Only 40% of rural Canadians today have suitable internet access and a Canadian minister is now “open to the idea” of transforming broadband in the country into a universally available public utility.

Minister for Rural Economic Development Maryam Monsef admits that Canada’s current reliance on private cable and phone companies like Bell, Telus, and Rogers has kept large parts of Canada from getting affordable, 21st century internet access. Creating a public broadband utility that would provide universal access may be the best solution to reaching areas considered too unprofitable to serve by private companies.

The impetus to consider creating one of the world’s largest publicly owned broadband providers comes as a result of the COVID-19 pandemic, which has forced millions of Canadians to work from home. But with well under half of rural Canada lacking high speed internet service, educators, medical personnel, and business workers find themselves unable to connect.

Nancy and Jeff Boss of Flamborough, Ont., live 10 minutes outside of Hamilton. They are “off the grid” for high speed internet by just 100 meters. To bring cable broadband to their home, the local cable company quoted an installation price of $27,000. As a result, the Boss family relies on a cell phone data plan that costs $150 a month and offers 100 GB of usage on a 4G LTE network. The family often exceeds its usage allowance, and told CBC’s “The Current” their monthly bill has crept up to $500 in usage charges at times.

Nancy Boss is a school teacher, and life without internet in the COVID-19 era of online classes is difficult.

“I am struggling daily with my lessons, I can’t do live lessons as the minister of education is requiring us,” Boss told CBC Radio, adding that her own children’s education is being affected too. “It’s really hard for our kids to participate in their lessons [and] it’s sad, they can’t chat with their friends who they miss very much.”

Monsef

The Liberals promised $5-6 billion for rural internet expansion in the 2019 budget as part of a party pledge to get 100% of Canadians connected to high-speed internet by 2030. But that was before the pandemic struck, making internet connectivity more essential than ever before.

Broadband advocacy group OpenMedia’s Laura Tribe says the government’s promises are nice, but the target date remains 2030 — a decade away. She argues people need internet access today. Tribe says the weak link is relying on corporate cable and phone companies to do the work to reach rural Canada. Despite repeated funding efforts and ongoing lobbying, Tribe believes many of the country’s largest providers have dragged their feet on rural expansion for years, noting they operate in the interest of shareholders, not rural Canadians. Recently, Tribe believes many of Canada’s largest telecom companies have made rural Canadians “pawns” in a greater debate about deregulation and wireless spectrum for 5G. When providers see their business interests threatened, they warn lawmakers and regulators the result may be further delays in rural internet expansion.

That is why Tribe advocates declaring broadband service to be an essential public utility, putting the onus on the government to complete “last mile” buildouts to individual rural homes and businesses like the Boss family as quickly as possible. On that point, Monsef seemed to agree.

“One of the things that the federal government can do is to invest in that last mile, where the business case for the private providers is not the same,” Monsef, who also serves as the MP for Peterborough-Kawartha said. “Once you do connect Canadians, though, those investments will pay off because that connectivity leads to economic development and a higher quality of life.”

When pressed about her support for declaring broadband service a national public utility, Monsef said she was open to the idea and having a debate on what solution will work best for rural Canada.

“What COVID has done is create an opportunity for a resurgence of good ideas, and that’s a good idea that I’m open to,” Monsef said. “This is among the many good ideas that we are considering: What are the pros? What are the cons? How do we get it done? Who’s on board?”

CBC Radio One’s “The Current with Matt Galloway” spent a half hour exploring the plight of rural Canadians expected to work at home who lack suitable internet access. Is it time for Canada to make broadband service a public utility? (24:07)

Santa Broadband: Ajit Pai’s magical world of broadband

God bless deregulation and your local phone and cable companies for making American Broadband Great Again.

That’s the message FCC Chairman Ajit Pai hopes will be the take away in the forthcoming 2019 Broadband Deployment Report — a highly dubious and over optimistic assessment of America’s rural broadband landscape.

“For the past two years, closing the digital divide has been the FCC’s top priority,” Chairman Pai said. “We’ve been tackling this problem by removing barriers to infrastructure investment, promoting competition, and providing efficient, effective support for rural broadband expansion through our Connect America Fund. This report shows that our approach is working. But we won’t rest until all Americans can have access to broadband and the 21st century opportunities it provides to communities everywhere.”

Except closing the rural-urban broadband gap has been a FCC priority for more than two years, and was a particularly high priority for the previous administration, which devoted a large amount of controversial stimulus funding after the Great Recession to internet expansion during the Obama Administration. In fact, Chairman Pai repeatedly claimed credit for broadband expansion projects that were funded by the previous administration, while at the same time criticizing the FCC under former Chairman Thomas Wheeler for harming investment in broadband with the enforcement of net neutrality.

The FCC continues to rely on dubious and flawed data to produce its reports — unverified data typically volunteered by the country’s phone and cable companies. The FCC has been frequently criticized for relying on inaccurate broadband availability maps, taking providers at their word on broadband speeds that fail to materialize in the real world, and reporting expansion projects that do not directly benefit consumers.

Pai’s office this week released a press release attempting to conflate broadband gains to his deregulatory policies and the banishment of net neutrality.

“The private sector has responded to FCC reforms by deploying fiber to 5.9 million new homes in 2018, the largest number ever recorded. And overall, capital expenditures by broadband providers increased in 2017, reversing declines that occurred in both 2015 and 2016.”

But Pai does not offer any evidence to back up those claims. In fact, as Stop the Cap! has reported, many of the country’s largest telecom companies have been cutting capital expenditures, many initiated as part of system upgrades to convert to digital cable television or to increase the amount of fiber optics to increase cable system reliability — neither relevant to the debate about net neutrality. This year, Charter Communications has announced a dramatic drop in spending (despite the repeal of net neutrality) because their long-planned system upgrades surrounding the retirement of analog cable television are now complete. Charter also had its merger agreement with Time Warner Cable revoked in New York for failing to meet its rural broadband commitments in that state.

Comcast cut spending by 3% because it bought fewer set-top TV boxes in light of cord-cutting customer losses. Verizon, which has been aggressively promoting its forthcoming 5G millimeter wave wireless network, slashed spending from $17.2 billion in 2017 to between $16.6-17 billion last year, and a significant sum of that money was earmarked for 5G buildouts in urban areas, not expanding rural internet. AT&T’s capital expenditures for 2019 are not expected to move much, placed in the $23 billion range for 2019, just a little more than last year. But AT&T is expecting to be reimbursed $1.6 billion by the federal government for AT&T’s FirstNet public safety network buildout, and much of its other spending is targeting its wireless business, including a plan to launch 5G services in 19 cities this year. That means less money for AT&T’s wireline network, including fiber broadband for homes and businesses.

Pai’s claims about the increased availability of broadband, at higher speeds, comes largely at similar incremental rates to progress under the Obama Administration. In New York, which is seeking to approach near universal broadband coverage, what moved the needle the most was a large sum of funding available to subsidize rural broadband expansion. The availability of substantial financial assistance from the state government, which some described as corporate welfare, appeared to be the most effective broadband expansion motivator for an industry Pai praised in his press release, not deregulation or the repeal of net neutrality.

The telecom industry wants a new tax on broadband services to pay for rural broadband expansion.

Nearly two years after FCC Chairman Ajit Pai announced the formation of a new federal advisory committee on broadband development, the telecom industry-stacked panel has recommended implementing a new tax on websites and online subscription services like Netflix, Hulu, and Amazon Prime Video and turning over the proceeds to many of the same companies dominating the Committee.

The proposal is part of a large set of recommendations from the Broadband Deployment Advisory Committee (BDAC) designed to promote and streamline broadband expansion, especially in rural areas. If adopted by the states, the new tax would create a large broadband deployment fund that could be accessed by telecommunications companies like AT&T and Comcast to expand service without having to pay back the funds or give up part ownership of the taxpayer-funded expansion.

What caught many by surprise was the sweeping impact the new tax could have on the internet economy, because online businesses, streaming services, and even many website owners could be subject to the tax, if enacted:

Entities that financially benefit from access to a broadband system located in the state, including advertising providers, shall contribute to the Broadband Deployment Fund.

A comprehensive piece by Jon Brodkin on Ars Technica points out defining the meaning of “entities” and “advertising providers” will be crucial to determine who will have to pay the tax and who won’t:

Article 11 of the BDAC’s model state code would create a Rural Broadband Deployment Assistance Fund, paid for by contributions from broadband providers and “Broadband Dependent Services.”

The definition of “Broadband Dependent Services” is where things get interesting. An earlier version of that definition—available in this document—reads as follows:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee which requires the capabilities of the Broadband Service which the consumer has purchased and shall also include entities that financially benefit from access to a broadband system located in the state, including advertising providers.

The BDAC met on December 7 and pared that definition back a bit to exclude “entities that financially benefit from access to a broadband system.” Video is available here; the discussion on the definition starts around 2:04:45.

BDAC Chair Elizabeth Bowles, who also runs an Arkansas-based wireless Internet service provider called Aristotle, expressed concern that the original version of the definition “was including every small business in America,” potentially forcing them all to pay the new tax.

Nurse

AT&T has been one of the strongest advocates for the new tax, and argued it should be as expansive as possible.

“It basically is everybody [that should be taxed] because this is a societal objective,” said Chris Nurse, assistant vice president for state legislative and regulatory affairs at AT&T. “Universal service is a societal objective. We want to spread that $20 or $30 billion burden more broadly so the tax is low on everybody.”

Google Fiber policy chief John Burchett objected, claiming under AT&T’s vision, everyone who has an internet connection would be taxed. In his view, AT&T’s proposal was “absurd.”

As the debate raged on, it became clear AT&T was once again looking for a way to be compensated by companies like Amazon and Facebook — using its ‘pipes’ without contributing towards the cost of the network.

“Who are we cutting out and who are we leaving in?” Nurse asked. “Today it’s basically the telephone companies [who pay] and not Google and not Amazon and not Facebook, right? And they’re gigantic beneficiaries from the broadband ecosystem. Should they contribute or not? Someone has to pay.”

Burchett

In the end, the BDAC settled on adopting a compromise over what broadband entities will be subject to the new tax:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee, and shall also include advertising-supported services which requires the capabilities of the Broadband Service which the consumer has purchased.

This compromise definition primarily targets the new tax on streaming video services — the ones AT&T itself competes with. But it will also cover any websites sponsored with online advertising — like Facebook and Google, ISPs, subscription services delivered over the internet, as well as AT&T’s broadband competitors.

The proposal also seeks to guarantee that rural residents be granted access to affordable broadband, but the industry-dominated Committee chose to define “affordable” as the cost of internet access in urban areas, which some would argue isn’t affordable at all.

The draft proposal has been criticized by many stakeholders, including the National Rural Electric Cooperative Association, representing electric cooperatives. The group implied the new proposal was just the latest attempt to get the telecom industry’s wish list enacted.

“Instead of focusing on solutions for unserved and underserved rural communities, many of the recommendations focus on issues specific to urban areas where broadband is already available,” said NRECA CEO Jim Matheson. “Ignoring the precedent of federal law and laws in 20 states, the state model code would treat co-op poles like those belonging to large investor-owned utilities. The state model code would also cap pole attachment rates in state statute, effectively making those rates permanent. This code, in effect, increases regulatory burdens while giving co-ops less time and less money to comply with those regulations.”

The National Multifamily Housing Council also objected to another proposal approved in the draft.

“Article 8 of the MSC grants broadband providers the unilateral right to install facilities in all multifamily residential and other commercial buildings and mandate construction of broadband facilities at the property owner’s expense without regard to the rights and concerns of the owner,” the organization claimed. “NMHC/NAA and its real estate industry partners argued that Article 8 of the MSC is riddled with many practical and legal problems. Among the most serious issues with the MSC is that it interferes with private property rights, disrupts negotiations and existing contracts between property owners and communications service providers and will lead to costly regulation and litigation at the state level without any assurance of actually spurring broadband deployment.”

AT&T would be among the biggest beneficiaries of the tax fund, already receiving $428 million annually from another rural broadband fund to expand wireless internet access in rural areas. If Nurse’s predictions are correct, the tax could collect $20-30 billion, far more than has ever been spent on rural broadband before.

Liccardo

Critics also contend the BDAC’s industry-friendly proposals are predictable for a Committee created by FCC Chairman Ajit Pai and well-stacked with telecom industry executives and lobbyists. The former head of the BDAC was arrested by the FBI on fraud charges, and San Jose Mayor Sam Liccardo quit the Committee in January, writing, “the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public” in his letter of resignation.

Whatever the BDAC ultimately decides, the final proposal has a long road to travel before becoming law. Each state can choose to adopt the proposal, part of it, or none of it. In the end, it is just a “model code” for states to consider. But it will be part of the argument made by the telecom industry that laws must be streamlined to prevent delays in deploying service, and that those benefiting from broadband should cover more of the costs to provide it.

Ironically, the person most likely to be embarrassed by the model code could be FCC Chairman Ajit Pai, who has almost universally rejected new taxes and fees on broadband services. But his approval is not required to advance the argument and the model code to the states, where the telecom industry’s lobbyists are waiting to begin advocating the passage of new state laws enacting its recommendations.

Using data from the 2017 American Community Survey (ACS), released in September 2018 by the U.S. Census Bureau, the National Digital Inclusion Alliance ranked all 191 U.S. cities with more than 50,000 households by the percentage of each city’s households that lack home Internet connections of any kind.

Note that this data is not an indication of the availability of home broadband service, but rather of the extent to which households are actually connected to it.

In general, affordability and familiarity are the two biggest impediments that stop someone from signing up for internet access. With broadband providers boosting speeds, but also dropping affordable lower-speed plans, a digital divide based on dollars has worsened in many communities, despite the availability of discounted internet access plans for poor families with school age children or elderly users on disability. Kansas City, Kan. is a remarkable entry at 23rd worst in the country. It, along with its much larger counterpart across the Missouri border, was the first Google Fiber city.

1. Laredo, Texas
2. Brownsville, Texas
3. Hialeah, Florida
4. Detroit, Michigan
5. Cleveland, Ohio
6. Memphis, Tennessee
7. Miami, Florida
8. Philadelphia, Pennsylvania
9. Newark, New Jersey
10. Syracuse, New York
11. Chattanooga, Tennessee
12. Springfield, Massachusetts
13. Milwaukee, Wisconsin
14. New Orleans, Louisiana
15. Shreveport, Louisiana
16. Birmingham, Alabama
17. Mobile, Alabama
18. Macon-Bibb County, Georgia
19. Richmond, Virginia
20. Dayton, Ohio
21. Rochester, New York
22. Topeka, Kansas
23. Kansas City, Kansas
24. Baltimore, Maryland
25. Montgomery, Alabama

Rutledge

Charter Communications is using the benefits of the Republican-promoted tax cut to buy back its own stock, because the only other option under consideration was using the money to buy up other cable operators.

“From a [mergers and acquisitions] perspective, I think cable is a great business. If there were assets for sale that we could do more of, we would do that,” said Charter Communications CEO Thomas Rutledge at this week’s UBS Global Media & Communications Conference. “We’ve been buying a lot of our own stock back. Why? Because we think the cable business is a great business and we haven’t been able to buy other cable assets.”

Charter is not using the company’s lower tax rate to benefit Spectrum customers with lower bills or more extravagant upgrades. Instead, it is accelerating efforts to please shareholders and executives with efforts to boost its share price — something key to top executives’ performance bonuses.

With digital and broadband upgrades nearly complete in areas formerly served by Time Warner Cable and Bright House Networks — the cable companies Charter acquired in 2016 — Rutledge told investors he can initiate additional upgrades without spending huge sums on infrastructure buildouts.

Gigabit speed is now available in most markets, and the company has doubled its lowest internet download speeds in areas where it faces significant competition from AT&T from 100 to 200 Mbps, boosting sales of Spectrum broadband service, according to Rutledge.

Today, about 60% of Spectrum customers are offered 100 Mbps, while the other 40% — mostly in AT&T service areas — are getting 200 Mbps.

Rutledge told investors he does not see much threat from Verizon FiOS or its newly launched 5G offerings, and has no immediate plans to upgrade service in Verizon service areas because neither offering seems that compelling.

“I saw that Verizon had some passings that they could do 800 Mbps in,” Rutledge said. “We have 51 million passings that we can do 1 gigabit in and we can go to 10 gigabits relatively inexpensively and I think we will because I think the world will go to 10 gigabits.”

Analysts are uncertain whether Rutledge’s comments are naïve or brave.

“We see 5G fixed wireless broadband [like that offered by Verizon] as the largest existential threat to broadband providers, by far,” wrote analysts at Cowen. Until now, most broadband competition for cable operators came from phone companies pitching DSL. Verizon retrenched on its FiOS offering several years ago. But AT&T has been more aggressive upgrading urban areas to fiber service, which has forced Charter to respond with higher speeds and better promotions.

Rutledge does not see Verizon’s 5G being a significant competitive threat for several years, and suspects Wall Street may once again punish Verizon for spending money on a wireless network less capable than what the cable industry offers today. Shareholders may also dislike watching Verizon distracted by the home broadband market when portable wireless revenues are much more important to the company.

Verizon officials claim about half of those signing up for its 5G service plan were not current Verizon customers. But the company would not say whether their new fixed wireless customers were coming largely from cable or DSL disconnects, which would prove marketplace disruption.