CRTC sets speed target for broadband Internet and maintains obligation to provide basic home telephone service

 

OTTAWA-GATINEAU, May 3, 2011

Broadband target

The Canadian Radio-television and Telecommunications Commission (CRTC) today set a target for broadband Internet access services across Canada. By the end of 2015, the CRTC expects all Canadians to have access to broadband speeds of at least 5 megabits per second (Mbps) for downloads and 1 Mbps for uploads.

“A well-developed broadband infrastructure will serve as a gateway for Canadians to participate in the digital economy,” said Konrad von Finckenstein, Q.C., Chairman of the CRTC. “The target we have established is the minimum speed we believe consumers in rural and remote areas should be able to receive. The industry is actively responding to market demands and we have every confidence in its ability to meet the target.”

The CRTC anticipates that this target will be reached through a combination of private investments, targeted government funding and public-private partnerships. The launch of new satellites and advances in wireless technologies will make it possible to provide Canadians in rural and remote regions with reliable broadband connections at reasonable rates and higher speeds than those available today.

Despite Canada’s unique geography, 95% of households currently have access to Internet download speeds of at least 1.5 Mbps through telephone, cable or fixed-wireless networks. Over 80% of households already have access to download speeds of 5 Mbps or higher.

The CRTC will closely monitor the industry’s progress in reaching the target.

Local telephone service

Given that competition is flourishing in 80% of residential telephone markets, the CRTC has lifted the requirement to meet the basic service objective in these deregulated areas. The CRTC determined, however, that large telephone companies must continue to offer residential subscribers a basic telephone line at a reasonable rate. Companies will have the flexibility to gradually increase rates for this service over the next three years, to a maximum of $30 per month.

In regulated areas, the CRTC is maintaining the obligation to provide basic residential telephone service and to meet the basic service objective. Most incumbent telephone companies will continue to receive a subsidy to ensure basic telephone service is offered to all consumers in rural and remote areas and to help offset higher costs.
 
The CRTC will phase-in a new formula over the next three years, which will reduce subsidies available to companies in regulated areas. To offset lost subsidies, companies will have the option of gradually raising rates to a maximum of $30 per month by 2013.

“Some companies in rural and remote areas charge their customers much less than what it actually costs them to provide this service and, as a result, their rates are lower than in urban areas. The new price ceiling will make for a more consistent and reasonable rate across Canada and reduce the reliance on subsidies,” said Mr. von Finckenstein.

Local competition

Finally, the CRTC will continue to encourage greater consumer choice in the residential telephone market for Canadians in rural and remote areas. The CRTC has decided to maintain its existing framework for competitors wishing to enter territories served exclusively by smaller telephone companies.

To ensure that the smaller companies are able to provide reasonable access to residential telephone service, the CRTC has introduced the following measures:

  • Smaller telephone companies will continue to receive subsidies for their subscribers until competitors can offer service to 75 per cent of the market.
  • Smaller telephone companies will be able to claim half of the subsidy they would normally receive for subscribers that switch to a competitor during the first three years of competition.
  • New entrants will be required to pay the start-up costs in markets where the smaller telephone company has fewer than 3,000 subscribers. Start-up costs can include those associated with ensuring that consumers are able to keep the same telephone number when changing providers (number portability) or connecting the competitor’s network with that of the smaller telephone company.

Telecom Regulatory Policy CRTC 2011-291

 

The CRTC

The CRTC is an independent public authority that regulates and supervises broadcasting and telecommunications in Canada.

 

Reference document:

Telecom Notice of Consultation CRTC 2010-43

 

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Additional information on basic residential telephone services

In 1999, the Canadian Radio-television and Telecommunications Commission (CRTC) established a basic service objective that reflected the level of telecommunications service available to Canadians at that time. The objective applied to the large telephone companies that had built extensive networks to reach the majority of the population, namely: Bell Aliant, Bell Canada, MTS Allstream, SaskTel, Telebec and Telus. It also applied to Northwestel and the smaller telephone companies that operate mostly in rural and remote areas.

Over the last decade, competition in the provision of home telephone service has grown steadily in Canada. The CRTC has deregulated 80% of home telephone lines in markets where consumers have access to competing providers. As a result, the former monopoly companies operating in those markets no longer need to obtain the CRTC’s approval to set local telephone rates or introduce new services and packages.

Given these developments, the CRTC has reviewed three measures related to the basic services that the large companies must offer to Canadians in regulated and unregulated markets. They are:

  1. The requirement to serve existing customers as well as new customers requesting telephone service, known as the obligation to serve.
  2. The basic service objective, which is a minimum target for residential service that includes the following features:
    • local service on an individual telephone line
    • access to low-speed Internet at local rates
    • operator and directory assistance services
    • access to the long-distance network
    • enhanced calling features, and
    • a copy of the current local telephone directory.
  3. The regulatory regime that gives subsidies to companies providing local telephone service to residential customers in rural and remote areas.

In addition, the CRTC has reviewed its local competition framework in the markets served by smaller telephone companies.

 

Obligation to serve and basic service objective

 

i) Deregulated markets

 

The CRTC will maintain the obligation to provide basic residential telephone service in deregulated markets—that is to say, a telephone line without any optional features such as call waiting or call answer. Companies will have the flexibility to meet this obligation using the technology of their choice. The basic service objective has been lifted in these markets since there is sufficient competition to protect the interests of consumers.

The CRTC has also decided to maintain the safeguard of a price ceiling for basic residential telephone service. The ceiling will gradually increase to $30 per month by 2013. Telephone companies whose monthly rates are below $30 have the option of either maintaining them at their current level or raising them over the next three years until they reach the ceiling.

Starting on June 1, 2014, the price ceiling will be increased annually by the rate of inflation.

 

ii) Regulated markets

 

In regulated markets, the CRTC is preserving the obligation to provide basic residential telephone service and the basic service objective. At the same time, the requirement to mass-distribute print copies of the white pages directory has been eliminated. Similar to the current practice in deregulated markets, telephone companies will only have to provide a print copy upon request.

 

Subsidy regime

Many Canadians live in rural and remote areas where it is more expensive to provide basic residential telephone service. Companies operating in these areas receive a subsidy from the National Contribution Fund to help offset the costs of providing such a service and keep prices reasonable. Canadian telecommunications companies with annual revenues over $10 million must contribute to the Fund.

Although the subsidy regime is still required in rural and remote areas, the amount available to companies will be reduced by approximately 20% by 2013. This will be achieved in part by eliminating subsidies in high-cost areas that are no longer regulated, effective June 1, 2011.

The CRTC will also introduce a new formula to calculate the subsidy amounts in regulated areas where a company’s monthly rates are below $30. In most instances, the new formula will be based on the difference between the costs to provide basic residential telephone service and a rate ceiling that will be phased-in over the next three years. The rate ceiling will gradually increase to the lesser of $30 per month or the amount required to eliminate the subsidy.

In addition, companies have realized significant productivity improvements in rural and remote areas. The CRTC will no longer reduce the companies’ costs when calculating the subsidy for providing basic telephone service.

 

Local competition

Smaller telephone companies operate in rural and remote areas in Ontario, Quebec and British Columbia. They have traditionally held a monopoly in their home markets for the provision of home telephone service.

The CRTC previously established a framework to permit local competition in the markets of the smaller telephone companies, but has proceeded cautiously given their unique operating circumstances. To date, only three markets have been opened to competitors.

The CRTC will continue to allow competitors to enter the smaller telephone companies’ home markets. To mitigate the impact of local competition, it has introduced the following measures:

  • Smaller telephone companies will continue to receive subsidies for their subscribers until competitors can offer service to 75 per cent of the market.
  • Smaller telephone companies will be able to claim half of the subsidy they would normally receive for subscribers that switch to a competitor during the first three years of competition.
  • New entrants will be required to pay the start-up costs in markets where the smaller telephone company has fewer than 3,000 subscribers. Start-up costs can include those associated with ensuring that consumers are able to keep the same telephone number when changing providers (number portability) or connecting the competitor’s network with that of the smaller telephone company.