Opinion
Chris Windeyer

CRTC Hearings: Broadband Rights and Wrongs

Is Northern Internet in a state of market failure?

On EDGE | ANALYSIS

Leafing through the submissions from the three territorial governments to the CRTC’s latest round of consultations on broadband availability, there’s a concept that keeps jumping out of the text: market failure.

If you’re reading this on an internet connection in any one of the three territories, you know this: your internet is pretty bad and extremely expensive, at least compared to southern Canada. Your market options for doing anything about it are decidedly limited.

A major component of these hearings, which started Monday and run until April 28, will be yet another link in the endless daisy chain that is the debate over how to improve internet access North of 60. Among other things, the CRTC is trying to determine whether broadband internet should be considered a basic service obligation of telecom providers.

The CRTC, bless its heart, is painfully behind the times, as illustrated by the fact that while it requires southern telecom customers to pay a levy on their monthly bill to subsidize basic landline telephone service in the North, it has not yet done the same for broadband internet services.

What we have now is the worst of both the free market and government intervention.

Of course, with the possible exception of the North’s smallest communities, it’s hard to argue anymore that landlines are more important than internet service. In the NWT and Yukon, Northwestel enjoys an effective monopoly on these services. While the CRTC can and does force Northwestel to lower its prices on occasion, rates here are still well above what’s considered the norm in southern Canada.

In a submission to the CRTC, the GNWT did some price comparisons and found that Northwestel rates as much double southern costs for DSL service, while prices for satellite-provided services run three to five times higher for a comparable speed (a large part of this, of course, is that satellite bandwidth is far more expensive to buy wholesale than fibre optic).

“Northwestel customers are playing far more to receive far less,” wrote Mike Aumond, the NWT’s deputy finance minister. Meanwhile, the Yukon Government argues ensuring internet access, particularly in remote communities, is “too important to leave to market forces.” Nunavut, which would love to have the kind of internet service those of us in the other two territories routinely complain about, suggests that the CRTC needs to spur subsidies not just for pricing, but for new infrastructure builds.

And in comments to this week’s hearings, Oana Spinu, the director of the Nunavut Broadband Development Corporation said this: “What we have in Nunavut is market failure. Private sector providers are competing for subsidies and not customers. And we are left with parallel regulated monopolies, one for voice and one for broadband, with little choice and even less progress.”

While Nunavut enjoys some internet competition in its larger centres between Northwestel and the government-subsidized Qiniq service provided by Yellowknife’s SSi Micro, Spinu’s suggestion of a market failure applies to all three territories.

Northwestel did not file any interventions for the CRTC’s current proceedings and did not respond to a request for comment. Bell, Northwestel’s parent company, did file an intervention including a legal opinion that the CRTC can create funds for new infrastructure construction but does not have the legal authority to order telcos to build new broadband facilities in remote communities.

It will be interesting to see what comes of this month’s hearings. The CRTC does not move swiftly and generally prefers to tweak market conditions rather than order massive changes.

What we have now is the worst of both the free market and government intervention. In the NWT and Yukon, Northwestel’s incumbent position and its ownership of the fibre optic backbone have allowed it to crowd out new competition in retail internet by pricing wholesale bandwidth above a level that would make it possible for would-be entrants to make a go of it.

It has done this with the aid of both the CRTC, which has not done much to aid new (or existing) competition, and, somewhat more curiously, the Yukon and NWT governments, which have both granted contracts for (admittedly welcome) expansions of the fibre optic network to Northwestel.

It’s still not clear exactly who will own the Dempster Highway line—the YG has been extraordinarily evasive on that question. The GNWT will apparently own the Mackenzie Valley line, though it will be maintained by Northwestel who will, strangely, advise the government on what to charge for bandwidth.

One presumes Northwestel’s advice will be wholly dispassionate.