National Post (National Edition)
High-speed broadband access is a given in major cities, but some small towns are finding the best option for faster Internet access is building fibre themselves.
SOME TOWNS BUILDING FIBRE THEMSELVES The vast majority of Canadians have steady access to upgraded Internet networks fast enough to meet their insatiable demand for instant downloads, seamless video streaming and constant connection, with some big city dwellers enjoying speeds up to 1,000 megabits per second.
A slow Internet connection is as frustrating to them as a crowded subway or a crawling highway at rush hour. Yet residents in many of Canada’s small towns can only dream of ever video chatting or uploading large files.
“Currently, the best access we have is old school DSL,” said Jon Allan, economic development officer in Sundre, Alta., a 3,000-person outpost about 120 kilometres northwest of Calgary. “You’re lucky to get 7 megabits per second (Mbps) download speeds.”
Although the Canadian Radiotelevision and Telecommunications Commission recently declared broadband a basic right and set nationwide targets for download and upload speeds of 50 Mbps and 10 Mpbs, respectively, federal grants for broadband infrastructure aren’t a given in towns such as Sundre. And telecommunications giants aren’t racing to spend their own money in small towns since their investment priorities are in cities. That leaves Sundre with a choice: Deal with slow speeds until someone injects cash into the region, or join the expanding list of communities building fibre themselves. Allan hopes the town will pick the latter. He’s championing a $2.75-million plan to build fibre-to-thepremises connections throughout the entire town — a plan council approved to send to the public consultation phase this week. The plan calls for Sundre to pay for the fibre with a debenture and, with conservative market penetration estimates, Allan projects it would be profitable within four years by selling wholesale access to Internet service providers.
Shaw Communications Inc. has already expressed interest in buying space on the network, Allan said, as has O-Net, the communityowned gigabit-fibre network operator down the road in Olds, Alta. If the public decides the project is worth the risk, the network could be up and running by 2018.
“The opportunity is huge, but we don’t want to mess up,” he said.
Sundre isn’t the only community with slow Internet that’s fed up enough to take broadband investment into its own hands. Municipalities have successfully built networks in Olds, Coquitlam, B.C., Stratford, Ont., and more than 80 communities in the U.S.
Some attempts have miserably failed. Critics’ favourite example is the one in Provo, Utah, where the city sunk US$40 million into broadband in 2004 only to sell the network to Google Inc. for US$1 nine years later.
Such failures provide ample fodder for the main arguments against community broadband: one, it’s bad economics for subsidized government services to compete with private entities, and, two, governments don’t have a great track record when they do.
About 20 states have gone so far as to pass laws — many lobbied for by the telecom industry — that make it illegal or difficult for municipalities to build broadband networks.
No such laws exist in Canada, and Vancouver-based Internet advocacy group OpenMedia is ramping up a campaign to encourage municipal governments to get in on the action.
OpenMedia’s push piggybacks on the CRTC’s decision to make broadband a basic service and create a $750-million fund to build infrastructure in rural and remote areas. To be eligible for the fund, any proposal must have financial support from some level of government.
“What that did is really make the value proposition for municipalities even more compelling,” OpenMedia’s communications manager David Christopher said.
Business models for such networks include operating a telecom service for end customers, such as in Olds, or selling wholesale access to other service providers, as is done in Coquitlam.
OpenMedia, which blames the hold that big providers have on the market for many Internet access woes, likens municipal broadband to building toll roads.
“It’s a positive way in which local communities can take matters into their own hands instead of waiting for the big telecoms to take them up to speed,” he said.
Councillors in various municipalities have expressed interest in the campaign thus far, Christopher said, citing those in Bowen Island, a notorious Internet black spot a short ferry ride from the City of Vancouver.
Nearby Coquitlam took the plunge into municipal broadband almost a decade ago. Internet service providers that use its fibre network offer faster and cheaper service than the incumbents, so new multi-residence buildings, business and public facilities such as schools are clamouring to get hooked up to the gigabit-speed network.
“There’s a significant increase in the amount of service orders with reference to businesses and some tech companies,” said Danny Bandiera, general manager of Coquitlam Optical Network Corp. (QNet). “We’re doing our best to keep up with demand.”
Coquitlam originally installed fibre-optic cables to help co-ordinate traffic signals, but there was a lot of unused capacity. It started leasing wholesale access to its so-called dark fibre to telecom providers in 2008 to make extra cash and recoup the city’s $4.95-million investment.
Since then, seven new service providers have popped up where Shaw and Telus Communications Inc. once effectively had a duopoly, according to city documents.
“Telus is a little pissed at us to be quite honest,” Bandiera said. But QNet stays out of the fibre-to-the-home game to avoid direct competition with the big players. “We’re not holding them back. There’s been a demand for FTTH. We don’t want to compete.”
QNet has been in the black since 2013, though it anticipates it will take another decade to pay off its loan. It expects to earn $11.7 million in profit by the end of its 30-year business plan.
“It doesn’t make a lot of money, obviously, but it makes enough money that it’s self-sustaining,” Bandiera said. “There’s no tax dollars for this by any means.”
Any use of tax dollars for municipal networks is what irks industry players and free-market fans.
“Governments have a really lousy track record of operating things for consumers,” said telecom consultant Mark Goldberg.
Governments are good at building things, he said, but there isn’t any “political glory” associated with maintenance when, for example, aerial fibre cables get cut in ice storms. Plus, there’s a risk of setting up monopolies since private-sector companies can’t compete against their own tax dollars.
Goldberg would prefer to spend government subsidies on connecting low-income residents who can’t afford Internet or computers, including those in urban centres where excellent broadband is available but is too pricey for many.
Despite his misgivings about taxpayer-funded networks, Goldberg sits on the board of Lakeland Holding Ltd., whose municipalityowned subsidiary, Lakeland Networks, built a fibre network to offer high-speed Internet throughout Ontario’s Muskoka district.
“If what you’ve got is a community banding together saying we want to help attract advanced communications, absolutely, folks should be out advocating for it,” he said. “The question is the architecture that’s used to deliver it.”
Jack Studer, a former Wall Street banker who cofounded a tech hub in Chattanooga, Tenn., after the city built its own gigabit network, doesn’t see a contradiction in free-market types supporting municipal networks. “Anyone who makes the tech available is benefiting entrepreneurs,” he said. “If there’s infrastructure, that’s not a problem for us. The point is that it’s available.”
Studer said Chattanooga’s fibre network, built in 2010, has become a “calling card” for the city of about 175,000, helping to attract tech entrepreneurs, including a tech accelerator and startup hub launched in 2012.
Local colleges and universities have also adopted a more tech-savvy curriculum and more young people are staying in the city as successful startups launch and venture capital comes to town, he said. Plus, he noted that telco giant Comcast Corp. now offers faster speeds at more competitive rates in the city.
“The result has been more competition, better service and better customer service,” Studer said. “It was always a wonderful city … but I don’t think a lot of that activity would’ve happened if we hadn’t put that stake in the ground.”
But Sean Speer, a senior fellow at the MacdonaldLaurier Institute and economic adviser to former prime minister Stephen Harper, thinks there’s a better way to improve broadband in smaller centres.
He said the federal government could attach “unprecedented” requirements for broadband build-out in under-served areas as part of the upcoming spectrum auction instead of setting aside spectrum for smaller players.
For example, if Bell Canada bought spectrum in Thunder Bay, Ont., it would also have to invest in broadband for outlying areas such as Atikokan.
“We’ve had build-out requirements before, they’ve just never been quite as ambitious,” Speer said. “If we can substitute private financing for public financing, I don’t know why we wouldn’t seize on it at every opportunity.”
He said there is a role for subsidies where the market fails in remote centres, but pointed out that private companies have done a good job of getting Canada online thus far.
“Canada has, generally speaking, built a fairly highquality network with limited public dollars,” Speer said.
Approximately 98 per cent of Canadian households can access Internet with speeds greater than 5 Mbps, and 80 per cent subscribe to such services, according to the CRTC’s most recent statistics from 2015.
But back in Sundre, Allan contends that 5-Mbps speeds can leave businesses “pulling their hair out” to do something as simple as set up a Facebook page.
Private investment in telecom infrastructure would be nice, he said, but providers don’t have the capital to spend in a small town. As a result, his gigabit dreams depend on the public’s appetite for faster Internet and the risk of failure.
“If people say government needs to stay out of it, that’s an ideological reaction,” Allan said. “We are actually supporting private business … if anything, we’re providing them the means to compete.”