Government urged to spend spectrum proceeds on broadband

An increasing chorus of voices is calling on the government to spend the $4.2 billion windfall from an auction of cellphone airwaves on internet access to prevent Canada from falling behind the rest of the world.

With the auction of cellphone airwaves having raised more than $4.2 billion and nearing its end, an increasing chorus of voices is calling on the government to invest in broadband internet access to prevent Canada from falling behind the rest of the world.

Both the Liberals and NDP on Monday urged the government to invest a large portion of the auction's haul — which is far more than the $1.5 billion the Conservatives projected before the sale of airwaves began in May — into improving high-speed internet access across Canada, particularly in rural regions.

Scott Brison, MP for Kings-Hants and the Liberals' industry critic, said businesses in rural communities are finding it increasingly difficult to compete because many are still stuck on dial-up internet access. He said at least $2 billion from the auction should be put toward improving broadband availability in remote areas.

"They've waited far too long," he told "Those communities cannot be competitive in a global, technologically-driven economy if they don't have broadband."

Large internet service providers such as Bell Canada Inc., Rogers Communications Inc., Telus Corp. and Shaw Communications Inc. have mostly stuck to rolling out broadband in larger cities, where their costly investments pay off more quickly because of a greater number of potential customers.

Canada has consequently seen its early global lead in broadband evaporate. In 2002, Canada was second only to South Korea in the 30-member Organization for Economic Co-operation and Development in terms of per-capita broadband subscriptions, a ranking that has slipped now to tenth.

As of December 2007, Canada had 8.6 million broadband subscribers, or approximately 26.6 per 100 inhabitants, according to the OECD. Denmark, the OECD leader, had 35.1 subscribers per 100 inhabitants.

The decline is dangerous, Brison said, because high-speed internet access is now on a par with roads or rail infrastructure.

"Broadband is just as important today," he said. "For a rural community to survive, it needs to be able to do business. It's awfully hard to do business today without broadband access."

Minister of Industry Jim Prentice has been non-committal about what the government plans to do with the windfall from the auction, which will also result in new cellphone providers sprouting up in the next year or two. In a House of Commons question period last month, he said he would like to wait until the auction ends before discussing what to do with the money.

Some companies have already been ordered to spend on rural broadband by the Canadian Radio-television and Telecommunications Commission. Companies such as Bell and Telus had since 2002 been prevented from cutting their phone rates in big cities so that cable providers such as Rogers and Shaw could earn a foothold in the home phone market.

The CRTC instead ordered that overpayment by urban customers go into a deferral account, which by the beginning of this year amounted to about $650 million. The regulator in January ordered the phone companies to spend about $300 million of that pot on rural broadband, and to return the rest to their urban customers.

CRTC should oversee rollout: NDP

Peggy Nash, MP for Parkdale-High Park and NDP industry critic, said the spectrum proceeds should be used to augment the deferral account investment. But rather than simply handing the auction money back to the large internet service providers (ISPs) to build out broadband, the investment should be done with CRTC oversight.

"That way it's not entirely left up to the market to decide how and where there will be service," she said.

Broadband access, however, isn't just an issue in remote parts of the country, Nash said.

"For a lot of people living in cities, that's amazingly still a concern."

A number of large ISPs, including Bell and Rogers, are currently embroiled in controversy over limiting the speeds of certain uses of the internet. The ISPs say they are slowing uses such as peer-to-peer applications, including BitTorrent, because they are chewing up all of their network capacity.

The auction surplus could be used to help build more capacity, Nash said, to prevent a tiered internet — where ISPs decide which applications get faster speeds and which don't — from arising.

The Liberal and NDP MPs have joined other industry commentators in urging the government to spend auction proceeds on rural broadband. Mark Goldberg and Michael Sone, the organizers of the annual Telecom Summit, and Michael Geist, the University of Ottawa's Canada Research Chair of Internet and E-commerce Law, also made the same recommendation last month.

The spectrum auction continued to grind into its eighth week, with only four new bids placed in the last round on Monday. After 270 rounds, the auction stands to net at least $4.21 billion.