The new normal: CRTC modifies local telephone service obligations, sets broadband speed targets

May 4, 2011

In an important decision for Canadian telephony, the Canadian Radio-television and Telecommunications Commission (CRTC) has, for the first time, established target speeds for broadband Internet access; however it is unclear what effect these targets will have on the rollout of broadband to Canadians.

The Commission has also retained the obligation of incumbent telephone companies to provide residential local service, but has revised the required characteristics of the service they are to provide.

In making these changes, the CRTC cited significant changes to technology, competition and the regulatory environment.

For decades, Canadians have generally been entitled to receive wireline-based primary exchange service, consisting of a voice connection with flat-rated calling to a local area, as well as access to a long distance network of the subscriber’s choice (subject to extraordinary construction charges to extend service to unserved areas).  In addition, since 1999 the basic service objective has set out a minimum standard for the features to be provided as part of residential local service, including touch-tone dialling, dial up Internet access capability, a white pages directory and access to emergency, operator and director assistance services.

Obligations under the new regime vary between incumbent carriers (Incumbent Local Exchange Carriers, or ILECs) and new entrants (Competitive Local Exchange Carriers, or CLECs), and between regulated and forborne (deregulated) exchanges.  ILECs continue to have an obligation to serve in all exchanges within their operating territories; however, are no longer required to meet the basic service objective in forborne exchanges.  CLECs have no obligation to serve and are not required to meet the basic service objective.

In addition, effective June 1, 2011, CLECs will no longer be eligible to receive subsidies to provide service in high-cost serving areas.  Previously, both ILECs and CLECs were entitled to receive subsidies, funded by annual proportional payments by virtually all telecommunications service providers with over $10 Million in annual telecommunications revenues.

The Commission declined, however, to extend or establish any industry-funded mechanisms to assist in the roll-out of broadband Internet access to underserved parts of the country, noting that market forces and targeted government funding will continue to drive the extension and improvement of broadband Internet access services in rural and remote areas.  The Commission similarly determined that it would not be appropriate, at this time, to require broadband Internet access to be provided as part of any basic service objective.

At the same time, the Commission concluded that it would be in the public interest to establish a target speed for broadband Internet access that should be available to all Canadians.  The target set by the CRTC is to have minimum broadband speeds of 5 Mbps download and 1 Mbps upload available to all Canadians by the end of 2015.

Interestingly, this target is presented as a bare objective only; it has not been legally mandated by the CRTC, although the Commission has indicated that it will monitor developments to determine whether regulatory intervention may be needed.  Given the short time frame, the lack of a legal requirement to meet the speed objective and the fact that no new funding is being made available in connection with the decision, it remains to be seen whether the new target will have any meaningful impact on the rollout of broadband in Canada.

The decision follows a lengthy public proceeding, commenced in 2010, which examined a number of issues relating to the obligation to serve, the basic service objective and the current local subsidy regime.

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