

 To the extent that there may be an income problem, federal and provincial governments are in a better position to address income related issues by means of tax policy and other initiatives.

 The Commission has a limited ability to address income problems through price reductions for services it regulates, and such policies, if implemented, are likely to be costly and inefficient.

 If the Commission decides, nonetheless, to address income problems through pricing, it should (i) use a bidding process to limit the size of any required subsidy, (ii) fund such a subsidy from general revenues to the extent possible, and (iii), if not possible, implement a broad-based charge on all telecommunications services.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
76
Adoption

 The Government of Canada Digital Canada 150 strategy outlines programs to address the broadband adoption issue.

 The Commission can play a constructive and far-reaching role in conducting and coordinating additional research in this area with other agencies addressing this issue.

 The Commission should develop a blueprint based on these undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

Subsidies
181. TELUS recommends the following:

 No changes are required to the existing local service voice telephony subsidy regime.

 Voice and broadband services are accessible to all or almost all Canadians at affordable rates. To the extent that there is an income problem for some Canadians, it is best solved by other agencies. Public utility rate setting is not the right tool to address systemic income distribution problems. Such challenges need to be addressed more directly by Government.

 Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area,

 The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues; and

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
77

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all

telecommunications services.
* * * End of Document * * *

Intervention: Telus (Intervenor 299)

Document Name: 2015-134.224015.2395442.Intervention(1fcc201!).pdf

CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

TELECOM NOTICE OF CONSULTATION CRTC 2015-134
REVIEW OF BASIC TELECOMMUNICATIONS SERVICES
FIRST INTERVENTION OF
TELUS COMMUNICATIONS COMPANY
July 14, 2015
i
TABLE OF CONTENTS

Executive Summary .................................................................................................................... ES1 1.0 Introduction ..........................................................................................................................1 2.0 The Three Policy Pillars for the Review of Basic Telecommunications Services – the Telecommunications Act Policy Objectives, the Policy Direction and the TELUS Public Policy Principles ..................................................................................................................4 2.1 Telecommunications Act Policy Objectives ........................................................................ 5 2.2 Policy Direction to the CRTC ............................................................................................. 7 2.3 TELUS Public Policy Principles ......................................................................................... 8 3.0 Basic Telecommunications Services: Definition and Proposed Services .........................10 3.1 No Definition of Basic Telecommunications Services in the Telecommunications Act .. 10 3.2 Application of the TELUS Public Policy Principles to Define a Basic Telecommunications Service ............................................................................................ 10 3.2.1 Principle 1. Basic Telecommunications Service (BTS) Definition .......................... 11 3.2.2 The specific technological platform for supplying a BTS is immaterial .................. 15 3.3 Basic Services: Voice Telephony .................................................................................... 15 3.4 Basic Internet Services: Broadband Internet.................................................................... 19 4.0 Availability, Affordability, Adoption: An Assessment of Basic Telecommunications Services and TELUS Recommendations ...........................................................................28 4.1 Summary of Findings in Dr. **** W. ****’s Expert Report .................................. 28 4.1.1 Canada has a high broadband adoption rate compared to other countries ................ 28 4.1.2 Canada requires greater capital and operating costs than other countries ................ 30 4.1.3 Canadian broadband prices are low to moderate by international standards ............ 31 4.1.4 Canada has strong platform competition .................................................................. 33 4.1.5 High broadband speeds are available in Canada ....................................................... 33 4.1.6 Broadband connection of 5 Mbps is sufficient ......................................................... 34ii

4.1.7 How best to design subsidies .................................................................................... 34 4.2 Availability: An Issue Being Resolved ............................................................................ 34 4.2.1 Voice and voice-related services .............................................................................. 34 4.2.2 Broadband services ................................................................................................... 35 4.2.2.1 What is the current situation? ....................................................................... 35 4.2.2.1.1 The role of market forces ............................................................................ 36 4.2.2.1.2 Increasing satellite availability .................................................................... 37 4.2.2.1.3 Other private sector initiatives .................................................................... 39 4.2.2.2 Is there a problem? ........................................................................................ 40 4.2.2.3 If there is a problem, who should fix it and how? ........................................ 40 4.2.2.3.1 The role of the Federal Government ........................................................... 40 4.2.2.3.1.1 Industry Canada’s Connecting Canadians program ............................. 41 4.2.2.3.1.2 Licensing of wireless spectrum for rural areas..................................... 42 4.2.2.3.2 The role of provincial governments ............................................................ 44 4.2.2.3.3 The role of municipal governments ............................................................ 46 4.2.3 Conclusions regarding availability and TELUS recommendations .......................... 47 4.3 The Scope of the Affordability Problem is Limited ......................................................... 49 4.3.1 Voice and voice-related services .............................................................................. 49 4.3.2 Broadband services ................................................................................................... 49 4.3.2.1 What is the current situation and is there a problem? ................................... 49 4.3.2.1.1 The first type of affordability: higher prices in high cost serving areas (HCSAs) ..................................................................................................................... 50 4.3.2.1.2 The second type of affordability: price as a deterrent to adoption ............. 53 4.3.2.1.3 The third type of affordability: low income users ...................................... 55 4.3.2.2 If there is a problem, who should fix it and how? ........................................ 58iii

4.3.3 Conclusions regarding affordability and TELUS recommendations ........................ 58 4.4 The Need to Increase Adoption ........................................................................................ 59 4.4.1 Voice and voice-related services .............................................................................. 59 4.4.2 Broadband services ................................................................................................... 59 4.4.2.1 What is the current situation? ....................................................................... 59 4.4.2.2 Is there a problem? ........................................................................................ 60 4.4.2.3 If there is a problem, who should fix it and how? ........................................ 62 4.4.2.3.1 Government’s role in addressing broadband adoption ................................ 62 4.4.2.3.2 TELUS’ commitment to encouraging greater broadband adoption ............ 63 4.4.2.4 Conclusions regarding adoption and TELUS recommendations .................. 64 5.0 There Is No Need for Additional Commission Subsidies ..................................................65 5.1 The cost of any potential subsidy should be minimized ................................................... 66 5.1.1 First-best approach: a subsidy funded out of general tax revenues ......................... 67 5.1.2 Second-best approach: a broad-based telecommunications charge ......................... 71 5.2 Conclusions Regarding Subsidies and TELUS Recommendations .................................. 73 6.0 Summary of TELUS Recommendations ...........................................................................74 Basic Telecommunications Services ........................................................................................ 74 Availability, Affordability and Adoption of Basic Telecommunications Services .................. 75 Subsidies ................................................................................................................................... 76 Appendices

Appendix A – Expert Report of Dr. **** W. **** entitled “The Performance of the Canadian Telecom Sector: A Policy Perspective.” Appendix B – Basic Telecommunications Services (BTS) Flowchart Appendix C - TELUS’ responses to the “Questions for discussion in this proceeding” listed in Appendix B to the Notice.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES1
Executive Summary

E1. Almost uniquely in the world, Canadians benefit from access to multiple, high quality, advanced networks (LTE and HSPA wireless, copper and fibre, cable and satellite) and high levels of investment, at affordable rates.

E2. With respect to voice services, wireline and wireless networks reach over 99% of Canadians.

E3. With respect to broadband, 94% of Canadian households have access to at least 5 Mbps download speeds over all technologies, 91% over terrestrial broadband and 81% over the mobile broadband network, all at affordable rates. Canadian adoption per household is among the highest in the world, exceeded in only 7 other developed countries, despite Canada’s very low population density and resulting higher costs of deployment. By 2017, all, or almost all, households will achieve the 5/1 Mbps target speed given current private section investment and government programs.

E4. This is a remarkable achievement given the challenges of building networks in a vast, sparsely populated country. This plurality of high quality, competing networks, reaching almost all Canadians, is the direct result of Commission and Federal Government policies that have encouraged robust facilities-based competition. Canadians are well served by the existing Commission and Government frameworks. As a result, only focused changes are necessary to ensure that Canadians continue to have access to affordable, world-class telecommunications services that enable them to participate meaningfully in the digital economy. These changes, and the Commission’s role in implementing them, are explained below.

E5. In this proceeding the Commission will examine the following key questions:

 What are the telecommunications services that Canadians require to participate meaningfully in the digital economy;

 What are the respective roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal), including the TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES2

Commission, in ensuring the availability of modern telecommunications services to all Canadians;

 What changes, if any, are required to the Commission’s existing rules, including the obligation to serve and the basic service objective; and  What new funding mechanism, if any, is required to support the provision of modern telecommunications services necessary for Canadians to participate meaningfully in the digital economy.

E6. The threshold question in this proceeding concerns the definition of a “basic telecommunications service” (“BTS”) in today’s digital economy. Having answered this question,

 the Commission must determine the specific services that should be considered a BTS necessary for Canadians to participate meaningfully in the digital economy;

and

 the Commission must also determine what actions must be taken, if any, and by whom, if these services are not available to all Canadians, on an affordable basis.

E7. The Commission should examine basic telecommunications services using three policy pillars: the Telecommunications Act, the Policy Direction, and a framework of seven public policy principles developed by TELUS. Based on the law, economics and relevant academic literature, TELUS has developed its framework of seven public policy principles to assist the Commission in meeting the terms of the Telecommunications Act and the Policy Direction. TELUS uses these three pillars to examine the issues of availability, affordability and adoption of basic voice and broadband services and to suggest, should any subsidies be required, how they can be minimized and efficiently funded.

What **** TELUS Recommend as a BTS?

E8. TELUS has assessed existing telecommunications services in light of the policy objectives in the Telecommunications Act, the requirements of the Policy Direction, and a framework of seven public policy principles. On the basis of this analysis, the following are BTS:

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES3

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;

 Accessibility-related services for persons with disabilities; and  Access to broadband service at the 5/1 Mbps target speed.

The Government of Canada Has Established 5 Mbps as the Target Download **** for Broadband Service

E9. The Government of Canada has determined that broadband at the 5 Mbps target speed is sufficient to participate in the digital economy. Moreover, Industry Canada’s Connecting Canadian’s program has adopted the same standard. The UK has also endorsed the 5 Mbps standard.

The Commission Must Take Into Account the Realities of Today’s Canadian Telecommunications Services Environment

E10. Today’s Canadian telecommunications services environment is markedly different than that which prevailed when the Commission initially developed policies aimed at ensuring the broad availability of affordable telephone service.

E11. Prior policies were imposed in an environment of monopoly supply of telephone service, and these polices were implemented by means of obligations borne exclusively by incumbent telephone companies providing service over copper lines.

E12. Communications services are now offered over a plurality of ubiquitous, overlapping communications platforms: cable, satellite, telephone company networks, multiple national and regional wireless providers, amongst others.

E13. The Commission’s basic service protections apply to only a minority of these networks and only to incumbent telephone companies. But more Canadians obtain their broadband services from cable companies than from incumbent telephone companies. About 40% TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES4

of Canadians now obtain their residential telephone service from a provider other than the telephone company. Wireless access lines significantly outnumber wireline access lines in Canada.

E14. The Commission’s basic services framework does not yet recognize this sea change in the marketplace and extends only to Canadians that obtain service from an incumbent telephone company offering primary exchange service.

E15. If these services are truly vital for participation in today’s digital economy, then rules concerning the definition of a BTS should be applied symmetrically across providers and platforms so that Canadians are protected regardless of their choice of platform or service provider.

E16. Yesterday’s rules must evolve if they are to protect Canadians in the multi-platform, competitive world of today’s digital telecommunications marketplace.

The Commission Must Take Into Account Canada’s Comparative International Broadband Performance

E17. TELUS has asked Dr. **** W. **** of the Brookings Institution to review Canada’s broadband performance on a comparative international basis and to make recommendations regarding the questions raised in this proceeding.

E18. Dr. **** draws the following conclusions:

 Canada’s broadband adoption is high compared to other countries.

 Canada’s broadband prices are low to moderate on an international comparison basis.

 Canada has strong platform competition and high capital spending on telecommunications infrastructure.

 A 5 Mbps download speed is adequate for Canadians to participate in the digital economy.

 Any required subsidy is best funded out of general tax revenues.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES5
Availability of BTS
What is the current situation?

E19. Voice services provided by landline or by wireless are available to 99% of the population.

E20. Broadband speeds well in excess of the Commission’s 5/1 Mbps target speed, provided on multiple platforms, are available to the vast majority of Canadians.

E21. Broadband service meeting the 5/1 Mbps target speed will be available to all, or almost all, Canadians by 2017.

 This is being accomplished by a combination of private initiatives and federal, provincial and municipal programs.

Is there a problem?

E22. Some ancillary voice services such as privacy, accessibility and emergency services, may not be available to all basic voice customers, although they are ubiquitously available to TELUS customers. This is a question of fact for the Commission to determine.

E23. It is possible that there may still be pockets of Canadians without broadband service meeting the 5/1 Mbps target speed in 2017.

If there is a problem, who should fix it and how?

E24. The Commission should ensure that ancillary voice services such as privacy, accessibility and emergency services, are available to all basic voice customers, across all platforms and providers on a symmetrical basis.

E25. If pockets of unserved or underserved areas for broadband remain in 2017, the Commission should develop a targeted plan to serve those areas or make recommendations to the Minister of Industry and other federal departments that would see further rounds of funding along the Connecting Canadians model.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES6

E26. The Commission should undertake monitoring activities to track the availability of ancillary voice and broadband services. Enhanced monitoring will inform, focus and direct subsequent Commission and broader government actions.

Affordability of BTS
What is the current situation?

E27. Prices for basic voice and ancillary services are affordable.

E28. Basic voice services are either provided at regulated (“just and reasonable”) rates, or subject to a Primary Exchange Service (“PES”) price ceiling, or on a forborne basis as a result of a Commission finding of competition sufficient to protect the interests of users.

Such rates and prices are presumptively affordable.

E29. Most ancillary voice services are included in the price of basic voice services and therefore are provided at no additional charge to the user.

E30. Prices for broadband service meeting the 5/1 Mbps target speed are affordable.

E31. For most Canadians, broadband prices are set in a competitive market and are presumptively affordable as a result of a Commission finding of competition sufficient to protect the interests of users.

E32. Dr. **** finds that Canadian broadband prices compare favorably on an international basis.

Is there a problem?

E33. Broadband prices in high-cost areas are also affordable.

 Prices in high cost areas may differ from prices in non-high cost areas for some service providers, and the Commission has previously permitted cost-based rates to be higher in high cost areas.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES7

 Prices set in competitive markets are presumptively affordable given the Commission’s finding that competition for broadband services is sufficient to protect the interests of users.

E34. Broadband prices are not a major deterrent to the adoption of broadband.

E35. Low income residential customers may have a problem paying for broadband service, just as they may have a problem paying for all other goods and services.

If there is a problem, who should fix it and how?

E36. To the extent that there may be an income problem, federal and provincial governments are in a better position to address income related issues by means of tax policy and other initiatives.

E37. The Commission has a limited ability to address income problems through price reductions for services it regulates, and such policies, if implemented, are likely to be costly and inefficient.

E38. Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area,  The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues;

and

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all telecommunications services.

Adoption of BTS
What is the current situation?

E39. Commission data show that there is a significant gap between broadband availability and broadband adoption.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
ES8

E40. In telecommunications markets like Canada and the U.S., with advanced platform competition across cable, wireline, wireless and satellite infrastructures, encouraging adoption represents a major opportunity to generate additional socio-economic benefits.

Is there a problem?

E41. An examination of the issue shows that educational attainment, digital literacy and other demographic considerations are the major factors influencing broadband adoption.

If there is a problem, who should fix it and how?

E42. The Government of Canada’s Digital Canada 150 strategy outlines programs that begin to address the broadband adoption issue.

E43. The Commission can play a constructive and far-reaching role in conducting and coordinating additional research in this area with other agencies addressing this issue.

E44. The Commission should develop a blueprint, based on these undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

Subsidies

E45. There does not appear to be any need for additional Commission initiated subsidies for voice or broadband services.

E46. These services are accessible to all or almost all Canadians at affordable rates. To the extent that there is an income problem for some customers, it is best addressed by other agencies. Public utility rate setting is not the right tool to address systemic income distribution problems. Such challenges need to be addressed more directly by Government.

E47. Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area, TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
ES9

 The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues;

and

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all telecommunications services.

TELUS Recommendations for Commission Action
E48. TELUS recommends that the Commission:

 Ensure that all voice customers have access to ancillary BTS.

 Continue to monitor broadband availability to support government initiatives by providing, through its monitoring capabilities, the information that can underpin governmental programs.

 Develop a plan to provide broadband service meeting the 5/1 Mbps target speed for any unserved or underserved areas in 2017, which is when a number of ongoing government and private initiatives currently underway will have been completed.

 Maintain a robust commitment to facilities-based competition policies by limiting mandatory unbundling of networks. This will increase network availability and broadband adoption.

 Develop a blueprint, based on its additional undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
1
1.0 Introduction

1. In accordance with section 26 of the Canadian Radio-television and Telecommunications Rules of Practice and Procedure, TELUS Communications Company (“TELUS”) is filing this first Intervention pursuant to paragraph 44 of Review of basic telecommunications services, Telecom Notice of Consultation CRTC 2015-134, dated **** 9, 2015, as amended by Telecom Notice of Consultation CRTC 2015-134-1, dated **** 3, 2015 (“TNC 2015-134” or “the Notice”).

2. Canadian telecommunications services continue to evolve rapidly. Technological advances and consumer preferences are driving competition to provide the best services possible. Basic voice and some ancillary services are currently considered to be basic telecommunications services (“BTS”) and are subsidized from the National Contribution Fund in high-cost areas. However, in light of rapid technological and social change, the issue of what now constitutes a BTS must be reconsidered.

3. Broadband services are now undeniably basic telecommunications services in today’s digital economy. Besides wireline Internet access which Canadians have long enjoyed, mobile wireless data services play an increasingly important role in meeting Canadians needs for Internet access.

4. TELUS has invested billions of dollars to extend its wireline and wireless networks to provide enhanced broadband services to Canadians. TELUS has also worked in partnership with public agencies and other private organizations to provide broadband services where it has not been economical for TELUS do so on its own. For example, TELUS’ recent broadband-related investments include:

 Extending fibre to the premises (FTTP) to over 50,000 subscribers in Alberta and British Columbia, with plans for extensive further builds including in Edmonton, Alberta.

 Extending TELUS’ world-leading long term evolution (“LTE”) wireless network across Canada.

 Launching 8,000 WiFi hotspots in Alberta and British Columbia.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
2

 Working in partnership with the Government of British Columbia to expand broadband facilities to rural and remote areas where it would not otherwise be economical to do so.

 In Quebec, TELUS participated in both the “Villages branchés du Québec”

1
and “Communautés rurales branchées"
2
programs that have

been established to expand broadband coverage to households in unserved and underserved areas.

5. The Commission’s facilities-based competition policies are working to bring world-class voice and broadband services to the vast majority of Canadians. Private sector investment has resulted in broadband deployment by the cable companies, the incumbent telephone companies, wireless carriers, fixed wireless providers, satellite providers and numerous new FTTP providers. The result is Internet access speeds that in many instances far exceed the Commission’s 5/1 Mbps target speed. Canada must continue to encourage innovation and investment going forward to ensure that Canadian broadband networks remain world-class.

6. Certain gaps remain where there are unserved or underserved areas. Market forces, new technologies and targeted government programs, including the Federal Government’s Connecting Canadians program, are working to rapidly close remaining gaps.

7. The definition of basic broadband service must be carefully considered in this context.

TELUS submits that the Commission’s current aspirational 5 Mbps target speed is sufficient for basic telecommunications service. This speed is consistent with the Federal Government’s target speed for its Connecting Canadians program and is consistent with the findings of other jurisdictions in their reviews of this issue.

1

Le Programme Villages branchés du Québec, Culture et Communications Québec, http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050 , accessed **** 25, 2015.

2

Programme Communautés rurales branchées, Portrait et perspectives, Affaires municipales, Régions et Occupation du territoir Québec, https://www.craaq.qc.ca/documents/files/03_Roberge_Daniel.pdf , accessed **** 25, 2015.

http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050http://www.mcc.gouv.qc.ca/index.php?id=3929&tx_ttnews%5Bpointer%5D=14&tx_ttnews%5Btt_news%5D=1254&tx_ttnews%5BbackPid%5D=3927&cHash=6563f07e653acd264fe199257db9a050https://www.craaq.qc.ca/documents/files/03_Roberge_Daniel.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
3

8. Besides being widely available, Canadian broadband services are also largely affordable.

As such, the Commission must carefully consider its role in a multi-actor environment where many initiatives are already underway to deal with the core concerns of availability and affordability. A third core concern, that of adoption, is an issue that is also being addressed by initiatives announced in the Digital Canada 150 policy, such as the Business Development Bank of Canada’s support of small and medium sized businesses with digital technology adoption, and Employment and Social Development Canada who administer Canada Job **** program.

9. TELUS’ first Intervention is organized as follows. In Section 2, TELUS reviews the three policy pillars that it submits should guide the Commission in making its decisions in this proceeding. These three policy pillars are the Telecommunications Act policy objectives, the Policy Direction to the CRTC and a set of public policy principles that have been developed by TELUS. In Section 3, TELUS considers what are basic telecommunications services in today’s digital economy. In Section 4, TELUS addresses the issues of availability, affordability and adoption of basic telecommunications services, and the roles of market forces, government programs, and Commission initiatives in addressing these issues. Section 5 explains that no further Commission subsidies are required at this time. Should the Commission determine that an additional subsidy is required, it should be funded from general tax revenues or, failing that, from a broad-based telecommunication charge. Section 6 provides a summary of TELUS’ recommendations on the key issues under consideration in this proceeding.

10. TELUS attaches three appendices to its first Intervention. TELUS has asked Dr. **** W. **** of the Brookings Institution to prepare a report entitled “The Performance of the Canadian Telecom Sector: A Policy Perspective.” This report, which is found in Appendix A, demonstrates that Canada’s broadband service and prices compare favorably on an international basis. TELUS attaches, as Appendix B, a flowchart entitled “Basic Telecommunications Services (BTS) Flowchart” that summarizes TELUS’ proposed integrated approach to addressing the various issues in this case. Appendix C includes TELUS’ responses to the Commission’s “Questions for discussion in this proceeding,” which were attached to the Notice.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
4

2.0 The Three Policy Pillars for the Review of Basic Telecommunications Services – the Telecommunications Act Policy Objectives, the Policy Direction and the TELUS Public Policy Principles 11. The following paragraphs outline TELUS’ proposed framework to assist the Commission in evaluating the issues that are being examined in this proceeding. TELUS has developed its framework of seven public policy principles derived from the law, economics and relevant academic literature to assist the Commission in meeting the terms of the Telecommunications Act and the Policy Direction.

12. In the Notice, the Commission delineates the scope of the BTS proceeding and its role in addressing issues of availability and affordability.

The Commission will examine which telecommunications services Canadians require to participate meaningfully in the digital economy and the Commission’s role in ensuring the availability of affordable basic telecommunications services to all Canadians.

3

13. The Commission has also identified the following issues to be examined.

The Commission hereby initiates a proceeding to conduct a comprehensive review of its policies regarding basic telecommunications services in Canada and of the telecommunications services that Canadians require to participate meaningfully in the digital economy. In this regard, the Commission will examine how these telecommunications services are used by Canadians, and what prices Canadians should be expected to pay for these services.

The Commission will also examine the availability of telecommunications services to determine which areas in Canada are underserved or unserved.

The Commission will consider what its role should be in ensuring the availability of basic telecommunications services, particularly in rural and remote regions of Canada.

4

14. Further, the Commission has indicated that it will consider barriers that limit or prevent Canadians from meaningfully participating in the digital economy, including digital 3

TNC 2015-134, preamble, paragraph 1.
4
Ibid., paragraph 32-33.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
5

literacy, which TELUS considers is an issue relating the adoption of basic telecommunications services.

5

15. In a manner similar to the Commission, the Federal Communications Commission (“FCC”) has initiated a parallel proceeding that addresses the question of what constitutes a basic service in terms of what is required for participation in the modern economy.

6

The FCC has recognized along with the Commission and the Canadian Government that telecommunications is the lifeblood of the modern economy. In recognition of this fact, all citizens must have telecommunications services capable of supporting a basic use of the Internet including access to applications such as e-mail, e-commerce and distance education.

7

As discussed in greater detail in Section 3 of this first Intervention, the determination of what are BTS derives from the use of services that are necessary for meaningful participation in the digital economy.

16. Before describing the TELUS public policy principles that should inform the Commission’s deliberations in this proceeding, TELUS highlights the legal frameworks that describe how the Commission should go about addressing any outstanding issues related to availability, affordability and adoption of BTS. These requirements are primarily articulated in Section 7 of the Telecommunications Act and the Policy Direction to the CRTC.

2.1 Telecommunications Act Policy Objectives

17. In the Notice, the Commission indicates that it will review the matters raised in this proceeding in light of the Canadian telecommunications policy objectives set forth in section 7 of the Telecommunications Act and will take into consideration the Policy Direction.

8
5
Ibid., Appendix B, Question 1 d).
6

Federal Communications Commission, In the Matter of Lifeline and Linkup Reform and Modernization, Second Further Notice of Proposed Rulemaking, Order on Reconsideration, Second Report and Order, and Memorandum Opinion and Order, WC Docket Nos. 1142, 09-197 and 10-90, Released **** 22, 2015.

https://www.fcc.gov/document/fcc-releases-lifeline-reform-and-modernization-item 7

Ibid.
8
TNC 2015-134, paragraph 37.

https://www.fcc.gov/document/fcc-releases-lifeline-reform-and-modernization-itemTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
6

18. For the purposes of this proceeding, TELUS submits that the most important policy objectives of section 7 of the Telecommunications Act are the following:

(a) to facilitate 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;

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;

(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;

(g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;

(h) to respond to the economic and social requirements of users of telecommunications services; and

(i) to contribute to the protection of the privacy of persons.

19. TELUS submits that in the context of the current proceeding, the section 7 policy objectives indicate that first, Canadians should have access to affordable basic telecommunications services that facilitate their participation in the Canadian economy and provides for their basic needs.

9

Second, any governmental intervention that may be required to address issues related to the availability, affordability or adoption of BTS should be efficient in their application and rely on market forces to the maximum extent possible.

10
9
Telecommunications Act, Section 7 (b).
10
Ibid., section 7 (c) and (f).
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
7
2.2 Policy Direction to the CRTC

20. For the purposes of this proceeding, TELUS submits that the most important requirements of the Policy Direction to the CRTC11

are the following:
(a) the Commission should

(i) rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and (ii) when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;

(b) the Commission, when relying on regulation, should use measures that satisfy the following criteria, namely, those that

(i) specify the telecommunications policy objective that is advanced by those measures and demonstrate their compliance with this Order,

(ii) if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry,

(iii)if they are not of an economic nature, to the greatest extent possible, are implemented in a symmetrical and competitively neutral manner, … (c) the Commission, to enable it to act in a more efficient, informed and timely manner, should adopt the following practices, namely, (i) to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible, and

(iv) to continue to explore and implement new approaches for streamlining its processes.

21. The three seminal themes of the Policy Direction most relevant to the current proceeding are the following. First, the Commission should rely upon market forces to the greatest extent possible to address issues related to the availability, affordability and adoption of 11

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR /2006-355, P.C. 2006-1534, December 14, 2006.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
8

BTS. Second, when regulation is required, it should be implemented in a manner that (i) is efficient and proportionate to the intended purpose; (ii) interferes with competitive market forces to the minimum extent necessary to achieve the desired purpose; and (iii) is symmetrical and competitively neutral to the greatest extent possible. Third, any regulatory processes that are required should be implemented in a streamlined manner that is both minimally intrusive and minimally onerous.

22. TELUS recommends that the Commission use the BTS Flowchart found in Appendix B to evaluate the three BTS dimensions of availability, affordability and adoption.

Specifically, the Commission should first inquire as to whether there is a problem to be solved. If the answer to this question is “no”, then no government intervention is required. If the answer to this question is “yes”, then the Commission’s inquiry should turn to whether the problem is self-correcting by market forces. If the answer to this question is “yes”, then no government intervention is required. If the answer to this question is “no”, then the specific details of the government or regulatory intervention in the marketplace should be specified and carefully calibrated so that it is duly aligned with the three policy pillars.

2.3 TELUS Public Policy Principles

23. The principles developed in this section along with the relevant policy objectives of Section 7 of the Telecommunications Act and the Policy Direction to the CRTC constitute the three policy pillars that TELUS respectfully submits should serve as the foundation for the Commission’s deliberations in this proceeding. As will become evident in the discussion that follows, in some cases there is a degree of overlap between the TELUS public policy principles, Section 7 policy objectives and the Policy Direction. In other cases, the principles provide more operational direction as to the precise manner in which Commission policies should be crafted to ensure the requisite alignment with Section 7 of the Telecommunications Act and the Policy Direction. The TELUS public policy principles are provided in the table below. TELUS applies these principles in addressing the issues raised in the Notice in the remainder of this first Intervention.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
9
TELUS PUBLIC POLICY PRINCIPLES

Principle 1. Basic Telecommunications Service (BTS) Definition. A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for “meaningful participation in the digital economy.” Principle 2. The market is the default for the provision of BTS absent credible evidence that market forces alone are incapable of achieving the BTS objectives for availability, affordability and adoption.

Principle 3. Responsibility for developing policies and programs governing BTS availability and affordability objectives is shared by the Government and the CRTC in order to (i) leverage relative institutional competencies; (ii) avoid unnecessary duplication and inefficiency; and (iii) minimize inter-agency conflict and the risk of contradictory regulation.

Principle 4. Should financial assistance be necessary to achieve the BTS availability,affordability and adoption objectives, the first-best (“most efficient”) approach requires that it be (i) funded out of a broad-based charge on general revenues; (ii) structured to minimize the degree to which consumer demand is altered by the imposition of the charge; (iii) transparent in application and administration and (iv) targeted to achieve maximum efficiency.

Principle 5. Any test to calibrate the assistance necessary to address affordability concerns should be “needs based” and evaluated with respect to the totality of household expenditures required for a representative basket of basic goods and services rather than on the basis of an individual service (e.g., BTS).

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

Principle 7. (Technological Neutrality) The CRTC’s BTS policy should be technologically neutral in the sense that the particular technological platform used to supply BTS is of no particular relevance provided that all performance metrics are satisfied.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
10

3.0 Basic Telecommunications Services: Definition and Proposed Services 24. This section develops TELUS’ views on what is the fundamental issue in this proceeding – what basic telecommunications services do Canadians require to participate meaningfully in the digital economy? Because there is no statutory definition of what constitutes a BTS, TELUS applies the public policy principles it has developed for this proceeding to assist the Commission in its deliberations on this important issue.

3.1 No Definition of Basic Telecommunications Services in the Telecommunications Act

25. It is critical at the outset of this discussion to define what is meant precisely by a BTS.

Notably, the Telecommunications Act does not define a basic telecommunications service despite the fact that the concept itself is referenced throughout the statute.

12
Nor can a

definition of BTS be found in past Commission proceedings. For example, in Telecom Regulatory Policy (“TRP”) 2011-291, Obligation to serve and other matters, the Commission did not state what goals were to be achieved, nor what objectives were to be met in creating basic services beyond identifying particular services. At paragraph 7 of TRP 2011-291, the Commission addresses the various types of telephony features and services that are included in the basic service objective (“BSO”), but does not provide a rationale for why they were included.

3.2 Application of the TELUS Public Policy Principles to Define a Basic Telecommunications Service

26. In the absence of a statutory definition of BTS, and for the express purpose of developing a logical process for identifying the telecommunications services that should be considered basic, TELUS has developed a comprehensive set of public policy principles.

The primary objective of these principles is to provide a sound economic and public policy framework to assist the Commission in its deliberations on the issues raised by this proceeding. The TELUS public policy principles are found in Section 2.

12

For references to “basic telecommunications services” see, for example, Telecommunications Act, ss 2 “telecommunications service provider,” 33 and 46.5 (1).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
11

27. The first TELUS public policy principle defines a basic telecommunications service in terms of a telecommunications service that is necessary or indispensable for meaningful participation in the digital economy.

Principle 1. Basic Telecommunications Service (BTS) Definition. A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for “meaningful participation in the digital economy.”13

3.2.1 Principle 1. Basic Telecommunications Service (BTS) Definition 28. A number of important observations follow directly from TELUS public policy principle 1 and each of them is discussed in turn.

29. First, it is important to recognize that the definition of a basic telecommunications service is likely to vary from one observer to another and defies absolute precision due to the normative nature of the question.

14

Based on the classic construct of Maslow’s Hierarchy of Needs,

15

we can all agree that human survival requires food, shelter and clothing. And yet, reaching agreement on the specific types and quantities of food, shelter and clothing that are required is considerably more difficult, if it is possible at all. In a similar vein, we can all agree that Canadians require telecommunications services in order to communicate and function in a modern society.

13

Essential services have been defined in the following manner. “Essential services are typically defined as services of such importance to the economic and social welfare of the citizenry that universal access to such services at affordable rates remains a key element of public policy.” **** L. Weisman ‘‘Principles of Regulation and Competition Policy for the Telecommunications Industry – A Guide for Policymakers.’’ Report 06-0525, The Center for Applied Economics, Kansas University School of Business, ****, KS, 2006, p. 6.

14

The literature has defined the universal service obligation (USO) “as the obligation of an operator to provide all users with a range of basic services of good quality at affordable rates.” H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 7. In limiting the scope of what services might be considered essential, the authors specifically reference “education, public health or public safety.” 15

This distinction between basic and more advanced telecommunications services is constructively cast in terms of Maslow’s Hierarchy of Needs. This theory is often characterized in terms of a pyramid in which basic physiological necessities of life, including food, shelter and clothing occupy the first level of the pyramid. The second level of the pyramid includes protection and security. Higher levels of the pyramid include elements of self-worth, esteem and social relationships. See **** H. Maslow, “A Theory of Human Motivation,” Psychological Review, Volume 50(4), 1943, pp. 370-96. This article was retrieved from http://psychclassics.yorku.ca/Maslow/motivation.htm.

http://psychclassics.yorku.ca/Maslow/motivation.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
12

30. Second, consistent with the Commission’s statement in the Notice,16 it is reasonable to begin the analysis by defining a basic telecommunications service in terms of a service that is necessary to support the basic functions required for meaningful participation in the digital economy.

17

Once these basic functions have been identified, the Commission’s inquiry turns to the telecommunications services that are necessary to support them. For example, if voice communication via telephone is considered a basic function, then the primary exchange service necessary to support that basic function would be a BTS. Similarly, if e-mail, online commerce and distance education are considered basic functions, the minimum broadband offering necessary to support these basic functions should be a BTS.

18

A level of telecommunications service below this threshold would render it unduly difficult for consumers to participate meaningfully in the digital economy. Conversely, a level of service above this threshold would cross the line between a need and a want in the sense that the service in question may be necessary to support discretionary (non-essential) functions, but is not absolutely required to support the basic functions. Figure 1 shows an application of Maslows Hierarchy of Needs to telecommunications.

31. In the course of the process to determine what constitutes a basic telecommunications service, the Commission may be tempted to inform its decision-making by simply observing the services that are commonly used by Canadians in their everyday lives.

Taking this approach will lead to an incorrect conclusion. For example, whereas many Canadian consumers likely spend a significant part of their disposable income on fast food and video games, it would not be reasonable to conclude on the basis of this 16

TNC 2015-134, paragraph 32.
17

“[T]he universal service system is designed to ensure that everyone, regardless of wealth, has ‘affordable’ access to whatever communications services are deemed essential to participation in modern society.” **** E. Nuechterlein and **** J. Weiser, Digital Crossroads, Telecommunications Law and Policy In The Internet Age, Cambridge MA: The MIT ****, Second Edition, 2013, p. 307.

18

This process is consistent with the approach outlined in a 2012 OECD Report. “Even when countries define universal service in terms of access, it is normally preferable to use a definition of accessibility that is determined by the type of service or services that the network is able to support as opposed to the specific technological characteristics of the network itself. This approach is consistent with the idea that what really matter are the functionalities provided to end-users.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 19.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
13

behavior that consumption of such items is essential in the sense that it is required for basic survival.

Figure 1 – Hierarchy of Telecommunications Services 32. A similar problem arises in drawing conclusions on the basis of casual empiricism as to what telecommunications services are basic in nature. The complexity arises from the fact that the determination of what constitutes a basic or essential service should be independent of the price of the service, but the price of the service invariably affects the demand for a particular service. This explains why simple observations as to what services are commonly used by consumers are necessarily of limited value in drawing reliable inferences as to what constitutes a BTS. Assessments based on such exercises are likely to be under-inclusive when the price of the service is too high and over-inclusive when the price of the service is too low. To summarize, high demand for service A does not establish that service A is basic any more than low demand for service B establishes that Service B is not.

19

It is necessary to go beyond casual empiricism with a deeper inquiry that focuses on the telecommunications services that are necessary to support the basic functions widely viewed as required for meaningful participation in the digital economy.

19

Please see the related discussion in Section 4.2 infra in connection with the proper assessment of affordability.

Basic Telecommunications Services
Discretionary (Non-Essential)
Telecommunications Services
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
14

33. In a world of rapid technological change there will inevitably be calls from some parties to greatly expand the scope of service offerings that should be considered basic. For the purpose of this proceeding it is important to recognize that these services are not costless to provide, and there are practical limits on what can reasonably be funded out of general revenues and greater limits still on what can be financed from the telecommunications industry.

20

The logical implication is that there are tradeoffs between expanding the definition of BTS on the one hand and fostering efficient competition and encouraging innovation and investment in the telecommunications sector on the other hand.

21

34. It is therefore important that the Commission’s policy design for BTS strikes the appropriate balance between affordability and high quality telecommunications services responsive to the evolving social and economic requirements of Canadians called for in Sections 7(a), 7(b) and 7(h) of the Telecommunications Act and the efficient competition, research and innovation specified in Sections 7(c), 7(f) and 7 (g) of the Act.

This

observation necessarily raises the question as to whether the Commission’s adoption objectives necessary for meaningful participation in the digital economy should vary across services and geography – from 100% adoption for primary exchange voice service nationwide to less than 100% adoption of high-speed broadband in the most remote regions of the country.

22, 23

This approach recognizes that for the most basic telecommunications services (e.g., voice telephony), universal service is the goal, 20

See also TELUS public policy principle 3 and the related discussion of funding assistance programs in Section 5 infra.

21

The FCC found, for example, that an overly broad definition of universal service might undermine the fundamental goal of the 1996 Act, namely, preserving the provision of universal service without hindering efficient competition. See H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 10.

22

“It is often recognized that universal availability of broadband services may not necessarily yield universal service-like household penetration, though the provision of affordable access is an important goal.” Telecommunications Regulation Handbook, World Bank, Washington, D.C., 2011, p. 154.

23

For example, the more remote regions of the country do not have the same infrastructure, such as highway systems and airports, as the larger Canadian cities. In point of fact, Industry Canada on behalf of the Government of Canada recently announced funding for broadband services in the **** that would provide download speeds of 3 Mbps. See http://news.gc.ca/web/article-en.do?nid=997049. A performance metric of 3 Mbps (< 5 Mbps) is considered by Industry Canada to be sufficient to support the basic Internet applications required by Canadians in this region of the country.

http://news.gc.ca/web/article-en.do?nid=997049
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
15

whereas for more advanced telecommunications services (e.g., Internet broadband) universal access may well be the goal.

24

3.2.2 The specific technological platform for supplying a BTS is immaterial 35. Once the set of basic telecommunications services has been well defined, the Commission should remain agnostic with respect to the particular technological platform (wireline, wireless or satellite) that is used to deliver these BTS to consumers. If the Commission were to do otherwise, it would violate the principle of minimally intrusive regulation called for in Section 1 (a)(ii) of the Policy Direction to the CRTC. This section of the Policy Direction states that Commission should “when relying upon regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.” The concept of technological neutrality is stated in TELUS public policy principle 7.

Principle 7. (Technological Neutrality) The CRTC’s BTS policy should be technologically neutral in the sense that the particular technological platform used to supply BTS is of no particular relevance provided that all performance metrics are satisfied.

25
3.3 Basic Services: Voice Telephony

36. In TELUS’ view, the process used to define basic telephony services represents an opportunity for the Commission to establish service and feature/functionality floors for consumers. A key theme that TELUS recognizes in its policy prescription is that technological change in combination with the ever-increasing intensity of market forces demands a dynamic BTS classification; services will necessarily be added to the list and subtracted from the list of basic telecommunication services over time. This should not 24

The literature differentiates between universal access (UA) and universal service (US). UA refers to universal access or shared access at a public place. US refers to every individual or household having service that is private in nature. Telecommunications Regulation Handbook, **** Blackman and **** **** eds., World Bank, Washington, D.C., 2011, p. 155.

25

See Telecommunications Policy Review Panel, Final Report, 2006, p. 8-18 (underscoring the need for competitive and technological neutrality).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
16

be surprising in light of the fact that subsistence levels of nutrition and shelter are markedly different today than they were a decade or two ago.

37. TELUS submits that voice telephony for residential customers should continue to be a basic service along with the vast majority of the existing telephony safeguards and features. TELUS submits that the following services are BTS:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;26 and

 Accessibility-related services for persons with disabilities.27 38. In the context of Maslow’s Hierarchy of Needs, the services listed above reside exclusively on the first level of Maslow’s hierarchical pyramid as modified for telecommunications services as shown in Figure 1. TELUS deems these services to be basic in nature for the simple reason that they are necessary for basic societal participation and/or provide important safeguards for the security and protection of Canadian consumers. It is readily apparent that Canadians cannot participate meaningfully in the digital economy without the basic telephony services identified above.

39. There are three services included in the current BTS classification that should be removed. They are:

 Access to low-speed Internet at local rates (dial-up);

 Choice of long distance Network (i.e., equal access); and 26

This was initially discussed in CRTC 2011-291 at paragraph 7.

27

While the Commission’s CRTC 2011-291 decision at paragraph 7 discusses the provision of voice message relay, it is important to note that the Commission also decided that video relay service (VRS) must be offered in Canada and that funding would come from the National Contribution Fund (NCF) in order to make this available. See CRTC, Telecom Regulatory Policy 2014-187 – Video relay service, (22 **** 2014).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
17

 Requirement of an ILEC to make a copy of a local telephone directory available upon request.

28

40. None of the above services meets the TELUS definition of a BTS. As TELUS outlines in its introduction, and the Commission makes clear in its Notice, growth in the digital economy renders broadband necessary for Canadians. In particular, as the number of online activities grows, so too will the necessary capacities and speed capabilities that consumers require. In this environment, the provision of low-speed Internet at local rates can no longer be considered a BTS. As the Commission looks to the future to define broadband as a basic telecommunications service, the mandate for ILECs to provide dial-up Internet to customers becomes increasingly superfluous. The requirement for low-speed access to the Internet (dial-up) at local rates is now obsolete. This current element of the BSO is also contrary to TELUS public policy principle 7 (Technological Neutrality) in that it is technology specific and does not recognize that access to the Internet is possible by numerous other means in today’s multi-platform, competitive environment. The classification of dial-up Internet as a BTS further violates technological neutrality in that it applies only to the ILECs that have the obligation to serve for voice services. Neither TELUS nor any other service provider should have an obligation to serve for broadband services.

41. Today, many consumers avail themselves of one-stop shopping by purchasing a bundled package of local and long distance voice services from a single provider. Customer choice as to which provider supplies these services, among TSPs, cable companies or wireless carriers, provides sufficient competitive protections for consumers.

29
Use of the

equal access functionality has declined precipitously since 2008,30

indicating that the vast

majority of consumers obtain their long distance services from their local service provider or through alternative means such as wireless VoIP or dial-around service.

Increasingly, consumers cut the cord on their wireline local service in favour of mobile 28

This is outlined in CRTC 2011-291, at paragraph 7.

29

Section (a)(i) of the Policy Direction to CRTC states that “the Commission should rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives.” 30

See sec 3.1 of the Second Intervention of TELUS in the proceeding initiated by Telecom Notice of Consultation CRTC 2013-551, Review of wholesale services and associated policies, October 15, 2013 (the “Wireline Wholesale Services Proceeding”)

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
18

wireless or VoIP, options that preclude the choice of a long distance provider. This is yet another strong indication that equal access is now largely meaningless for most consumers.

42. This recommendation also recognizes that the market is the default in a manner consistent with Section 1(a)(i) of the Policy Direction that the “Commission should rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives . . .”

31
To do otherwise would needlessly distort

the competitive process in a manner that works at cross purposes with TELUS public policy principle 6.

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

43. By similar reasoning, the type of information provided in traditional, paper-based local phone books is now readily available on the Internet in more resource-friendly formats and is therefore no longer a requirement for consumers. It is noteworthy that TELUS provides printed directories only upon request and, even though they are available free of charge, very few TELUS customers choose to receive them.

44. In summary, whereas the level of Internet services required to participate in the digital economy may be the principal focus of this proceeding, for TELUS customers, and for many Canadians, voice services remain an important basic service. And yet, the classification of BTS must of necessity be dynamic in that it changes over time as the basic needs and requirements of Canadians change.

32, 33
This implies that some services,
31

Indeed, as Professor **** Sappington has observed, “It is generally preferable to replace regulatory control with the discipline of competition when competition provides adequate protection for consumers.” **** E. M. Sappington, “Price Regulation,” Handbook of Telecommunications Economics, ed. by **** ****, **** Majumdar, and **** Vogelsang, Amsterdam: ****-Holland, 2002, Chapter 7, p. 265, note 58.

32

The Telecommunications Policy Review Panel, Final Report, 2006 observes that “The challenge of achieving ubiquitous access to telecommunications networks is ongoing and evolves anew with each new generation of technology” (p. 8-6). See also H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, pp. 8-10 (noting that the FCC has “recognized that the definition of universal service should evolve and be reconsidered in the future.” p. 10.)

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
19

such as broadband, should be added to the list of basic telecommunications services, whereas other services, such as paper directories, should be dropped from that list and for similar reasons.

3.4 Basic Internet Services: Broadband Internet 45. In 2011, the Commission adopted an aspirational target speed for broadband services of 5 Mbps downstream and 1 Mbps upstream for Internet service (“5/1 Mbps”), but did not include broadband as part of the BSO. One of the central questions posed by the Commission in this proceeding concerns whether broadband should be considered a basic telecommunications service. In TELUS’ view, broadband is undeniably a BTS in today’s digital economy.

34

In recognition of this fact, TELUS is proposing that a 5/1 Mbps target speed be established as a basic telecommunications service.

35
In addition, the 5 Mbps

download speed is the Federal Government standard endorsed by the Minister of Industry.

36

This is also the standard that has recently been proposed in the UK.

37
It is

noteworthy that the proposed UK standard of 5 Mbps is the highest standard of any country on the European continent. In addition, the FCC is currently evaluating the telecommunications services that should be considered basic and whether the universal service framework should be expanded to include a broadband offering. It is significant 33

“The services to be included in the scope of universal access and service (UAS) will change as technology and society change.” Telecommunications Regulation Handbook, World Bank, Washington, D.C., 2011, p.

158.
34

A 2012 OECD Report observes that “broadband availability is expected to become a necessity for meaningful participation in society.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 21.

35

According to the CRTC, 95% of households in Canada have access to 5 Mbps download speeds. CRTC 2014 Communications Monitoring Report 2014, p. iii and Table 5.3.12. In addition, 91% of households have access to 1 Mbps upload speeds. CRTC, Departmental Performance Report 2013-14, 2014, p. 26.

36

Digital Canada 150, Industry Canada, 2014, p. 7. This report confirms that 5 Mbps broadband is sufficient for most popular applications, including e-mail, e-commerce, high-resolution video and distance education.

See also CRTC 2014 Communications Monitoring Report, Figure 5.3.8.

37

In the context of the 2015 Budget, the UK government made the following statement: The government is committed to ensuring that every single household in the UK has access to the basic broadband needed to live and work in the modern world. So we will look to raise the Universal Service Obligation (USO) – the legal entitlement to a basic service – from dial up speeds to 5Mbps broadband. This commitment to all goes further than any other country in Europe. Once in place, a USO would mean that consumers gain a legal right to request installation of 5Mbps capable services at an affordable price.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
20

that the FCC has also found that 5 Mbps is sufficient to support a broad range of popular Internet applications.

38

46. In 2014, Industry Canada in its Digital Canada 150 document stated that the 5 Mbps download speed is “a rate that enables e-commerce, high-resolution video, employment opportunities and distance education.”

39

Industry Canada has also set a goal of achieving wide-scale availability of the 5 Mbps download speed to over 98% of households by 2017.

40

Hence, for the Government of Canada, the Commission’s 5/1 Mbps target speed is a level of performance that meets or exceeds the public policy goals of ensuring that Canadians are able to engage with online web services and participate in the digital economy.

47. Whereas TELUS believes that voice service and broadband should both be considered basic telecommunications services, the characteristics of these two services are fundamentally different. As a result, the analysis underlying the determination that these two services are basic necessarily differs as well. Voice service is binary in nature – Canadians either have access or they do not . . . full stop. In contrast, the determination of what constitutes a basic Internet service contemplates a continuum of performance metrics that depends on the online activities (use of e-mail, access to distance education, engaging in e-commerce, etc.) that are considered basic and, in turn, on the minimum broadband service requirements necessary to support these activities.

41
As a result, a

more nuanced analysis is required to answer the question of what constitutes a basic Internet service and why.

48. TELUS considers the Statistics Canada study, “Individual Internet use and e-commerce, of 2012,” a reasonable starting point to commence the process of understanding the types 38

See https://www.fcc.gov/guides/broadband-speed-guide and https://www.fcc.gov/guides/household-broadband-guide.

39

Industry Canada, Digital Canada 150, Ottawa (2014), “Connecting Canadians,” p. 7.

40
Ibid.
41

A 2012 OECD reports observes that “broadband is not a uniform service and different technologies have different features, costs, and performance characteristics.” Universal Service Policies in the Context of National Broadband Plans, Working Party on Communications Infrastructures and Services Policy, OECD, 27 July, 2012, p. 19. The key point is that while voice service is well-defined, broadband service frequently is not. TELUS adopts the view that a basic broadband service must be defined in terms of the basic activities that it is able to support.

https://www.fcc.gov/guides/broadband-speed-guidehttps://www.fcc.gov/guides/household-broadband-guidehttps://www.fcc.gov/guides/household-broadband-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
21
of online activities in which Canadians engage.
42
This represents the most recent study

by Statistics Canada on this important and timely issue. Reproduced as Figure 2 below, among the most popular activities for Canadians are e-mail, browsing for goods and services online, electronic banking, reading or watching the news, and using social networking websites. These observations notwithstanding, the popularity of online content or web applications cannot inform the Commission on what constitutes a basic use of the Internet any more than pervasive consumption of fast food can speak to the basic nutritional needs of Canadians. The popular web activities identified by the Statistics Canada study serve only to identify Canadians’ online behavior. It cannot and does not speak to the importance of these online activities in providing for the economic and social welfare of Canadians or their meaningful participation in the digital economy.

In other words, these data are not dispositive of the types of basic Internet activities that should be supported by basic telecommunications services.

49. It is useful to invoke the logic underlying TELUS public policy principle 1 (Definition of BTS). In particular, it is necessary to determine whether the online activities identified by Statistics Canada, or a proper subset of these activities, represent the type of basic Internet use that should be supported by the set of basic telecommunications services identified in the course of this proceeding. For example, just as a want does not equate to a need, the use of popular Internet applications does not equate to a basic use of the Internet that is necessary for the economic and social welfare of Canadian citizens or their meaningful participation in the digital economy.

42

Statistics Canada, “Individual Internet use and e-commerce, 2012,” (October 28, 2013), http://www.statcan.gc.ca/daily-quotidien/131028/dq131028a-eng.htm .

http://www.statcan.gc.ca/daily-quotidien/131028/dq131028a-eng.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
22

Figure 2 – Online activities from any location, 201243

50. A number of the popular Internet activities identified in Figure 2 are most accurately characterized as satisfying the recreational and entertainment wants of Canadians rather than representing a basic use of the Internet that meets their basic telecommunications needs to actively engage in the digital economy. For example, downloading and streaming movies, television programming and music certainly allow individuals to be entertained through online services, but these do not rise to the level of being essential to the economic or social welfare of Canadians. In still other cases, it is not abundantly clear whether the popular services identified represent an individual’s basic use of the Internet because communications needs today can be met through other online or telecommunications tools. These include accessing the Internet to make telephone calls and engaging colleagues and friends through social networking sites. In addition, while banking, interacting with government websites and communicating through e-mail enhance the economic and social welfare of Canadians, watching movies and 43

Ibid.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
23

downloading music are properly characterized as discretionary. . . a synonym for which is non-essential.

51. Having established the set of online activities that constitute a basic use of the Internet, while excluding discretionary entertainment and recreational uses, the Commission’s inquiry should next turn to the minimum performance requirements necessary to support these activities. As Dr. **** states in his expert report, “the Commission's 5/1 Mbps target speed, established in Telecom Regulatory Policy 2011-291, is likely to be sufficient for households to participate in the digital economy for the foreseeable future.”

44

Dr. **** further concludes that for most basic uses of the Internet, even in households of up to 3 simultaneous users, the 5/1 Mbps target speed is sufficient to support the majority of household uses. Dr. ****’s conclusion is based partly on the FCC’s Household Broadband Guide as shown in Figure 4. TELUS has also included the FCC’s Broadband **** Guide, reproduced in Figure 3, as additional evidence.

Activity Minimum Download **** (Mbps)
E-mail 0.5
Web browsing

Job searching, navigating government websites 0.5 Interactive pages and short educational videos 1 Streaming radio Less than 0.5

Phone Calls (VoIP) Less than 0.5
Watching video
Standard streaming videos 0.7
Streaming feature movies 1.5

HD-quality streaming movie or university lecture 4 Video Conferencing

Basic video conferencing 1
HD video conference or telelearning 4
Gaming
Game console connecting to the Internet 1
Two-way online gaming in HD 4

Source: Federal Communications Commission, Broadband **** Guide, 2014.

https://www.fcc.gov/guides/broadband-speed-guide Figure 3 – FCC Broadband **** Guide

44

Expert Report of Dr. **** W. ****, “The Performance of the Canadian Telecom Sector: A Policy Perspective,” July 14, 2015, TELUS First Intervention, Appendix A, Section F, paragraph 53.

https://www.fcc.gov/guides/broadband-speed-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
24
**** Use
(Basic functions only:
e-mail, web surfing,
basic streaming
video)
Moderate Use
(Basic functions plus
one high-demand
application: streaming
HD, video
conferencing, OR
online gaming)
High Use
(Basic functions plus
more than one high
demand application
running at the same
time)
1 user on 1 device
(e.g., laptop, tablet, or
game console)
Basic Basic Medium
2 users or devices at a
time
Basic Basic Medium/Advanced
3 users or devices at a
time
Basic Basic/Medium Advanced
4 users or devices at a
time
Basic/Medium Medium Advanced
Basic Service = 1 to 2 Mbps
Medium Service = 6 to 15 Mbps
Advanced Service = More than 15 Mbps

Source: Federal Communications Commission, Household Broadband Guide, 2014.

https://www.fcc.gov/guides/household-broadband-guide Figure 4 – FCC Household Broadband Guide

52. The available evidence therefore establishes that the 5/1 Mbps target speed is sufficient to support the needs of multiple, simultaneous users of the Internet. This standard, however, is arguably higher than it needs to be because there is another dimension of consumer behavior that must be taken into account in determining the minimum speeds that are required to support basic Internet activities. Unlike basic voice telephony, consumer demand for Internet applications can be shifted across time and location. For example, children and young adults are able to utilize schools and libraries for Internet access, while their parents can access such services at work and at public locations. What is more, not all of these Internet applications are time critical. It is possible for children and young adults to shift their demand to different times of the day, for example, such as when their parents are at work. Similarly, parents can shift their demand to times when their children are sleeping or away from home.

53. The essential point is one that has long been recognized in the economics of public utilities, such as electric power, and that is the ability of consumers to shift demand from https://www.fcc.gov/guides/household-broadband-guideTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
25
peak to off-peak periods.
45

In fact, so-called smart appliances, including dishwashers, clothes washers and dryers, now incorporate delayed start features for precisely this reason. Similarly, modern technology enables Internet users to schedule downloads and uploads for times of low demand when their usage does not impose congestion externalities on other members of the household. The central point, which should be obvious, is that an assessment of a basic use of the Internet does not necessarily mean that all family members should be able to simultaneously engage high-bandwidth applications within their domicile, necessitating faster broadband service speeds.

46

54. A basic 5/1 Mbps target speed broadband service meets the criteria outlined in TELUS public policy principle 1 for a basic telecommunications service. Furthermore, the overwhelming weight of the evidence is that the 5/1 Mbps target speed proposed by TELUS is sufficient, arguably more than sufficient,47

to meet the basic communications

needs of Canadians. This policy prescription is consistent with a recent decision by the UK Department for Culture Media & Sport, through their digital communications infrastructure strategy, to change the UK’s Universal Service Obligation and raise the basic broadband speed for all regions from dial-up to 5 Mbps.

48
Finally, according to the

Commission’s own 2014 Communications Monitoring Report, Figure 5.3.8 reproduced as Figure 5, capacity requirements for a basic use of the Internet, including using e-mail, web surfing, audio streaming and video conferencing, require no more than the 5/1 Mbps target speed. Therefore, TELUS submits that its proposed 5/1 Mbps target speed for 45

See, for example, **** V. **** and John Tschirhart, NATURAL MONOPOLY REGULATION, New ****:

Cambridge University ****, 1988, chapters 5 and 6.

46

Another example is the use of the family car. There is no reasonable expectation that any family member should be able to travel anywhere s/he wants at any time s/he wants without coordination with other family members. Indeed carpools, ridesharing and public transportation are efficient resource-allocation mechanisms that families frequently employ to address automobile scarcity within the household. This example begs the question as to whether the requirements for basic Internet should differ markedly from the requirements for basic transportation with respect to the metric of simultaneous use.

47

On July 7, 2015, Industry Canada announced funding for broadband services in the **** that would provide download speeds of 3 Mbps. See http://news.gc.ca/web/article-en.do?nid=997049. A performance metric of 3 Mbps is considered by Industry Canada to be sufficient to support the basic Internet applications required by Canadians in this region of the country.

48

UK, Department for Culture Media & Sport and HM Treasury, “1.2 Government strategy for rural areas,” Policy paper: The digital communications infrastructure strategy, (18 **** 2015), https://www.gov.uk/government/publications/the-digital-communications-infrastructure-strategy/the-digital-communications-infrastructure-strategy.

http://news.gc.ca/web/article-en.do?nid=997049
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
26

broadband is sufficient to serve the needs of Canadians to participate meaningfully in the digital economy.

Figure 5 – Figure 5.3.8 Popular Internet applications – Bandwidth requirements49

55. The Commission’s strong commitment to facilities-based competition in Canada has given rise to a multitude of technological platforms and service providers capable of supplying the 5/1 Mbps target speed to Canadian consumers. These options include wireless, wireline and satellite. Hybrid technologies such as fixed wireless access technologies can also provide a valuable service to customers in rural and remote serving areas. What is not important, as duly recognized in TELUS public policy principle 7 (Technological Neutrality), is the particular technological platform that is used to provide this level of broadband service to consumers. In this respect, it is important that the Commission not deviate from the path of technological neutrality and not simultaneously 49

CRTC Technology Resource Centre, CRTC 2014 Communications Monitoring Report, (October 2014).

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
27

violate the principle of competitive neutrality as recognized in TELUS public policy principle 6.

50

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

56. What this means, of course, is that a Commission preference for a particular technological platform logically implies a preference for a particular telecommunications service provider or class of providers that make use of that particular platform. The necessary implication is that all telecommunications service providers that are technologically capable of supplying the 5/1 Mbps target speed should have a fair and equal opportunity to compete on the merits.

51
50

See Telecommunications Policy Review Panel, Final Report, 2006, p. 8-18 (underscoring the need for competitive and technological neutrality).

51

The term “competition on the merits” refers to the basic idea that the returns that a firm enjoys should reflect its superior efficiency and business acumen in the marketplace vis-à-vis its relatively less proficient rivals. In United States v. Aluminum Co. of Am., 148 F.2d 416, 430 (2d Cir. 1945), **** Learned **** observed that “A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry. . . . The successful competitor, having been urged to compete, must not be turned upon when he wins.” For a more recent discussion of the term “competition on the merits” and its role in differentiating between competitive and exclusionary behavior in antitrust enforcement, see Antitrust Modernization Commission, Report and Recommendations, Washington D.C.

2007.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
28

4.0 Availability, Affordability, Adoption: An Assessment of Basic Telecommunications Services and TELUS Recommendations 4.1 Summary of Findings in Dr. **** W. ****’s Expert Report 57. Dr. **** W. ****’s report52 in Appendix A responds to several of the issues raised by the Commission in the Notice. These include the availability, quality and price of broadband services in Canada and how Canadian broadband service compares to broadband service in other developed countries. The report also reviews available data on the price of mobile wireless services in Canada and other countries. Dr. **** then examines the available evidence on broadband speeds that are required for Canadians to participate meaningfully in the digital economy. Finally, the report addresses important issues in the design of any subsidy program that might be required to extend service to unserved or underserved areas in Canada.

58. The main conclusion that can be drawn from the report is that market forces are working, and working well, to provide most Canadians with broadband service sufficient to participate meaningfully in the digital economy. **** wireline and wireless Canadian broadband services compare favorably in terms of availability, quality and price on an international basis. Canadian broadband adoption is also among the highest in the world.

4.1.1 Canada has a high broadband adoption rate compared to other countries 59. Dr. **** concludes that “Canadian broadband penetration [adoption] per household is among the highest in the world, exceeded in only 7 other developed countries, most of which have much greater population density than Canada.”53

Figure 6 in Dr. ****’s

report, reproduced as Figure 6, shows that Canada's broadband adoption, measured in terms of subscribers per 100 inhabitants, is well above the OECD average. By this measure, Canada ranked 12th among OECD countries in the middle of 2014.

54
In fact,
52
****, op. cit.
53
Ibid., Section B.
54

OECD Broadband Portal, available at http://www.oecd.org/internet/oecdbroadbandportal.htm.

http://www.oecd.org/internet/oecdbroadbandportal.htmTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
29

Canada ranks much higher in broadband adoption per household and is the 8th highest in the OECD.

55

Figure 6 - Figure 6 OECD Fixed (wired) broadband subscriptions per 100 inhabitants, by technology, **** 2014

56

60. This high level of broadband adoption was achieved despite high costs of broadband deployment due to Canada’s low population density. For example, Dr. ****’s report indicates that Canada has the third lowest population density among the 34 advanced OECD countries

57

and has a much lower population density outside its urban areas than other OECD countries. Dr. **** also presents the results of a recent study finding that Canada’s rural population density is the lowest among the G-7 countries.

58

61. Canada’s broadband adoption has been further enhanced by a very competitive wireless market that has led to the widespread deployment of 4G LTE and therefore very high speed connections. According to Dr. ****’s report, 55

Estimates based on OECD broadband penetration data for **** 2014 and OECD estimates of average household size, available at http://www.oecd.org/els/family/47710686.pdf. Note that the data published by the FCC in its 2015 International Broadband Report are older and thus place Canada at a slightly lower ranking.

56
****, op. cit., Section C, Figure 6.
57
Ibid., Section C, Table 1.
58

**** Bennett, G-7 Broadband Dynamics: How Policy Affects Broadband Quality in Powerhouse Nations. American Enterprise Institute, 2014.

0
5
10
15
20
25
30
35
40
45
50
55
Source: OECD
Other Fibre/LAN (1) Cable DSL
OECD average
http://www.oecd.org/els/family/47710686.pdf
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
30

Akamai’s 2014 Q1 State of the Internet report shows that 60 percent of Canada’s wireless connections provide greater than 4 Mbps speeds.

59
In

Europe, only 6 of 24 countries had a similar or greater share of 4 Mbps connections, and in the United States only 33 percent of wireless connections provided this speed. Thus, many Canadians enjoy wireless broadband connectivity that meets the Commission’s 5/1 Mbps target speed.

60

4.1.2 Canada requires greater capital and operating costs than other countries 62. Dr. **** concludes that “the vast majority of Canadians have access to very fast broadband services despite the fact that such services must be deployed in areas of much lower population density than in most OECD countries, thereby requiring greater capital and operating costs.”

61

In fact, Canadian telecom companies’ capital expenditures have consistently been greater per dollar of revenue than expenditures by EU companies. Dr.

**** observes,

An even more dramatic difference emerges when one compares total communications sector capital spending per access path, thereby capturing the effects of spending by telecommunications companies, including wireless, cable, and satellite carriers. … Note that Canadian carriers have spent more than their U.S. counterparts and about as twice as much as EU carriers since 2007.

62, 63

This is demonstrated in Figure 5 of Dr. ****’s report, reproduced as Figure 7.

59

Akamai, State of the Internet 2014 Q1, Vol.7, No.1, p. 31.

60
****, op. cit., Section C, paragraph 13.
61
Ibid., Section B.
62

The data extend only through 2011 because the 2015 Communications Outlook has not yet been released by OECD.

63
****, op. cit., Section C, paragraph 11.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
31

Figure 7 - Figure 5 Total Telecom Capital Spending per Communication Access Path Canada, U.S., and EU-15

64

4.1.3 Canadian broadband prices are low to moderate by international standards 63. In spite of the low density and higher costs in Canada, Dr. **** concludes that “contrary to the Findings in the 2015 **** Report,65

the prices of Canadian broadband

and mobile wireless services are low to moderate by international standards despite the obvious high costs of providing such services in Canada’s low population-density environment.”

66

64. Dr. **** discusses several shortcomings of the **** Report that have led to a multitude of incorrect conclusions regarding the affordability of broadband services. The key weaknesses of the **** Report that lead to these incorrect conclusions are: 1) the pricing data collected for the 2015 **** Report uses the advertised list prices and speeds;

2) the size of the cities compared varies substantially; 3) the concentration on only large cities outside **** America; 4) the use of a “basic digital TV” package instead of standardizing the television component; 5) the lack of rural and remote area comparisons;

and 6) the disregard of retail taxes and regulatory fees.

65. In his analysis of broadband pricing, Dr. **** concludes that the measurement of broadband prices is inherently difficult. He suggests that a recent study that deals with 64

Ibid., Section C, Figure 5.
65

**** Communications, “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2015 Edition,” **** 31, 2015.

66
****, op. cit., Section B.
0
50
100
150
200
250
300
350
U
.S
.
$
/
p
at
h
EU-15 Canada U.S.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
32

many of these difficulties finds that Canadian broadband prices are lower than the average for developed countries.

67

The data from this study are reproduced in Figure 8 of Dr. ****’s report, reproduced as Figure 8.

Figure 8 - Figure 8 Quality – and Feature – Adjusted **** Relative to U.S Residential Standalone Broadband

68

66. Citing the most recent FCC International Broadband Report, Dr. **** concludes that the average price per Mbps in Canada is low compared to most other countries.

Canada's price per Mbps in 2013 was lower than the average of $4.33 per Mbps for the 37 countries for which data are reported.

69
[…] The FCC

International Broadband Report also shows the prices for standalone broadband plans with download speeds of 25 Mbps or less and usage limits, plans that should be of particular interest to Canadian consumers with modest incomes. These data show that Canada has the fourth lowest 67

**** Wallsten and **** L. Riso (2010), “Residential and Business Broadband Prices Part 2: International Comparisons, Part 2,” Technology and Policy Institute, Washington, DC.

68
****, op. cit., Section D, Figure 8.
69

FCC International Broadband Report, Appendix C, Table 5.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
33

prices for such plans among the 16 countries reporting such plans in 2012 and the third lowest among 14 countries reporting in 2013.

70, 71
4.1.4 Canada has strong platform competition

67. Dr. **** concludes that “the widespread availability of high-speed broadband in Canada is the result of strong platform competition among incumbent telecommunications carriers, cable television companies, and wireless carriers and extremely high rates of capital spending on these platforms.”72

Dr. **** states,

With strong capital investment from telecom companies and cable companies, high-speed access is available even in rural areas in Canada.

Much of the reason for this success lies in the Commission’s reliance on platform competition between cable television companies and traditional ILECs.

73

4.1.5 High broadband speeds are available in Canada 68. Because of this strong platform competition, Dr. **** notes that “(b)roadband speeds of 30 Mbps or more are available to more than 80 percent of Canadian households, but most households choose to subscribe to lower-speed services, presumably because they do not require higher speeds for the current generation of applications.”74

69. Based on a study by Akamai, Dr. **** notes that Canadian broadband services perform well on an international comparison basis even when compared to countries with greater population density like Germany, ****, Italy, Spain, Portugal, and ****. He states, “. . . in 2014 Canada ranked 17

th

in the world (among 134 ranked countries) in the share of broadband connections with speeds of 15 Mbps or greater.”75, 76

70
Ibid., Appendix C, Table 4a.
71

****, op. cit., Section D, paragraph 25 and 26.

72
Ibid., Section B.
73
Ibid., Section C, paragraph 12.
74
Ibid., Section B.
75
Akamai, op. cit., p. 23.
76
****, op. cit., Section D, paragraph 19.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
34

4.1.6 Broadband connection of 5 Mbps is sufficient 70. Having determined that Canada offers expansive coverage of broadband service at speeds in excess of 5 Mbps, Dr. **** finds that “even the most data-intensive consumer services – currently, high-definition video services – do not require subscriber connections that exceed 5 Mbps. For this reason, the Commission should not prescribe a “basic” level of service required by all Canadians to have download speeds above this level.”

77

Dr. **** also states that the Commission’s 5/1 Mbps target speed is sufficient to participate in these activities.

78
4.1.7 How best to design subsidies

71. Dr. **** concludes that “(i)f subsidies are required to extend affordable basic high-speed broadband service to the most remote areas of Canada, such subsidies should be carefully targeted to the incremental expansion of the requisite network facilities and funded from general revenues, not from explicit or implicit taxes on communications services.”

79

Dr. **** finds that should any subsidy be required, it should be funded through general tax revenues.

4.2 Availability: An Issue Being Resolved
4.2.1 Voice and voice-related services

72. The Notice recognizes that voice services are available to virtually all Canadians, stating that “. . . wireline and wireless networks reach over 99% of Canadians . . .”80

73. TELUS recommends in section 3.3 that the following services continue to be basic services:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
77
Ibid., Section B.
78
Ibid., Section F, paragraph 49.
79
Ibid., Section B.
80
TNC 2015-134, paragraph 6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
35
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services; and

 Accessibility-related services for persons with disabilities.

Each of these services is ubiquitously available in TELUS’ operating territories.

74. The Commission should continue its important monitoring role to ensure that all Canadians have access to these basic services. If some telecommunications service providers are not providing BTS, the Commission should take steps to ensure that these services are made available.

4.2.2 Broadband services
4.2.2.1 What is the current situation?

75. In TRP 2011-291 the Commission established an aspirational 5/1 Mbps target speed for all Canadian households. Since then, Internet service providers have been expanding and improving their services throughout Canada, including accommodating Canadians living in rural and remote areas. Broadband services well in excess of the target speed, at over 100 Mbps, are available to many Canadian households.

81
Broadband service at a 5 Mbps

download speed or faster is currently available to 94% of Canadian households over all technologies and to 81% over the mobile broadband network.

82
When also considering

upload speed, “91% of Canadian households have access to terrestrial broadband connections that can provide speeds of at least 5 Mbps download and 1 Mbps upload.”83

For the remaining pockets of households that do not have broadband service or that have broadband service at less than the 5/1 Mbps target speed, Government policies and private investment will soon provide access to a 5/1 Mbps target speed in all, or almost all, of these locations.

81

CRTC 2014 Communications Monitoring Report, p. 197, Fig 5.3.17.

82
Ibid., p. 194, Fig 5.3.15.
83

Satellite Inquiry Report, October 2014, p. 62, paragraph 134.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
36

76. In TELUS’ operating territories, broadband services with 5 Mbps or greater download speed are readily available to 95% of households in British Colombia, 97% in Alberta, and 94% in Quebec.

84

In addition, wireless broadband services cover a large area.

HSPA+

services cover 99% of Canadian households, and LTE covers 81%.

85
The

average expected download speed is 4-6 Mbps for HSPA+ and 12-45 Mbps for LTE.

86

77. The small pockets of households unable to connect to broadband are mostly in rural areas with very small populations. According to the CRTC 2014 Communications Monitoring Report, urban centres with populations greater than 30,000 people offer 100% availability of broadband at a 5 Mbps download speed, and there is 98% availability in centres with 1,000 to 29,000 people. Even for rural centres of less than 1,000 people, or less than 400 people per square kilometer, there is 72% availability of broadband service at 5 Mbps download speed with an additional 4% from HSPA+

and LTE.
87
Government programs

and private sector investment, however, are already in place that will achieve the 5/1 Mbps target speed by 2017 for all, or almost all, households.

4.2.2.1.1 The role of market forces

78. The data cited above confirm that the market is working very well to provide basic telecommunications services to the vast majority of Canadians, including broadband services that are required to participate meaningfully in the digital economy. This success is a direct result of the facilities-based competition policies that the Commission has embraced. Dr. ****’s report states that “(s)trong platform competition among incumbent telecommunications carriers, cable television companies, and wireless carriers and extremely high rates of capital spending on these platforms has ensured the widespread availability of high-speed broadband in Canada.”88

79. As a result of this competition, Canadian broadband adoption per household is among the highest in the world, exceeded in only 7 other developed countries, most of which have 84

CRTC 2014 Communications Monitoring Report, p. 196, Table 5.3.13.

85
Ibid., p.193, table 5.3.11.
86

TELUS coverage map, http://www.telus.com/en/qc/mobility/network/coverage-map.jsp , accessed **** 25, 2015.

87

CRTC 2014 Communications Monitoring Report, p. 197, Table 5.3.17.

88
****, op. cit., Section B.

http://www.telus.com/en/qc/mobility/network/coverage-map.jspTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
37
much greater population density than Canada.
89
Dr. ****’s report states that “(t)he

vast majority of Canadians have access to very fast broadband services despite the fact that such services must be deployed in areas of much lower population density and therefore at a much higher cost per subscriber than in most OECD countries…”90

The

inescapable conclusion is that the Commission’s facilities-based competition policies are working and working well. It should stay the course and not mandate any unbundling of broadband networks.

4.2.2.1.2 Increasing satellite availability

80. Insofar as satellite availability is concerned, there is sufficient C-band and Ka-band capacity to cover all of Canada. According to the Satellite Inquiry Report, produced under the direction of Commissioner ****, C-band frequencies can be used for broadband, and there is a “significant portion of C-band capacity” that remains unused on satellites currently deployed, without considering upcoming satellite launches.

91

Xplornet has leased capacity from ViaSat, which is scheduled to launch the ViaSat-2 satellite in 2016, that will offer additional bandwidth, coast-to-coast coverage (including the ****) and faster speeds to “meet the future Internet needs of our rural customers throughout the country.”

92

Xplornet also announced a partnership with **** Network Systems for a “lifetime lease for all of the Canadian satellite broadband capacity on ****’ EchoStar XIX, a next-generation high throughput satellite due for launch in mid-2016.”

93
89
Ibid., Section B.
90
Ibid., Section B.
91

Satellite Inquiry Report, p. 30, also p. 38-39. The Report indicates that there will be additional costs (i.e., equipment costs for earth station operators) and possibly scheduled downtime upon conversion, but all potential transport solutions will present either or both of these issues.

92

Xplornet news release, “Xplornet acquires Canadian capacity on viaSat-2 satellite.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/ , accessed **** 30, 2015. The news release claims that ViaSat-2 is designed to offer speeds comparable to fiber-to-the-node networks. This is consistent with the conclusions of the Satellite Inquiry Report (p. 37 paragraph 55) that new high throughput satellite (HTS) technology on Ka-band can “deliver Internet speeds in excess of the Commission’s target download speed of 5 Mbps”.

93

Xplornet news release, “Xplornet and **** sign agreement for Echostar XIX satellite.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/ , accessed **** 30, 2015.

http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-acquires-canadian-capacity-on-viasat-2-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/http://www.xplornet.com/about-us/news-releases/2014/xplornet-and-hughes-sign-agreement-for-echostar-xix-satellite/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
38

81. Existing C-band satellite service covers all of Canada94 and existing Ka-band satellites covers “. . . close to all communities that are presently served with C-band. . .”95

Images

of C-band and Ka-band coverage are reproduced as Figures 9 and 10. It is also important to note that new high throughput satellite (HTS) technology can be deployed on any frequency band and HTS on Ka-band can deliver “. . . Internet speeds in excess of the Commission’s target download speed of 5 Mbps.”

96
The announcement of new satellites

with additional capacity and broad coverage indicate that market forces can be expected to resolve any remaining availability issues in Canada.

82. Further private sector investment and the introduction of new technologies, such as Xplornet’s satellite service, will help to bridge the small availability gap currently experienced in Canada. Xplornet recently acquired 42 blocks of 2500 MHz spectrum to extend their service to more rural areas of Canada.

97
This year it also announced the

launch of high-speed (LTE) Internet in rural Alberta that now offers 25 Mbps broadband services to rural households that were previously unserved.

98
These fixed wireless

services, used in conjunction with satellite backhaul, will provide broadband service in rural and remote areas. Xplornet anticipates that it will offer 25 Mbps broadband service everywhere in Canada by 2017,

99

which is also the year when the Connecting Canadians program is expected to be completed.

94

Satellite Inquiry Report, p. 34, paragraph 51.

95
Ibid., p. 35, paragraph 54.
96
Ibid., p. 37, paragraph 55.
97

Xplornet news release, “Xplornet communications announces successful acquisition of 42 blocks of 2500 MHz spectrum.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/ , accessed **** 24, 2015.

98

Xplornet news release, “Xplornet launches fast 25 Mbps high-speed Internet in rural Alberta.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/ , accessed **** 25, 2015.

99

Xplornet news release, “Xplornet announces plan to deliver 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/ , accessed **** 24, 2015.

http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-launches-fast-25-mbps-high-speed-internet-in-rural-alberta/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
39
Source: Telesat

Figure 9 – Figure 5.4: Telesat’s Anik F2 C-band coverage100

4.2.2.1.3 Other private sector initiatives

83. There are also private sector initiatives that are working to enhance broadband service in rural and remote communities and that will meet the 5/1 Mbps broadband target speed set out in TRP 2011-291. For example, TELUS is upgrading its broadband service in rural communities such as Drayton Valley, Alberta

101
and urban areas such as Edmonton,
Alberta.
102

TELUS has also invested $712 million in 2014 to expand the 4G LTE network, which meets the broadband target speed of 5/1 Mbps.

103
Bell Canada has also

announced the launch of a 1 Gbps fibre-to-the-home (FTTH) service for “50,000 homes and businesses in Toronto during summer 2015” and, in the future, the expansion of this service to other cities.

104

These are prime examples of telecommunications companies continuing to improve and extend service.

100
Satellite Inquiry Report, p. 34, Figure 5.4.
101

TELUS Fibre, Drayton Valley. https://fibre.telus.com/draytonvalley, accessed **** 29, 2015.

102

TELUS media release, “New TELUS fibre optic network will help spur the next wave of social and economic opportunity for Edmonton.”

http://about.telus.com/community/english/news_centre/news_releases/blog/2015/06/19/test , accessed **** 20, 2015.

103

TELUS team advocacy site, “Network 101 and Industry Facts.” https://advocacy.telus.com/fastFacts/3 accessed **** 29, 2015.

104

TeleGeography, “Bell begins gigabit broadband rollout.” https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029, accessed **** 29, 2015.

file:///C:/Users/T908488/Documents/TELUS%20Fibre,%20Drayton%20Valley.%20https:/fibre.telus.com/draytonvalleyhttp://about.telus.com/community/english/news_centre/news_releases/blog/2015/06/19/testhttps://advocacy.telus.com/fastFacts/3

https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029https://www.telegeography.com/products/commsupdate/articles/2015/06/29/bell-begins-gigabit-broadband-rollout/?utm_source=CommsUpdate&utm_campaign=75d977b18b-CommsUpdate+29+June+2015&utm_medium=email&utm_term=0_0688983330-75d977b18b-8863029TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
40

Figure 10 – Figure 5.6: Non-HTS Ka-band satellite coverage and satellite–dependent communities

105
4.2.2.2 Is there a problem?

84. Broadband service to the few small areas without 5/1 Mbps service will be provided by a combination of market forces and Government programs. There does not seem to be a problem with availability.

4.2.2.3 If there is a problem, who should fix it and how?

4.2.2.3.1 The role of the Federal Government

85. If the Commission determines that market forces alone will not ensure the 5/1 Mbps target speed is available to all Canadians, then there are extensive program initiatives now underway by the federal and various provincial and municipal governments to address any residual problems of availability of basic broadband services for Canadians.

105
Satellite Inquiry Report, p. 36, Figure 5.6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
41

86. The Federal Government, especially Industry Canada, is playing a significant role in extending broadband availability through several initiatives. These include the public benefit obligation for some satellite licences, the National Satellite Initiative, the former Broadband for Rural and Northern Development program, the Eastern Ontario Regional Network,

106

and, in particular, the current Connecting Canadians program in which Industry Canada has committed to spend $305 million by 2017 to bring high speed Internet at the 5 Mbps download speed initially to 280,000 Canadians.

107

4.2.2.3.1.1 Industry Canada’s Connecting Canadians program 87. Industry Canada’s Connecting Canadians program anticipates providing “. . . 218,000 households in rural and remote areas of Canada with access to broadband Internet services.”

108

By 2017, the program anticipates that “(o)ver 98% of all Canadians will have access to high-speed Internet at 5 Mbps – a rate that enables e-commerce, high-resolution video, employment opportunities and distance education – providing rural and remote communities with faster, more reliable online services.”109

With Connecting
Canadians announcements now underway,
110, 111
and providers for approved projects

expected to begin building required infrastructure in 2015,112, 113

federal programs are

effectively addressing the few remaining availability gaps in Canada. Notably, a more recent news release from Industry Canada indicates that “(t)he Government has exceeded its Economic Action Plan 2014 target by over 75,000 households in the first round of 106

Eastern Ontario Regional Network: $55 million federal contribution derived from the **** Infrastructure Component of the Building Canada Fund. http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1.

107

Digital Canada 150, p. 8, See also the Commission’s recent report by its Inquiry ****, Commissioner ****, entitled “Satellite Inquiry Report” (October 2014), provides detailed information on governmental programs at the federal, provincial and municipal levels, providing support and subsidies toward the availability of basic telecommunications services via satellite.

108
Digital Canada 150, p. 9.
109
Ibid., p. 7.
110

“High-Speed Internet Coming to Scugog,” Recent Connecting Canadians announcement in Scugog, ON., http://news.gc.ca/web/article-en.do?nid=991709 , accessed July 7, 2015.

111

“High-Speed Internet Coming to Kenora District,” Recent Connecting Canadians announcement in Kenora district, ON., http://news.gc.ca/web/article-en.do?nid=991789 , accessed July 7, 2015.

112

Digital Canada 150, FAQs for ISPs, http://www.ic.gc.ca/eic/site/028.nsf/eng/50009.html , accessed **** 25, 2015.

113

“Improved High-Speed Internet Coming to Nunavut,” Recent Connecting Canadians announcement in Nunavut, http://news.gc.ca/web/article-en.do?nid=997049 , accessed July 9, 2015.

http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1http://www.infrastructure.gc.ca/regions/on/on-prof-eng.html?gotoTab=tab24&gotoSubTab=sub-region24-1&valid=25#sub-region24-1https://www.ic.gc.ca/eic/site/028.nsf/eng/home

http://news.gc.ca/web/article-en.do?nid=991709
http://news.gc.ca/web/article-en.do?nid=991789

http://www.ic.gc.ca/eic/site/028.nsf/eng/50009.htmlhttp://news.gc.ca/web/article-en.do?nid=997049

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
42

project approvals bringing high-speed Internet access to more than 356,000 homes across Canada and nearly 40 percent under budget.”

114

88. Industry Canada’s Connecting Canadians program is expanding high-speed access and extending satellite coverage to all provinces and territories, as shown in Figure 11. These are the areas where Internet performance will be upgraded to 5 Mbps download speed for the first time.

Figure 11: Connecting Canadians Expanding/Extending Coverage Map115

4.2.2.3.1.2 Licensing of wireless spectrum for rural areas 89. In addition, at the federal level Industry Canada spectrum policy supports the availability of spectrum in rural and remote areas for the provision of wireless broadband services and promotes the deployment of wireless broadband infrastructure through strict conditions of licence. Industry Canada has already spearheaded various initiatives to 114

“Improved High-speed Internet Coming to the Kootenays,” Recent Connecting Canadians announcement in the Kootenays, British Columbia, http://news.gc.ca/web/article-en.do?nid=997839 , accessed July 9, 2015.

115

Digital Canada 150, Map showing Internet coverage across Canada to be offered by Industry Canada’s Connecting Canadians program, http://www.ic.gc.ca/eic/site/028.nsf/eng/h_00587.html , accessed July 7, 2015.

http://news.gc.ca/web/article-en.do?nid=997839

http://www.ic.gc.ca/eic/site/028.nsf/eng/h_00587.htmlTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
43

extend broadband services by auctioning off spectrum licences to serve rural and remote areas currently without the 5/1 Mbps target speed.

90. Recently, Industry Canada completed a spectrum licence auction specifically tailored to put valuable 2500 MHz spectrum in the hands of wireless service providers in all areas of Canada, “especially those in rural areas,” recognizing that certain spectrum is “ideal for providing broadband services in rural areas”.

116
Similarly, spectrum in the 700 MHz and

AWS-3 bands left unallocated in previous licensing processes is to be made available later in 2015 in smaller areas in Canada’s **** and under strict deployment requirements. **** of these initiatives share the objective of making the benefits of advanced wireless broadband infrastructure available “to Canadians across the country, including those in rural areas, in a timely fashion.”117

91. These are the most recent spectrum policy initiatives that demonstrate Industry Canada’s commitment to the provision of wireless broadband services in rural and remote areas. In 2013 the Minister of Industry announced that the renewal of licences in the 2300 and 3500 MHz bands would be conducted in a manner so as to ensure that “Canadians living in rural areas benefit from greater access to high-speed Internet services” because fixed wireless access represented “the most affordable high-speed Internet access for many rural Canadians”

118

. Subsequently, Industry Canada released its decisions on policy changes and plans to implement a new licensing process for the 3500 MHz band. These changes include provisions to ensure the continued operation of these fixed wireless broadband services while permitting a transition to a new flexible use allocation.

119
Of

particular note is the inclusion in Industry Canada’s announcements of a quotation from an industry source noting that “the Minister has today affirmed his continued commitment to consumers by acknowledging that the 3500 MHz spectrum plays a 116

Auction results a win for rural Canadians, May 12, 2015 – Ottawa, Industry Canada.

117

Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands, Industry Canada, SLPB-002-15, May 2015, paragraph 4.

118

Statement by Minister of Industry **** Moore on Canada's Spectrum Licensing Framework, Ottawa, November 14, 2013.

119

Decisions Regarding Policy Changes in the 3500 MHz Band (3475-3650 MHz) and a New Licensing Process, Industry Canada, DGSO-007-14, December 2014.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
44

fundamental role in connecting rural Canadians to all the advantages of the digital world.”

120

92. Rural deployment requirements figured prominently in Industry Canada’s policy governing the 2014 auction for 700 MHz spectrum licences.

121
In its policy, Industry

Canada concluded that “700 MHz spectrum is a key enabler for provision of the latest wireless services to Canadians and a condition of licence is required to ensure that services are delivered to a high percentage of rural areas and that they are not unduly delayed.”

122

In comments following the release of the rural deployment obligations as part of the 700 MHz spectrum auction policy, the Minister of Industry remarked, “Our Government has taken action. And now we look to you, our service providers, to deliver higher speeds, extend your footprints and help close the rural–urban gap.”123

93. It is abundantly clear that Government policy considers that the provision of wireless broadband services to Canadians in high cost serving areas is essential for their participation in the benefits of the digital economy and that ongoing efforts by Industry Canada will ensure that the required spectrum is available to Canadians in these areas. In short, the Federal Government has decided that wireless services have a key role to play in remote and rural areas.

4.2.2.3.2 The role of provincial governments

94. Provincial governments have also developed programs that demonstrate the high importance they attach to high speed Internet services.

95. In Alberta, the Alberta SuperNet program is supporting access to connect public institutions across the province. The province has also developed the $5.1 million program, the “Alberta Final Mile Rural Connectivity Initiative,”124

to connect unserved
120

Unprecedented amount of mobile spectrum to be released to Canadians in 2015, December 18, 2014 – Vancouver, Industry Canada.

121

Policy and Technical Framework Mobile Broadband Services (MBS) — 700 MHz Band, Industry Canada, SMSE-002-12, **** 2012.

122
Ibid.
123

Canadian Telecom Summit, Speaking Notes, Minister of Industry, Toronto, **** 5, 2012.

124

Alberta Final Mile Rural Connectivity Initiative, https://www.servicealberta.ca/FMRCI.cfm.

https://www.servicealberta.ca/FMRCI.cfm
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
45
Alberta households. Ontario
125
and Newfoundland and Labrador
126
also have programs

to extend the availability and support the affordability of broadband service in rural areas.

96. In Quebec, TELUS participated in both the “Villages branchés du Québec”127 and “Communautés rurales branchées"

128
programs that have been established to expand

broadband coverage to households in unserved and underserved areas. In 2002, “Villages branchés du Québec” was focused on bringing Internet service to schoolboards and municipalities, while in 2009 the “Communautés rurales branchées” focused predominantly on providing broadband service to businesses and households in rural areas. In 2010, in partnership with Industry Canada and the Government of Quebec’s “Communautés rurales branchées” program, TELUS completed an innovative project to bring broadband Internet service to homes in 31 remote communities via an HSPA+ mobile network. The project is ongoing and boasts a high customer satisfaction (81% in TELUS’ 2014 Gaspé project survey). The project has developed a specific wireless network design to guarantee average speeds of 1.5 Mbps to 8 Mbps in each community and has kept prices comparable to regular TELUS wireline High **** Internet Access (HSIA) service for capacities up to 100 GB.

97. The Connecting British Columbia Agreement of 2011 provides an important example of the ongoing partnership between TELUS and provincial governments to address small regional pockets with limited access to broadband connectivity. On July 29, 2011, the Province of British Columbia signed a 10-year strategic telecommunications agreement with TELUS aimed at increasing broadband connectivity for people in rural and remote areas to 100% by 2021.

129

British Columbia, for example, developed Broadband for B.C.

(or Network B.C.)
130

to help subsidize and support the extension of high speed Internet services.

125

Northern Ontario Heritage Fund, http://nohfc.ca/en/programs/strategic-economic-infrastructure-program.

126

$4.6 million Rural Broadband Initiative, http://www.releases.gov.nl.ca/releases/2014/ibrd/0716n01.aspx.

127

Le Programme Villages branchés du Québec, op. cit.

128

Programme Communautés rurales branchées, Portrait et perspectives, op. cit.

129

Connecting British Columbia Agreement (2011 to 2021), https://news.gov.bc.ca/factsheets/factsheet-network-bc.

130

Broadband for B.C., http://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bc.

http://nohfc.ca/en/programs/strategic-economic-infrastructure-programhttp://www.releases.gov.nl.ca/releases/2014/ibrd/0716n01.aspxhttps://news.gov.bc.ca/factsheets/factsheet-network-bchttps://news.gov.bc.ca/factsheets/factsheet-network-bchttp://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bchttp://www2.gov.bc.ca/gov/content/governments/services-for-government/information-technology/broadband-for-bcTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
46

98. TELUS’ collaborative efforts with various levels of government have been widely recognized. The Premier of British Columbia, **** Clark, for example, recognized TELUS’ contributions and efforts, stating that “TELUS’ continued investment in telecommunications infrastructure across B.C. is good news for families, schools, businesses, and rural communities.”

131
4.2.2.3.3 The role of municipal governments

99. At the municipal level, there are also programs connecting additional households to broadband services. There have already been municipal fibre builds to expand wireline coverage in rural areas. For example, the goal of the FTTP project by the Olds Institute for Community and Regional Development in Olds, Alberta, is to connect residences and businesses to Alberta’s SuperNet.

132

This particular example highlights the productive collaboration between various levels of government and the private sector in a concerted effort to connect unserved or underserved Canadians to the Internet.

100. Additional examples of municipal FTTP programs include the Coquitlam Optical Network Corp. (QNet) in Coquitlam, British Columbia133

and the Kamloops Community
Network (KCN) in Kamloops, British Columbia.
134
A non-exhaustive list of competitor

FTTP deployments, including private and public initiatives, was filed by TELUS as an Annex in the recent Review of wholesale services and associated policies proceeding.

135
131
TELUS News Release,

https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018, accessed **** 23, 2015.

132

“Fibre-to-the-premises project,” http://www.olds.ca/communty/fttp.pdf , accessed **** 23, 2015.

133

“About Us, QNet, http://qnetbc.net/about-us/overview , accessed July 7, 2015.

134

“Community Network Supports Economic Development,” Kamloops community network, http://www.kamloops.ca/it/kcn.shtml , accessed July 7, 2015.

135

Telecom Notice of Consultation CRTC 2013-551, Review of Wholesale Services and Associated Policies, Reply comments of TELUS Communications Company, Appendix C, October 14, 2014.

https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018https://about.telus.com/community/english/news_centre/news_releases/blog/2015/04/15/telus-will-invest-4-billion-across-british-columbia-through-2018http://www.olds.ca/communty/fttp.pdf

http://qnetbc.net/about-us/overview
http://www.kamloops.ca/it/kcn.shtml
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
47

4.2.3 Conclusions regarding availability and TELUS recommendations 101. With respect to voice and voice-related services, the Commission should continue its important monitoring role to ensure that all Canadians have access to the basic services recommended by TELUS. If there are gaps in other telecommunications service provider’s territory where these services remain unavailable, the Commission should take the appropriate action.

102. Broadband availability is being addressed by market forces and Government programs at all levels. Government programs like Industry Canada’s Connecting Canadians program and private sector initiatives like TELUS’ broadband network expansion and increased satellite coverage have been successful in extending broadband service to previously unserved or underserved areas. Improvements to wireline technologies like fibre, wireless technologies like LTE and satellite high-throughput technologies like high-throughput signals are poised to provide 5/1 Mbps broadband service to Canadians nationwide. Other initiatives like the licensing of wireless spectrum to rural areas that is now being pervasively used for broadband and that comes with strict deployment conditions, and provincial government programs, such as Alberta’s SuperNet and Network B.C., are addressing current pockets without 5/1 Mbps service. Industry Canada states that 98%,

136
and Xplornet states that 100%,
137
of Canadian households will have
5/1 Mbps service by 2017.

103. The coordination between government agencies is important for efficiency and to avoid duplicative or contradictory efforts. This is consistent with TELUS’ public policy principle 3 that outlines how responsibility is shared between the Government and the Commission to manage availability and affordability issues.

136
Digital Canada 150, p. 7.
137

Xplornet news release, “Xplornet launches fast 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/.

http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
48

Principle 3. Responsibility for developing policies and programs governing BTS availability and affordability objectives is shared by the Government and the CRTC in order to (i) leverage relative institutional competencies; (ii) avoid unnecessary duplication and inefficiency; and (iii) minimize inter-agency conflict and the risk of contradictory regulation.

104. First, any failure of coordination between the Commission and other agencies or levels of government that results in unnecessary duplication and inefficiency violates the Policy Direction. These tenets also imply that the allocation of responsibilities between the Commission and other agencies or levels of government should take into account and leverage relative institutional competencies.

105. Second, the Government of Canada Digital Canada 150 policy is clear that facilitating broadband availability for Canadians transcends telecommunications policy to encompass industrial policy.

138

The affordability of such access, inclusive of the policies requisite to achieving it, constitutes an integral part of social policy. This means that efficient coordination across branches or levels of government is not only advisable, it is essential for effective policy development and implementation. Broadband has attained such an important dimension to Canadians that it transcends the reach or mandate of any individual government actor.

106. Third, in order to avoid inter-agency conflict and the risk of contradictory regulation, the Commission must take into account all existing Government programs as it considers the issues in this proceeding.

107. The Commission’s role should be to support the Government’s initiatives by providing, through its monitoring capabilities and institutional expertise, the information that can underpin governmental programs. This coordination of institutional roles yields the greatest potential to meet the needs of those few Canadians for whom the availability of basic telecommunications services remains a problem, and this coordination will provide all Canadians with access to broadband at the 5/1 Mbps target speed by 2017.

138
Digital Canada 150.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
49

108. The most significant action the Commission can take is to maintain a robust commitment to facilities-based competition policies by limiting unbundling of networks. This will increase network availability and broadband adoption. In the event that the Commission finds in 2017 that there remain pockets of customers that do not have access to broadband service at the 5/1 Mbps target speed, the Commission should take action, in consultation with the Federal Government, and provincial, and municipal governments if they are affected, to devise a plan to provide broadband service to these customers.

4.3 The Scope of the Affordability Problem is Limited 4.3.1 Voice and voice-related services

109. Voice and voice-related services are affordable for virtually all Canadians. Basic voice service is affordable, and the ancillary services that TELUS submits are also basic services and most are included with basic voice service at no additional charge.

110. Voice and voice-related services are affordable for two reasons. First, when rates for voice and voice-related services are regulated by the Commission, then, by default, they are just and reasonable and, hence, affordable. Second, rates in forborne areas are set in a competitive market and are presumptively affordable.

4.3.2 Broadband services

4.3.2.1 What is the current situation and is there a problem?

111. There are three types of affordability issues to consider: 1) high prices in high-cost serving areas (HCSAs); 2) high price as a general deterrent to adoption; and 3) low income users. After describing the current situation for each of these three types of affordability, the next step is to determine whether there is a problem and, if so, who is responsible for addressing it.

112. The first two types of affordability require no action by the Commission. First, there is no evidence that broadband prices in HCSAs are unduly high compared to broadband prices in non-HCSAs, and prices in HCSAs are set in a competitive market and are TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
50

deemed affordable. Second, the available evidence confirms that the price of broadband is not a major deterrent to the adoption of broadband service. **** is merely one of many factors, and not the most important one, deterring some people from subscribing to broadband service.

113. However, the third type of affordability regarding low income users may require some government action, but the Commission is not the agency or institution of government in the best position to address an income redistribution problem.

4.3.2.1.1 The first type of affordability: higher prices in high cost serving areas (HCSAs)

114. A potential affordability problem is that higher costs can lead to higher prices in HCSAs.

However, there is no evidence that broadband prices in HCSAs are unduly high compared to broadband prices in non-HCSAs, and for the vast majority of Canadians, including those in non-HCSAs, broadband prices are set in a competitive market and are deemed affordable. The Commission’s policy of relying on platform competition and market forces is working well to provide the requisite pricing discipline. The market has provided competitive pricing for both voice and broadband landline as well as voice and data wireless services.

115. Furthermore, in spite of its low density, Canada compares favourably on an international basis with respect to broadband service availability, quality and pricing. For example, Dr. **** concludes that “… the prices of Canadian broadband and mobile wireless services are low to moderate by international standards despite the obvious high costs of providing such services in Canada’s low population-density environment.”139

Dr.

**** also finds that Canadian broadband prices are below the OECD average.

116. The Oxford Internet Institute shows that Canadian broadband prices are among the most affordable in the world, as shown in Figure 12.

139
****, op. cit., Section B.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
51

Figure 12 – Cost of broadband subscription as percentage of average yearly income

140

117. It is important to note that in past decisions the Commission has permitted or stated that it would permit, with cost support, higher prices in high cost areas than in non-high-cost areas. In Local Competition, Telecom Decision CRTC Decision 97-9, the Commission concluded that “it is appropriate to maintain rural rates at levels which are not greater than the rates paid by urban customers, unless it can be demonstrated that circumstances warrant higher rates in rural areas.”

141
In Implementation of Regulatory Framework:

Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, the Commission stated that “the evidence in this proceeding supports previous findings that local services are priced, on average, below cost.”142

Also, the Commission determined

that “. . . in the regulated HCSAs of all large and small ILECs where subsidies have not yet been eliminated and monthly rates are below $30, these rates can be increased, as discussed below, to the lesser of $30 or the amount required to eliminate subsidy.”143

Rates approved by the Commission are just and reasonable and, therefore, presumptively 140

Oxford Internet Institute University of Oxford, “Oxford Internet Institute Map of Broadband Affordability,” http://geography.oii.ox.ac.uk/?page=broadband-affordability , accessed July 10, 2015.

141

Telecom Decision CRTC 97-9, Local Competition, paragraph 162.

142

Telecom Decision CRTC 95-21, Implementation of Regulatory Framework: Splitting of the Rate Base and Related Issues, section IV: Rate Rebalancing.

143
TRP 2011-291, paragraph 122.

http://geography.oii.ox.ac.uk/?page=broadband-affordabilityTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
52

affordable for the vast majority of Canadians. Furthermore, the following two initiatives by the Government and by the private sector will also result in affordable rates.

118. First, Industry Canada’s Connecting Canadians program put out for bid the provision of broadband service meeting the 5 Mbps download target speed in unserved and underserved areas. The projects selected by Industry Canada receive contributions of up to 50% of total eligible costs for rural and remote areas and up to 75% of total eligible costs for very remote communities and Aboriginal communities to be used towards the total cost of the ISP’s project.

144

The program states that the “government is committed to ensuring that Canadians in rural and remote regions of our country have access to affordable broadband services.”

145

In order to ensure that affordable prices are being charged to these users in remote and rural areas, Industry Canada states that “projects with a lower monthly cost for subscribers rated higher on this criterion than projects with a higher monthly cost for subscribers.”

146

In other words, even though the inhabitants in rural or remote areas might be charged higher prices than those in urban and less-remote areas, Industry Canada has determined that the prices the ISPs intend to charge are affordable.

119. Second, Internet service offered by satellite and fixed wireless and specifically by Xplornet is widely available and affordable. Xplornet recently acquired 42 blocks of 2500 MHz spectrum to extend its service to more rural areas of Canada.

147
It anticipates

that it will offer 25 Mbps broadband service everywhere in Canada by 2017, which is also the year that the Connecting Canadians program is to be completed.

148
Xplornet’s

subscription prices are comparable to the price of broadband elsewhere in Canada.

Xplornet’s 5/1 Mbps service is priced at $59.99 per month, which is comparable to the 144

Digital Canada 150, FAQs for ISPs, “How much funding dos the program provide.” 145

Ibid., “How much will this new service cost?” 146

Ibid.
147

Xplornet news release, “Xplornet communications announces successful acquisition of 42 blocks of 2500 MHz spectrum.” http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/ , accessed **** 24, 2015.

148

Xplornet news release, “Xplornet announces plan to deliver 25 Mbps broadband Internet to 100% of rural Canadians.” http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/ , accessed **** 24, 2015.

http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2015-news/xplornet-communications-announces-successful-acquisition-of-42-blocks-of-2500-mhz-spectrum/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/http://www.xplornet.com/about-us/news-releases/2014/xplornet-announces-plan-to-deliver-25-mbps-broadband-internet-to-100-of-rural-canadians/TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
53

prices offered throughout the provinces where TELUS operates.

149
For example,

according to the CRTC’s 2014 Communications Monitoring Report, the prices for 5/1 Mbps broadband service range from $37-$130 per month in British Columbia, $55-$65 per month in Alberta and $32-$65 per month in Quebec.

150

120. In summary, TELUS concludes that there is no evidence that an affordability problem exists due to high prices charged in high cost areas. Industry Canada has said that the prices for service from ISPs participating in its Connecting Canadians program are affordable. Xplornet’s prices are also affordable compared to the broadband prices of other service providers. Thus, there is no evidence to conclude that there is an affordability problem caused by the price of broadband service at the 5/1 Mbps target speed that prevents Canadians from participating meaningfully in the digital economy.

4.3.2.1.2 The second type of affordability: price as a deterrent to adoption 121. Another potential affordability problem is that the high price of broadband service may deter adoption. However, the available evidence shows that the price of broadband is not a major deterrent to the adoption of broadband service. **** is merely one of many factors, and not the most important one, deterring some people from subscribing to broadband service.

122. Three recent studies have shown that age, education, and income are the primary factors that limit broadband adoption.

151,
152,
153

However, the main reason offered by non-users of the Internet is a lack of interest or no need for the service, which is the reason given by “66.5% of Internet non-users in 2012.”

154
In this study conducted by Statistics Canada

and Industry Canada, only 7.7% of non-users indicated that the cost of service or 149

Xplornet plans and pricing, http://www.xplornet.com/plans-pricing/residential-plans-pricing/ , accessed July 2, 2015 at 10am EST.

150

CRTC 2014 Communications Monitoring Report, p. 183, Fig. 5.3.3.

151

**** Landry and Anik ****, “The Evolution of Digital Divides in Canada,” 2014 TPRC Conference Paper, **** 15, 2014, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2418462.

152

**** Zickuhr, “Who’s not online and why,” Pew Research Center, **** 25, 2013, http://www.pewinternet.org/2013/09/25/whos-not-online-and-why/.

153

“Equipement et Branchement Internet des Foyers Québécois,” Cefrio, NETendances, Vol. 5, No. 2, 2014, http://www.cefrio.qc.ca/media/uploader/NETendances2013_V4N2_Equipement_branchement.pdf 154

**** and ****, op. cit., p. 12.

http://www.xplornet.com/plans-pricing/residential-plans-pricing/http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2418462http://www.pewinternet.org/2013/09/25/whos-not-online-and-why/http://www.cefrio.qc.ca/media/uploader/NETendances2013_V4N2_Equipement_branchement.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
54

equipment was the main reason for not using the Internet. In this same study, the authors present the results of a multivariate statistical analysis and conclude that “education and age are the most discriminating factors in determining an individual’s use of the Internet.”

155

123. In a 2013 study by the Pew Research Center, 34% of Americans surveyed stated that relevance (not interested, waste of time, too busy, don’t need or want) was the principal reason that they did not subscribe to Internet service. Only 19% stated that price (too expensive, don’t have a computer) was the main factor.

156
Another subgroup of users

who use the Internet but not from their residence indicated that the main deterrent to household adoption is the total price (the combination of a lack of computer, the ability to access data another way and the price of the service).

157
None of these studies separates

the price of the broadband service itself from the cost of computers and equipment necessary to access the Internet, rendering it even more difficult to conclude that the price of broadband service itself is a major deterrent to using the Internet.

124. These studies conclude that education, age, and income remain the highest barriers to Internet use. Another recent study, “Équipement et Branchement Internet des Foyers Québécois” also confirms that there is a substantial difference in the percentage of household broadband connections among households with a primary education (44%) versus a university education (94%). Similarly, there is a difference from the oldest users (42% for 75

+

year-olds) to the youngest users (100% for 18-24 year-olds), and from the lowest income (45%) to the highest income (97%) users.

158

125. In addition, some users choose to access the Internet only via a mobile device and do not use wired broadband service. According to the Statistics Canada and Industry Canada study, Internet use with a wireless handheld device increased from 26.2% of all Internet users in 2010 to 48.6% of users in 2012.

159

In addition, the percentage of Internet users accessing the Internet from a mobile device increased over the same time period in both 155

**** and ****, op. cit., p. 14.
156
Zickuhr, op. cit., p. 2.
157
Ibid., p. 12.
158
Cefrio, op. cit., p. 5.
159
**** and ****, op. cit., p. 11, Table 2.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
55

urban (28.3% to 52.1%) and rural (18.4% to 35.4%) areas.

160
The increase in Internet use

with a wireless device is also due to the increased use of smartphones. For example, in Quebec, the number of households with smartphones increased from 42% in 2013 to 53% in 2014.

161

Since the number of mobile Internet users is increasing, some of these users must connect to the Internet using only their mobile devices.

126. As can be seen in many of these studies, the price of broadband service is never a major standalone deterrent but is typically combined with other factors, such as the cost of the necessary technology to support the broadband service (i.e., computers), and the ability to access the data another way (i.e., smartphones). While there are deterrents to adoption, price is only one of many factors, and far from the most important one, discouraging some Canadians from subscribing to broadband services.

4.3.2.1.3 The third type of affordability: low income users 127. The third potential affordability problem relates to low income users. Low income customers, no matter where they live, may have trouble paying for food, rent, broadband Internet service, etc. If low incomes require some income augmentation to make the purchase of all goods and services, including broadband Internet, more manageable, this suggests a solution that goes beyond the jurisdiction of the Commission. TELUS comments on these issues briefly below and discusses them thoroughly in section 5.0 on subsidies.

128. Issues of income and affordability are best dealt with by other government departments, for example, through GST rebates or through tax policies of the Department of Finance.

Issues of affordability arise from a nexus of complex social issues that transcend the scope of telecommunications regulations and cannot be solved with the limited tools at the disposal of a regulator. It is unfortunate, though nonetheless true, that the magnitude of this problem is such that lowering any telecommunications price by a few dollars a month will do little to address systemic, economy-wide problems of income distribution.

160
Ibid.
161
Cefrio, op. cit., p. 6.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
56

129. The Commission’s central premise, that basic telecommunications services are vital to meaningful participation in the digital economy, necessarily implies that any outstanding issues of affordability be addressed on an economy-wide basis through general tax revenues rather than through narrow, industry-specific taxes.

162
Indeed, as Professors

**** and Nachbar emphasize, “If we are no longer talking about benefits that are internal to the telecommunications system, but accrue to society as a whole, is it not a little odd that we should be charging telecommunications users to provide a subsidy to telecommunications users?”

163

130. Furthermore, a distinct advantage of any economy-wide tax arises from the fact that the broad nature of the tax implies that the burden of the tax will be spread across the economy in a manner that will not cause the price for any individual good or service to rise by very much. This is significant because the welfare losses associated with a tax increase rise dramatically with the percentage change in prices induced by the tax.

164

131. As a result, direct government funding from general tax revenues should be used to pursue the social objectives underlying the Government’s digital agenda. Tax-based subsidies are not only preferable because they are the least distortionary in terms of market outcomes and incentives to innovate but also, as noted by the Consumer Groups in previous policy reviews, “(t)ax-based subsidies are preferable to service/subscriber-based subsidies insofar as they are more progressive, i.e., less burdensome on low income 162

To cite two examples, food assistance for Canadians is not funded exclusively by the food services industry nor is housing assistance funded exclusively by the housing industry. The structure of this funding is explained by the fact that there is widespread recognition that ensuring subsistence food and housing is an important societal issue, the responsibility for which transcends any one particular industry.

163

**** O. **** and **** B. Nachbar, COMMUNICATIONS REGULATION, St. **** MN: ****/West, 2008, p. 555.

164

H. Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 29, note 38: “For standard explicit commodity taxes, this point can be explained as follows. From standard microeconomic theory we know that the deadweight loss associated with a tax increases more than proportionally with its per-unit rate.

Consequently, the welfare loss per unit of tax increases as the tax increases. Now, this implies that for a given total tax revenue, the total welfare loss will be smaller if many goods are taxed at a low rate than if few goods are taxed at a high rate, i.e., the larger the tax base the smaller the welfare loss.” TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
57
households.”
165

Tax-based subsidies are the only ones that can successfully target low income Canadians where the subsidies are needed the most.

132. The case for action to address affordability related to geography is also weak. While some provincial and territorial governments contend that the Commission should “ensure that rates are fair and just when compared to the other regions of Canada,”166

this is

simply not realistic and is not in keeping with the prices of other goods and services provided in those areas. Food and transportation are also more expensive in the ****, for example; the prices of these goods and services are not the same as in other parts of the country. Rather, the Government recognizes the higher cost of living in the **** through the tax system and provides various subsidies and tax measures to compensate.

While not diminishing the value of broadband for these communities, TELUS reiterates that tax-based subsidies, as stated in TELUS public policy principle 5 and described in more detail in section 5, from general revenues are best suited to address the special circumstances where affordability is a concern.

133. In addition, various provincial programs are in place to subsidize equipment costs. For example, as part of the B.C. Broadband Satellite Initiative, the Government of British Columbia has partnered with Xplornet to make Internet installation more affordable. The new program offers discounts for the installation of equipment necessary to connect rural British Columbians to high-speed Internet where either wired or wireless broadband is not currently available.

167
165

Telecom Policy Review Panel, Comments of the Consumer Groups (Public Interest Advocacy Centre, the Canadian Internet Policy and Public Interest Clinic, the Consumers Association of Canada, and the National Anti-Poverty Organization), 2005, https://cippic.ca/sites/default/files/CG_TPR_final_rev.pdf, paragraph 257.

166

Telecommunication Policy Review Submissions, 2005, book 6, Government of Newfoundland Submission. See also Government of Northwest Territories Submission, paragraphs 40 and 52 which states a similar position.

167

Xplornet news release, “Community and government partnerships.” http://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=en , accessed July 7, 2015.

https://cippic.ca/sites/default/files/CG_TPR_final_rev.pdfhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enhttp://www.xplornet.com/why-choose-xplornet/community-and-government-partnerships/british-columbia/bc-broadband-satellite-initiative?lang=enTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
58

4.3.2.2 If there is a problem, who should fix it and how?

134. Nonetheless, if the Commission finds that it should provide rate assistance or subsidize broadband prices in order to assist low income households to meaningfully participate in the digital economy, TELUS recommends that any such program be means tested so as to be limited to low income households and be funded with a broad-based telecommunications charge as explained in Section 5.

4.3.3 Conclusions regarding affordability and TELUS recommendations 135. With regard to voice and voice-related services, the Commission should continue to monitor rates for basic services across Canada. Emergency services, privacy and access services for various disabilities should be pervasively available across Canada. Should there be gaps in areas where these basic services are not affordable, the Commission should take remedial action.

136. There are three types of affordability issues with respect to broadband services in Canada.

The first two types of affordability require no action by the Commission, which is consistent with TELUS public policy principle 2. First, although there may be higher prices in HCSAs, Industry Canada’s Connecting Canadians program as well as Xplornet’s recent initiatives offer affordable service to rural and remote areas. Second, there is no evidence that the price of broadband service is a major deterrent to household broadband adoption. The price of the service is merely one of many factors, and not the most important one, that may discourage households from purchasing broadband service.

137. The third type of affordability, regarding low income users, potentially requires some Government action, but the Commission is not suited to address an income redistribution problem. Any required action is more effectively addressed by public policies, such as direct Government funding from general tax revenues, than by the Commission, which is not equipped with the necessary tools to address issues of income and affordability in a comprehensive and effective manner. Nonetheless, if the Commission determines that it should provide rate assistance or subsidize broadband prices, such a policy should be TELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
59

targeted to low income households and funded by a broad-based, non-distortionary telecommunications charge.

4.4 The Need to Increase Adoption

138. Though not explicitly referenced in the Notice, the issue of adoption is addressed by the Commission in its list of questions in Appendix B of the Notice. This is evident in its consideration of barriers to Canadians’ meaningful participation in the digital economy.

While the adoption of voice communication is extremely high in Canada, the adoption of broadband service lags behind voice service. It is therefore important to understand the factors that explain the relatively lower level of broadband adoption in Canada today.

4.4.1 Voice and voice-related services

139. From 2002 to 2012, the combined number of wireline and wireless telephony connections per 100 households rose from 98.7 to 99.2, an extremely high rate of adoption.

168
The

Commission has found that mobile wireless voice services are substitutes for wireline voice services in forborne exchanges.

169
The Canadian experience supports the

Commission’s finding. During this same period, the number of mobile-wireless only homes has grown from 1.7 homes per 100 to 15.7.

170
Among those under the age of 35,

wireless substitution is even more pronounced, as 60% of households in which inhabitants are under the age of 35 are mobile-wireless-only households.

171
The adoption

of voice telephony services is not a concern for the Commission at this time.

4.4.2 Broadband services
4.4.2.1 What is the current situation?

140. Not all Canadians who have access to broadband service have adopted it. For example, the CRTC’s 2014 Communications Monitoring Report shows the gap between 168

CRTC 2014 Communications Monitoring Report, Table 2.0.8.

169
TRP 2011-291, paragraph 48.
170

CRTC 2014 Communications Monitoring Report, Table 2.0.8.

171

Statistics Canada, “Residential Telephone Service Survey, 2013,” (June 23, 2013), http://www.statcan.gc.ca/daily-quotidien/140623/dq140623a-eng.pdf.

http://www.statcan.gc.ca/daily-quotidien/140623/dq140623a-eng.pdfTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
60

availability and adoption as being approximately 20% nationally, 14% in British Columbia, 22% in Alberta and 19% in Quebec in 2013.

172
Canadians who have not

adopted broadband at home are limited in their participation in the digital economy. Key to increasing adoption, however, is understanding the barriers that prevent households from engaging in online activities and subscribing to broadband services.

4.4.2.2 Is there a problem?

141. In their paper, “The Evolution of Digital Divides in Canada” **** and **** identify a number of trends in Canada that have contributed to the lagging adoption of Internet services.

173

Using regression analysis to examine a set of socio-economic variables, **** and **** find that age, education and income are key predictors of an individual’s Internet use.

174

Citing statistics from both the 2010 and 2012 Canada Internet Use Surveys, reproduced as Figure 13, the authors show that non-Internet users most often cite a lack of interest and a lack of skills or training as key reasons why they do not access the Internet.

175

The cost of service or equipment was cited as a reason by only 9.1% of non-Internet users in 2010 and only 7.7% of non-Internet users in 2012.

176

The authors suggest that consumer decisions to purchase an Internet subscription are “only modestly sensitive to price, thus rendering access subsidies only partially effective tools in bridging the digital divide.”

177
In another study Carare et al., surveyed

households that do not subscribe to broadband. Two-thirds of those households “indicated that they would not consider subscribing to broadband at any price.”178

172

CRTC 2014 Communications Monitoring Report, Figure 5.3.14 Broadband availability vs broadband subscriptions by province/territory (2013).

173
**** and ****, op. cit.
174
**** and ****, op. cit., p. 10.
175
Ibid., p. 13.
176
Ibid.
177

Ibid. p. 14, citing: A. Chaudhuri, K. Flamm and J. Horrigan, An Analysis of the Determinants of Internet Access, 29 (9-10) Telecommunications Policy (2005), pgs. 731-755.

178

Octavian Carare, **** McGovern, **** Noriega and Jay Schwarz, “The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey,” Information Economics and Policy 30, 2015, pp.19 – 35.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
61

142. The persistence of lagging digital skills among non-Internet adopters has been an on-going issue for ISPs and regulators. Other studies179

have identified skill deficits as

contributing to non-adoption. Notably, Hauge and Prieger challenge the notion that supply-side regulatory responses alone can stimulate broadband adoption. They underscore the importance of focusing on demand-side policies to encourage adoption, including building knowledge, such as digital skills, about new technologies among potential adopters.

180

Similarly, **** shows how different rates of Internet adoption in Japan versus **** Korea, two countries with wide-scale broadband availability, can be explained by well-funded programs targeting usability and affordability, such as digital literacy programs that target Internet population groups that lag behind in terms of Internet adoption.

181
179

For example see **** D. ****, “Policies to Increase Broadband Adoption at ****” (November 2009), http://www.itif.org/files/2009-demand-side-policies.pdf .

180

**** Hauge and **** Prieger, “Demand-Side Programs to Stimulate Adoption of Broadband: What Works?” (14 October 2009), http://ssrn.com/abstract=1492342 , p. 4. [Published in Review of Network Economics, Vol. 9, No. 3, Article 4, 2010.]

181
****, op. cit., p. 2-3.

http://www.itif.org/files/2009-demand-side-policies.pdfhttp://ssrn.com/abstract=1492342

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
62

Figure 13 – Chart 1. **** reasons for not using the Internet182

4.4.2.3 If there is a problem, who should fix it and how?

4.4.2.3.1 Government’s role in addressing broadband adoption 143. Significant barriers to adoption of broadband Internet services by Canadians exist, including a lack of interest, skills, and equipment to access the Internet. Hence, a multi-pronged approach that engages a cross section of government agencies at all levels is necessary. At the present time, this includes programs overseen by Industry Canada, Employment and Skills Development Canada, as well as by provincial Ministries of Education and Infrastructure or Technology. These agencies are funding initiatives to enhance digital literacy and address skill deficits that are significant barriers to broadband adoption.

144. The most important action the Commission can take to increase adoption is to maintain a robust commitment of facilities-based competition. Research183

has shown that

broadband adoption is greater in countries with facilities-based competition.

145. The Federal Government’s Digital Canada 150 policy identifies a number of federal departments that are working to increase Canadians’ use of the Internet and states as a goal that “Canada will rank among world leaders in adopting digital technologies.”184

In

terms of protecting Canadians, the Office of the Privacy Commissioner is involved in the administration of Personal Information Protection and Electronic Documents Act (“PIPEDA”) and education programs to ensure that the privacy of Canadians is protected when they engage in online activities.

185

This will help address the safety and privacy concerns of Canadians.

186

Employment and Social Development Canada administers the Canada Job **** skills training programs, and the Government of Canada provides 182

**** and ****, op. cit., Chart 1. **** reasons for not using the Internet.

183

**** W. ****, **** A. Eisenach and **** T. Ingraham, “The long-run effects of copper-loop unbundling and the implications for fiber,” Telecommunications Policy 37, 2013, pp. 262 – 281.

184
Digital Canada 150, p. 14.
185
Ibid., p. 12.
186
Ibid., p. 11.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
63
grants for internships in high-demand fields.
187
The Business Development Bank of

Canada supports digital technology adoption through its work with small and medium-sized businesses.

188

In addition, Industry Canada works with other government agencies and the private sector through the Computers for Schools program to provide students and interns with improved access to computer equipment and skills training.

189

146. As administrators of the education system in each province and territory, the provincial and territorial governments have the responsibility to include digital literacy in their curricula for all students. Such training will provide students with the skills to actively participate online in a safe manner, understand the benefits and challenges of Internet activities, and build the technologies of the future. In Alberta, for example, students from kindergarten through grade 12 are taught the ICT program of study that aims to provide them with “a broad perspective on the nature of technology, how to use and apply a variety of technologies, and the impact on self and society.”190

4.4.2.3.2 TELUS’ commitment to encouraging greater broadband adoption 147. TELUS works with media literacy organizations and contributes to programs to ensure that Canadians have greater access to computer equipment. Since 2002, TELUS has supported the initiatives of MediaSmarts, and its predecessor the Media Awareness Network, to provide children and teens in Canada with the digital skills they need to work online in a safe and secure manner. For over 20 years, TELUS has supported the Computers for Schools program to improve the accessibility of Canadian students to computer equipment so that they can develop at an early age the computer skills they will need in the future.

148. TELUS also created TELUS WISE (Wise Internet and Smartphone Education), an educational program focused on Internet and smartphone safety to help keep families safe from online criminal activity such as financial fraud and cyberbullying. This program is 187

Ibid., p. 15.
188
Ibid.
189
Ibid.
190

Government of Alberta, “Programs of Studies,” Information and Communication Technologies, Alberta Education, https://education.alberta.ca/teachers/program/ict/programs.aspx .

https://education.alberta.ca/teachers/program/ict/programs.aspxTELUS Communications Company TNC 2015-134

July 14, 2015 First Intervention
64

available to all Canadians in a variety of ways including in-person seminars, visits to schools and online activities. TELUS WISE content was developed in partnership with leading industry experts and aims to provide timely, informative and relevant information about topics related to Internet safety. To date, TELUS has reached 750,000 Canadians with this program.

4.4.2.4 Conclusions regarding adoption and TELUS recommendations 149. While voice service is used by virtually all Canadians, broadband adoption lags. There is a need to develop policies and programs to reduce barriers to broadband adoption. A number of studies confirm that age, education and income are key barriers to broadband adoption. Overcoming these barriers will require a coordinated effort on the part of multiple government agencies. TELUS encourages the Commission to work collaboratively with Statistics Canada and other key federal departments and agencies to develop programs and policies to overcome these barriers. The Commission should develop a blueprint, based on its additional undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
65

5.0 There Is No Need for Additional Commission Subsidies 150. Based on the findings in the availability, affordability, and adoption sections of this submission, TELUS submits that there is no evidence demonstrating the need for rate assistance or for broadband subsidies at the present time. There is not a broadband availability problem in Canada as market forces and programs at all levels of government are addressing availability. Also, the price of broadband service is not a major deterrent to adoption and, to the extent that there is an income distribution problem, the Commission cannot be effective in solving this problem by adjusting broadband prices.

Although low income users present a potential affordability issue, other agencies and branches of government are better positioned than the Commission to devise solutions to what is first and foremost a socio-economic problem rather than a telecommunications problem.

151. In the event that the Commission determines that there is a need for rate assistance or for a subsidy, a bidding mechanism, either like Industry Canada has used for its Connecting Canadians program, or a reverse auction, can be implemented to minimize the size of any subsidy. Any such subsidy should be funded out of general tax revenues. Failing that, a subsidy should be funded from a broad-based telecommunications charge.

152. Dr. **** discusses a prescription for efficient subsidies in his report.

Professor Austan Goolsbee addressed some of these problems in a 2002 paper, recommending that subsidies be directed only to incremental build-out of facilities in areas that otherwise would not be built.

191
He explicitly

recommended against subsidizing broadband usage by subsidizing the operating costs of carriers or subscriber fees because the subsidy’s effectiveness would be diluted as it would be collected by carriers who would build out anyway or it would accrue to subscribers who would subscribe even without the subsidies. Goolsbee’s recommended subsidy program is also self-liquidating, thereby reducing its cost or allowing a 191

Austan Goolsbee, " Subsidies, the Value of Broadband, and the Importance of Fixed Costs," in **** Alleman and **** Crandall, Broadband: Should We Regulate High-Speed Internet Access? AEI-Brookings Joint Center for Regulatory Studies, 2002.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
66

given amount of subsidy expenditure to have a much greater impact on subscriptions.

192

5.1 The cost of any potential subsidy should be minimized 153. Should the Commission conclude that a subsidy is necessary, a bidding mechanism should be implemented to minimize the overall size of the subsidy. There are two methods to introduce such a bidding scheme: follow the method used by Industry Canada’s Connecting Canadians program or through a reverse auction. With either of these mechanisms, one-time subsidies would be offered for incremental builds by the supplier and not on an ongoing basis to end-users.

154. Industry Canada’s Connecting Canadians program has set a good precedent by putting the provision of broadband service in geographic areas out for bid. The program selects winning bids from ISPs based on various factors, one of the most important being the size of the subsidy required to serve a given region. **** is also using a bidding process to extend broadband services.

193

155. A recent news release by Industry Canada states that “[t]he Government has exceeded its Economic Action Plan 2014 target by over 75,000 households in the first round of project approvals, bringing high-speed Internet access to more than 356,000 homes across Canada, and nearly 40 percent under budget.”

194
Being 40 percent under budget

demonstrates the benefit of bidding or reverse auctions to hold down the cost of these programs.

156. A reverse auction, in which service providers are able to lower their bid to serve a designated region in successive rounds of bidding, has the potential to result in even lower subsidy amounts than a bidding process like the one that Industry Canada has employed. Reverse auctions are being used in other countries, for example in “the U.S.

192
****, op. cit., Section G, paragraph 58.
193

**** McGreevy, “Ireland’s broadband black spots,” The **** Times, http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169 , accessed July 14, 2015.

194

“High-Speed Internet Coming to the Kootenays,” Recent Connecting Canadians announcement in the Kootenays, British Columbia, http://news.gc.ca/web/article-en.do?nid=997839 , accessed July 9, 2015.

http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169http://www.irishtimes.com/life-and-style/ireland-s-broadband-black-spots-1.2103169http://news.gc.ca/web/article-en.do?nid=997839

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
67

for the Mobility Fund auctions for broadband mobile licences for rural and tribal regions.”

195

5.1.1 First-best approach: a subsidy funded out of general tax revenues 157. Any subsidy that the Commission ultimately deems necessary should be funded out of general tax revenues.

Principle 4. Should financial assistance be necessary to achieve the BTS availability,affordability and adoption objectives, the first-best (“most efficient”) approach requires that it be (i) funded out of a broad-based charge on general revenues; (ii) structured to minimize the degree to which consumer demand is altered by the imposition of the charge; (iii) transparent in application and administration and (iv) targeted to achieve maximum efficiency.

158. It is instructive to discuss in careful detail the underlying rationale for each of the four elements that comprise TELUS public policy principle 4 and to relate these elements to both Section 7 of the Telecommunications Act and the Policy Direction.

159. The first element of TELUS public policy principle 4 notes that a distinct advantage of any economy-wide charge arises from the fact that the broad nature of the charge implies that the burden of the charge will be spread across the economy in a manner that will not cause the price of any individual good or service to rise by very much. This is significant because the welfare losses associated with a charge increase rise dramatically with the percentage change in prices induced by the charge.

160. The second element of TELUS public policy principle 4 calls for the charge to be “structured to minimize the degree to which consumer demand is altered by the imposition of the charge.” This entails levying the charge on goods and services in a manner that induces the least amount of distortion in consumer purchasing behavior 195

CRTC Consultation CRTC 2012-669-1, Review of Northwestel Inc.’s Regulatory framework, modernization plan, and related matter, Testimony submitted on behalf of the First Mile Community Consortium, by professor **** E. ****, Institute of Social and Economic research, University of Alaska Anchorage.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
68

relative to the purchasing behavior that prevailed before the imposition of the charge.

196

The efficiency loss from the imposition of the charge derives from the avoidable nature of the charge. This means that it is optimal to levy the charge in a manner that renders the charge as unavoidable as possible, and this explains why lump-sum or head taxes are considered ideal candidates for taxation—dying is really the only way to avoid them!

197

Charges should therefore be targeted to goods and services with demand patterns that are highly insensitive to changes in price.

198

161. The third element of TELUS public policy principle 4 is that the charge be “transparent in application and administration.” For example, the Commission’s revenue-based per cent contribution charge is not currently visible on the end-user’s bill. The charge is levied on telecommunications service providers that must remit funds to the Central Fund Administrator. TELUS public policy principle 4, element (iii) advocates that this charge be clearly visible on end-users’ bills so that it is transparent and customers are fully informed that this charge is being levied and comprises part of the amount they pay for service.

162. The fourth and final element of TELUS public policy principle 4 is that the financial assistance “be targeted to achieve maximum efficiency.” This element speaks only to adoption and not to availability or affordability. In the case of subsidies for users, this means that there exists no reallocation of available assistance that would yield higher BTS adoption. Another way of stating this element of TELUS public policy principle 4 is that the increase in BTS adoption per dollar of available assistance is maximized. In 196

See, for example, **** Riordan, “Universal Residential Telephone Service,” in HANDBOOK OF TELECOMMUNICATIONS ECONOMICS, **** E. ****, **** K Majumdar and **** Vogelsang eds., Amsterdam: Elsevier, pp. 433-439. The efficiency loss from the tax used to generate subsidies is increasing in the absolute value of the price elasticity of demand, the quantity of output in the market bearing the tax, and the market power present in that market, ceteris paribus.

197

“A tax is nondistortionary if, and only if, there is nothing an individual can do to alter his tax liability.

Economists call taxes that are non-distortionary lump-sum taxes.” **** E. Stiglitz, ECONOMICS OF THE PUBLIC SECTOR, Second Edition, New ****: W.W. **** and Company, 1988, p. 392.

198

In more technical terms, the amount of a tax should vary inversely with the price elasticity of demand for the good or service. [The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.] The more inelastic the demand, the higher the tax, ceteris paribus. Hence, at the optimum in which the efficiency loss from the tax is minimized, the percentage distortion in output as a result of the tax is equal across all goods and services that are subject to the tax. See Frank A. Ramsey, “A Contribution to the Theory of Taxation,” Economic Journal, Volume 37, 1927, pp. 47-61.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
69

addition to constituting sound public policy, this element of TELUS public policy principle 4 is seemingly required by Section 7(f) of the Telecommunications Act that requires the Commission “to ensure that regulation, where required, is efficient and effective.”

163. Any subsidy could be further reduced by targeting low income households as is consistent with TELUS public policy principle 5.

Principle 5. Any test to calibrate the assistance necessary to address affordability concerns should be “needs based” and evaluated with respect to the totality of household expenditures required for a representative basket of basic goods and services rather than on the basis of an individual service (e.g., BTS).

164. This principle explains why the Government should take into account all geographic, cost-of-living differences for the entire representative basket of basic goods and services to ensure that any financial assistance is provided in an economically efficient and socially equitable manner.

199

165. A rebate on the GST based on real “inflation-adjusted” income is one avenue through which the Government could address affordability concerns in a more effective, efficient and equitable manner. It would also serve to target assistance where it is needed most.

200

166. This observation is particularly important given that the Commission is a national regulator in a country that exhibits pronounced variance in regional affordability. It also underscores the importance of TELUS public policy principle 3 and the need for the Commission to coordinate issues of affordability across other agencies or levels of 199

In Germany, the concept of affordability turns on whether the real (inflation-adjusted) price of telephone service for a rural consumer exceeds the corresponding real price for an urban consumer. See H. Cremer, F.

Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 9, note 7.

200

“The FCC has arrived at a similar conclusion with respect to the importance of taking into account regional, cost-of living differences. The FCC considers that it is appropriate to use per-capita income and the cost of living in a local or regional area when determining rate affordability.” Because of the important role of these local factors, the FCC gives primary responsibility to the states in evaluating affordability. See H.

Cremer, F. Gasmi, A. Grimaud and J.J. Laffont, “Universal Service: An Economic Perspective,” Annals of Public and Cooperative Economics, Vol. 72(1), 2001, p. 9.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
70

government. The issue here is not whether the Commission should have a role in assessing affordability; clearly it should. The Commission should recognize the importance of distributing financial assistance in a socially equitable and economically efficient manner. Statistics Canada possesses the institutional competency to collect and analyze data concerning affordability.

167. Any subsidy should not distort competition in the market, which is consistent with TELUS public policy principle 6.

Principle 6. (Competitive Neutrality) The CRTC’s BTS policy should not distort the competitive process in that the policy should not constitute a source of competitive advantage or disadvantage for any telecommunications services provider.

168. TELUS public policy principle 6 is consistent with Section b(ii) of the Policy Direction that economic regulation should “neither deter economically efficient competitive entry into the market nor promote economically inefficient entry.” It is also consistent with Section b(iii) of the Policy Direction that calls for regulation to be implemented in a “symmetrical and competitively neutral manner.” Indeed, as Professor **** Kahn observes, where regulation continues to be necessary, “it should, to the greatest extent possible, be designed in such a way as to be compatible with competition rather than obstructive of it.”

201

169. TELUS public policy principle 6 also means that no telecommunications services provider should be required to bear any unfunded or under-funded asymmetric service obligation (e.g., rate subsidization, carrier-of-last resort obligation,202

etc.). To the extent

that a telecommunications service provider is required to bear an asymmetric service 201 **** E. Kahn, “Deregulation: Looking Backward and Looking ****,” **** Journal on Regulation, Volume 7, **** 1990, p. 340.

202 For a discussion of the economics underlying carrier-of-last-resort obligations in competitive telecommunication markets, see **** L. Weisman, “Default Capacity Tariffs: Smoothing The Transitional Regulatory Asymmetries In The Telecommunications Market,” **** Journal on Regulation, Vol. 5(1), **** 1988, pp. 149-178.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
71

obligation, it should not be required to do so on a non-compensatory basis, at rates below its actual cost of providing service.

203

170. For all the reasons indicated, general tax revenues would be the best avenue to fund the existing, ongoing efforts by governments at all levels to support the availability, affordability and adoption of basic broadband telecommunications services to that small portion of Canadians currently underserved or unserved.

5.1.2 Second-best approach: a broad-based telecommunications charge 171. In the event that the Commission considers that the first-best approach to generating the funds necessary to provide assistance proves infeasible, a second-best approach, so called because it is the next most efficient approach relative to the first-best approach, would entail a competitively neutral (non-distortionary) charge on all telecommunications service providers. This means that the Commission should not (i) impose under-funded, asymmetric obligations on incumbent providers,

204
(ii) engage in inefficient and

unsustainable cross-subsidization, or (iii) subsidize multiple, competing telecommunications networks that provide comparable functionality.

205
In this regard, it

is significant that Section 1(b)(iii) of the Policy Direction directs the Commission to ensure that regulation is to the greatest extent possible “implemented in a symmetrical and competitively neutral manner.”

172. There are several disadvantages to a broad-based telecommunications charge as compared to a subsidy funded out of general tax revenues. It necessarily follows from 203

It is important to be clear on this point as there will be a natural temptation by some parties in this proceeding to put forward the economically unprincipled concept of the efficient-firm cost standard in a misguided attempt to reduce the size of the subsidies required to provide the basic services in question.

The efficient-firm cost standard was thoroughly canvassed in the course of TELUS’ evidence in TNC 2013-551. See, in particular, Appendix A to the First Intervention of TELUS [Economic Principles to Inform the Scope of Mandatory Competitor Access in the Canadian Telecommunications Industry, January 31, 2014]; and Appendix B to the Reply Comments of TELUS [Determining the Scope of Mandatory Competitive Access in Canadian Telecommunications – What is the Regulator to Do?, October 24, 2014].

See also interrogatory response TELUS(CRTC)31Jul14-16 filed in TNC 2013-551.

204

**** E. M. Sappington and **** L. Weisman, “Regulating Regulators in Transitionally Competitive Markets,” Journal of Regulatory Economics, Vol. 41(1), February 2012, pp. 19-40. [Recommendation 3.

Limit under-funded asymmetric obligations on incumbent suppliers.] 205

**** E. Nuechterlein and **** J. Weiser, DIGITAL CROSSROADS, TELECOMMUNICATIONS LAW AND POLICY IN THE INTERNET AGE, Cambridge MA: The MIT ****, Second Edition, 2013, pp. 304-306.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
72

the above discussion that a narrow, telecommunications-industry based charge is inefficient because it discourages investment and the use of telecommunications services.

206, 207

Section 1(c)(ii) of the Policy Direction requires the Commission to adopt practices “with a view to increasing incentives for innovation and investment in and construction of competing telecommunications network facilities.” In addition, Section 7(g) of the Telecommunications Act states that Canadian telecommunications policy has as its objective “to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services.” The Telecommunications Act also calls upon the Commission “to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications” (Section 7(c)) and “to ensure that regulation, where required, is efficient and effective” (Section 7(f)).

173. Dr. ****’s report also concludes that should a subsidy program be necessary, it should be funded from general tax revenues, not from a charge on telecommunications services.

“Contribution” payments by telecommunications providers to fund subsidies necessarily raise the cost of services provided by theses carriers and, therefore, require higher prices for these services, thereby discouraging their use. The loss in economic value from such narrowly-targeted support regimes is much greater than the loss that results from taxes that are collected from a much wider tax base. Hausman (1998) has estimated that the taxes levied by the FCC on U.S. international and interstate carrier revenues to support universal service more than double the economic cost of providing the universal service subsidies because they substantially reduce subscribers’ use of international and interstate services.

208

If they were funded from general tax revenues, the economic welfare loss would be much lower.

209

174. Therefore, if the Commission decides to implement a subsidy for broadband service, it should consider very carefully the funding mechanism that it implements and the use of 206

**** Hausman, “Taxation by Telecommunications Regulation,” Tax Policy and the Economy, National **** of Economic Research, 1998, Vol. 12, No. 1, pp. 29-49.

207

**** Hausman and **** Shelanski, “Economic Welfare and Telecommunications Regulation: The E-Rate Policy for Universal Service Subsidies,” **** Journal on Regulation, Vol. 16, 1999, pp. 19, 30.

208
Hausman, op. cit., pp. 29-49.
209
****, op. cit., Section G, paragraph 60.
TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
73

the funds generated so as not to distort the market and to be certain that it is achieving its objectives in the most efficient manner.

5.2 Conclusions Regarding Subsidies and TELUS Recommendations 175. In conclusion, there does not seem to be any need for the Commission to establish a subsidy to provide rate assistance for broadband service, based on the findings in the availability, affordability, and adoption sections of this submission. However, if the Commission determines that there is a need for a subsidy, using a bidding mechanism, similar to the one already used by Industry Canada for the Connecting Canadians program, or a reverse auction, would minimize the size of the required subsidy.

Furthermore, any subsidy should be funded out of general tax revenues, and, failing that, from a broad-based telecommunications charge.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
74
6.0 Summary of TELUS Recommendations

176. The most significant action that the Commission can take is to maintain a robust commitment to facilities-based competition policies by limiting unbundling of networks.

This will increase network availability and broadband adoption.

Basic Telecommunications Services

177. TELUS recommends that a BTS be defined as follows:

 A BTS is a service recognized to be of such critical importance to the economic and social welfare of Canadian citizens that universal access to such services at affordable rates is necessary for meaningful participation in the digital economy.

178. Based on this definition, the Commission should classify the following services as BTS:

 Access to an individual local line with ****-Tone service;

 Access to the long distance network;
 Access to operator services;
 Access to a directory service;
 Access to emergency services;
 Access to privacy protection services;

 Accessibility-related services for persons with disabilities; and  Access to broadband service at the 5/1 Mbps target speed.

179. The Commission should no longer classify the following services as BTS:

 Access to low-speed Internet at local rates (dial-up);

 Choice of long distance Network (i.e., equal access); and  Requirement of an ILEC to make a copy of a local telephone directory available upon request.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
75

Availability, Affordability and Adoption of Basic Telecommunications Services 180. TELUS recommends the following:

Availability

 The Commission should ensure that ancillary voice services including privacy, accessibility and emergency services are available to all basic voice customers, across all platforms and providers, on a symmetrical basis.

 If pockets of unserved or underserved areas for broadband remain in 2017, the Commission should develop a plan to bring broadband service to these areas, taking into account all likely sources of public programs and private investment.

 The Commission should undertake monitoring activities to track the availability of ancillary voice and broadband services. Enhanced monitoring will inform, focus and direct subsequent Commission actions.

Affordability

 To the extent that there may be an income problem, federal and provincial governments are in a better position to address income related issues by means of tax policy and other initiatives.

 The Commission has a limited ability to address income problems through price reductions for services it regulates, and such policies, if implemented, are likely to be costly and inefficient.

 If the Commission decides, nonetheless, to address income problems through pricing, it should (i) use a bidding process to limit the size of any required subsidy, (ii) fund such a subsidy from general revenues to the extent possible, and (iii), if not possible, implement a broad-based charge on all telecommunications services.

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
76
Adoption

 The Government of Canada Digital Canada 150 strategy outlines programs to address the broadband adoption issue.

 The Commission can play a constructive and far-reaching role in conducting and coordinating additional research in this area with other agencies addressing this issue.

 The Commission should develop a blueprint based on these undertakings that identifies adoption issues, responsible actors, relevant programs, and any evident gaps. Given that no public actor is overseeing adoption on a coordinated basis, the Commission has an opportunity to make a unique and important contribution.

Subsidies
181. TELUS recommends the following:

 No changes are required to the existing local service voice telephony subsidy regime.

 Voice and broadband services are accessible to all or almost all Canadians at affordable rates. To the extent that there is an income problem for some Canadians, it is best solved by other agencies. Public utility rate setting is not the right tool to address systemic income distribution problems. Such challenges need to be addressed more directly by Government.

 Nonetheless, should the Commission find that a subsidy is necessary to reduce some broadband prices for a class of customers or in a particular geographic area,

 The size of any required subsidy needed to lower broadband prices can be reduced through a bidding process or a reverse auction;

 Any required subsidy is most efficiently funded out of general revenues; and

TELUS Communications Company TNC 2015-134
July 14, 2015 First Intervention
77

 If general revenue funding is not possible, the next best source of funds is from a broad-based charge on all

telecommunications services.
* * * End of Document * * *

Intervention: TELUS Communications Company

Document Name: 2015-134.224015.2395448.Intervention(1fcc801!).html

Copie envoyée au demandeur et à tout autre intimé si applicable / Copy sent to applicant and to any respondent if applicable: Non/No

Intervention: Telus (Intervenor 299)

Document Name: 2015-134.224015.2395448.Intervention(1fcc801!).html

Copie envoyée au demandeur et à tout autre intimé si applicable / Copy sent to applicant and to any respondent if applicable: Non/No