How do we close the digital divide in the current volatile geopolitical environment?

While I am sure many have been expecting me to react to the CRTC's unfortunate decision on incumbent resale of competitor fibre, I have refrained from doing so because the Commission has rightly or wrongly (in my view very wrongly) determined that the public interest is better served by allowing Telus to offer a bundled discount to consumers in urban ON than encouraging it to invest in fibre to the premise in rural and remote areas. It's over though; the Commission has convinced itself, with ISED's blessing, that is the correct course. The fact that Bell will resell in B.C. and Alberta at some point doesn't alter my assessment, but we really should move forward and take the CRTC at its word that it will monitor the situation.

However, all of this raises a broader question about what our strategy going forward is for meeting the broadband objective of 50/10 Mbps available to 100% of the population by 2030? Another question is, does our strategy need to adapt because of a very changeable and volatile geopolitical environment? This is the topic of this post.

Canada has been very successful at deploying next generation networks; in fact, we excel at it. Historically, we have encouraged private investment to build out these networks. The vast majority of the networks - both wireline and wireless - we enjoy today have been funded by private capital. More recently, and as a supplement, we have employed subsidy mechanisms like the CRTC Broadband Fund and other distinct funding streams that are provided by the Universal Broadband Fund, the Canada Infrastructure Bank and the Low Earth Orbit Satellite Initiative. All of these funding sources, along with provincial and municipal initiatives, have stacked on top of carrier investment to extend broadband even further into rural and remote Canada.

The results up until now have been impressive. According to the latest CRTC Communications Monitoring Report (2023), almost 90% of residential and business premises are addressed by Gibabit + broadband service. Admittedly, the 90% is a national average and is heavily skewed to the majority urban population and when looking to rural and remote areas, the results show more work is required. In 2023, only 53.6% and 43.6% of homes and businesses in rural and First Nations reserves respectively were addressed with Gigabit + broadband service.

A huge amount of credit should go to the industry and some government initiatives for what has been accomplished to date along with the rapid improvements in connectivity shown on the chart above for Gigabit + network reach. When compared with data from the FCC's National Broadband Map in the United States, Gigabit-capable infrastructure (both fibre to the premise and DOCSIS cable systems) there addresses only 60-70% of premises and the percentage with access plummets in rural areas and tribal lands. In the United Kingdom, Ofcom, the national regulator, reports that 69% of premises are addressed by full fibre networks and up to 83% have similar functionality when including hybrid fibre coaxial networks.

What is clear from this is, that Canada enjoys a significant advantage and that should resonate in productivity and opportunities for innovation as well as optimizing all manner of applications that deliver mission critical services in the health and education fields. Vis à vis the U.S., Canada has a distinct advantage as the FCC is interpreting down standards of assessing success in reaching its 100/20 Mbps advantage and eliminating the fibre-first focus and subsidizing more fixed wireless deployments. To put a finer point on it, the District of Columbia while being underserved is by no means rural, and it is converting plans for FTTP deployments into FWA deployments. For Canada, this constitutes an advantage we should exploit. With a similar 100/20 Mbps objective Canada's results (2023) are represented below.

Robust carrier capital expenditure programs, many focused on fibre deployment, and significant pools of grant funding made available by various government has resulted in meaningful progress being made in closing the remaining gap and overachieving on the broadband objectives by 2031. While the deployments have been largely fibre-first, some rural and remote deployments have utilized fixed wireless which, through recent improvements, has proven more serviceable for today's demands and more economic to deploy in some areas.

In pursuit of the 2031 target, the government's plan appeared to be that any remaining premises not meeting the broadband objective by terrestrial networks would be served by low earth orbit satellites. Notably, some Provinces, (e.g., ON, QC and NS), entered into subsidy and capacity agreements with Starlink to provide compliant services to their citizens. The federal Government provided significant loan guarantees to Telesat who has been developing its own low earth satellite called Light Speed that it contends will, when launched, provide superior capabilities.

However, to paraphrase the Scottish poet laureate Robert Burns in "To a Mouse", the best laid plans of mice and men oft go awry. What occurred was a confluence of events. A newly aggressive Russia invading Ukraine and coming into conflict with NATO and the United States upended any spending plans that were in place within the western alliance. Russia has increasingly made clear its intentions to expand and solidify its influence in the Arctic polar region, in particular along the Northwest passage. In response to this, the newly elected administration in the United States signalled its demands for greater collective defence spending from its NATO allies, particularly Canada, which had not met its 2% of GDP commitment and is now faced with 5% spending requirement totalling a baseline $150B/annum indexed to GDP into perpetuity.

The massive increase in defence spending, along with other things, was recognized by the Government as an existential threat to public finances requiring a reset. It announced potential cuts to legacy funded programming and has shifted investments to sectors that it has identified as strategic and subject to growth, as well as infrastructure projects with strategic adjacency to its new defence commitments. Included is an Arctic economic and security corridor roughly abutting the northern land border of Canada. One of the areas that the Federal and Provincial governments would appear to have de-prioritized are the funding streams, other than the CRTC Broadband Fund, whose purpose it was to extend next generation network to underserved and unserved areas. In short, after the completion of the current projects proceeding pursuant to existing funding agreements, funding will cease.

In my opinion, this is a strategic error and one that could be rectified by inclusion of further connectivity initiatives specifically tailored to those areas mentioned by Prime Minister Carney in his address to the Council on Foreign Relations in September. The Defence corridor the Prime Minister envisages is largely co-existent with areas of the greatest need and a fibre-first funding policy could leverage other defence or civil infrastructure investments to both bring more than adequate amounts of backhaul and access capacity to communities which otherwise would have had to rely on satellite connectivity for the foreseeable future. This would in my view be an error.

In addition to pushing transport and access fibre deeper into these areas, the Government could seek suitable partners to construct a submarine fibre link through the Northwest passage linking Asia and Europe. This would have immediate sovereignty advantages for Canada and would provide redundant fibre connectivity between our allies for all manner of applications while improving our strategic resilience. At some level, similar investments in connectivity and power resources will need to be made to bring the northern economic and security corridor to life, including upgrades to rail and port infrastructure as announced by the Prime Minister, so why doesn't Canada rise to the moment and leverage those investments in achieving its other connectivity objectives as well?

We will be able to make another assessment in coming days.