Ottawa's spectrum policy penalizes rural Canadians

Canadian broadband networks have performed admirably during the COVID pandemic, providing reliable broadband service at very high speeds as network utilization has surged far above pre-crisis levels. Despite Canada's vast expanse and often difficult terrain, even most rural Canadians currently have access to extremely fast broadband. OpenSignal recently reported that more than 80 per cent of rural Canadians can access an advanced wireless connection with an average download speed of 32 Mbps (megabits per second), far better coverage and speed than in the rest of the developed world, Japan excepted.

Last week Ottawa reiterated that it plans to provide $1.75 billion in subsidies to further extend high-speed services into rural Canada. This plan notwithstanding, Canada's national wireless carriers — Bell, Rogers and TELUS — will struggle to connect most of the remaining 19-plus per cent of rural Canadians and to allow existing users of high-speed services to continually expand their usage under current or future technology. Why? Because Ottawa has failed to provide them with sufficient “spectrum” — the airwaves through which signals travel.

The federal government periodically conducts auctions of the electromagnetic spectrum for a variety of uses, but it has recently been very slow to auction new spectrum. Moreover, it has allocated too little for mass wireless communications, and it has even deliberately withheld some from the national carriers, those most likely to deploy it to rural areas. The result is an artificial shortage of the key resource needed to expand wireless services, a shortage that will only get worse as carriers attempt to deploy the new 5G technology that is crucial to Canada's economic development. At the same time, the artificial scarcity of spectrum drives up spectrum prices, which, in turn, increases retail prices for Canadian wireless customers — by about 15 per cent, according to my estimate.

Most other developed countries are doing a much better job of providing spectrum for their national wireless carriers. Unlike Canada, most countries have completed auctions of the lower-band and mid-band spectrum required for the deployment of the new 5G technology. In Canada, the government has auctioned low-band spectrum but has delayed until the middle of next year the auction of the mid-band spectrum that is desperately needed to provide wireless capacity, particularly in underserved remote areas.

Even this delayed auction will not allow Canadian wireless carriers to deploy services efficiently, however, because the government is auctioning much less spectrum than they need. Many other countries have already auctioned up to twice the spectrum that Canada will auction next year. To make matters worse, Ottawa continues to set aside one-quarter of this insufficient spectrum for small, regional wireless carriers, who do not and will not use it to deploy services to rural areas as fully as the three national carriers. Other countries recognize the adverse effects of such set-asides and therefore rarely use them.

Canada's poorly designed spectrum policy results in the three national carriers having as little as half as much spectrum to begin to deploy 5G services as carriers in Austria, Germany or Japan — countries that clearly have less rural expanse than Canada. As a result, Canada's national carriers are unable to offer high-speed broadband in many rural and remote areas and are falling behind in the deployment of 5G, which in turn will delay adoption of the important new innovations that will come with it, including internet-connected cars, enhanced environmental sensors, remote medical services, and improved remotely-controlled household appliances.

The government continues to lament that its policy goal of providing all Canadians with access to broadband download speeds of at least 50 Mbps has not been achieved, but it does not acknowledge that its own spectrum policy is largely to blame.

A good start for remedying the spectrum scarcity problem would be to eliminate set-asides for small carriers in future auctions. The government has been privileging small, regional wireless carriers in the vain hope that one of them will eventually be able to compete on a national scale with the three existing national wireless carriers. But experience from other much more densely-populated countries, such as the United States, suggests that it is difficult for four national wireless carriers to thrive. Given Canada's low population density, four national carriers are even less likely to survive here. Recent research suggests Canadian subscribers would be better off with just three carriers rather than four anyway. The three carriers would each have more spectrum with which to deliver better service than would four carriers divvying up the same spectrum.

If Ottawa is truly concerned about broadband quality in rural and remote areas it should allocate more spectrum to commercial wireless and abandon the set-asides, joining the rest of the developed world in recognizing that set-asides are an anti-consumer policy.

OTHER DEVELOPED COUNTRIES ARE DOING A MUCH BETTER JOB

OF PROVIDING SPECTRUM.