Helaina Gaspard

May 19, 2021

There’s been much talk from government, industry, and labour of building back better post-pandemic.  When it comes to rural broadband, there’s opportunity for change.  With the pandemic, the need for reliable connectivity and differences in connectivity depending on where you lived became increasingly apparent. From education to e-commerce to entertainment, without reliable internet, you risked being cut-off from regular activities.

What makes the timing right, is the existing $8 billion allocation, and an additional $1 billion announced in Budget 2021. To get the buildout right, the combination of sufficient funding, instruments for financing and data are required.

Nationally, roughly 87 percent of Canadian households are connected at a speed of 50/10 Mbps.  When connectivity is broken down by urban and rural places, the differences are stark: nearly 99 percent of urban households have a 50/10 connection standard, relative to approximately 46 percent of rural households, with broadband availability at 35 percent of households on First Nations reserves.

Achieving the goal of universal connectivity in Canada will require a more effective use of public funding, that aligns to need and recognizes the differences between urban and rural places.

Why the challenge with connecting rural places in Canada? Variable geography, a lack of population density and demand mean that the business case for delivering rural broadband is limited or non-existent for many rural places.  It is costly to build hard connectivity infrastructure, and once in place, a provider must generate profit by selling services.

With the limited business case, the public sector has stepped in with funding to help to close the gap.  Countries such as the United States, the United Kingdom and Australia have used different instruments to fund rural broadband.  The Federal Communications Commission in the United States uses the reverse auction to fund connectivity in unserved or underserved areas with markets dictating cost.  Supplier-targeted subsidies and agreements with suppliers in the UK are intended to close connectivity gaps and most effectively use public money.  Australia attempted a state-led fibre capable connectivity initiative, but the buildout has been fraught with challenges, including cost overruns, suggesting that purely state-led projects may not be desirable.

Achieving the goal of universal connectivity in Canada will require a more effective use of public funding, that aligns to need and recognizes the differences between urban and rural places. How can existing resources be more efficiently and effectively applied to achieve the goal of universal connectivity?

The Institute for Fiscal Studies and Democracy (IFSD) recently published a report, Assessing the efficacy of instruments for rural broadband delivery (full disclosure: the report was undertaken at the request of TELUS Communications.  The views in the report are those of the authors and do not necessarily reflect the views of TELUS) .  There are three areas of action that decision-makers should consider to improve rural connectivity that are discussed in detail in the report.

1. Understand need from the bottom-up: Rural and urban connectivity needs differ.  Stakeholders, including communities, industry and governments would benefit from a detailed mapping of existing connectivity, user demand, and the potential to close those gaps on a geographic basis.  This information would serve all stakeholders to improve instrument choice and decision-making.
2. Use a variety of instruments: Different instruments should be applied to connect Canadians in rural places.  This country is geographically large and communities have diverse needs.  The use of a variety of spending (e.g. grants, reverse auctions) and non-spending (e.g. spectrum allocation, single door access to federal funding) instruments can connect Canadians in rural places by aligning to demand and need.  Some communities may establish their own broadband service as with O-Net, others may pool resources and work through a regional intermediary like SWIFT, while others sill may remain unserved or underserved until industry is incented to build or improve services in their areas.  When appropriate resources are allocated to make connectivity viable, supply is not the challenge; regulation and demand are the constraining factors. On the regulatory front, deployment conditions and spectrum allocation policies should be differentiated to meet the needs and different realities of urban and rural places.  Non-spending instruments can achieve these changes.  When it comes to community demand, there are a variety of instruments to align to community to resources.  Canada can enhance existing instruments by streamlining access to federal funding through a single point of contact and by adopting practices from other jurisdictions, such as the reverse auction.
3. Rally political and administrative will: The financial allocation for rural connectivity is sufficient when multiple technologies are used.  The changes to improve alignment between funding and connectivity can be managed through administrative and policy changes.  These require political decisions and administrative leadership.  Changes to spectrum policy and deployment requirements, as well as the introduction of new instruments and the refinement of existing ones can be done within existing authorities.  These changes over the short- and medium-terms can serve to better align funding to the goal of universal service.

Rural connectivity presents an opportunity for change through administrative and policy reform.  To get this right, bottom-up needs-based data, various instruments for funding and leadership are necessary.  With examples of instruments from Canada and abroad, political actors and senior civil servants can collaborate with community and industry to move forward to connect Canadians no matter where they live.

Contributing Writer Helaina Gaspard is Director of Governance and Institutions at the Institute of Fiscal Studies and Democracy at University of Ottawa.