Does the Government Have a Role in Internet Connectivity?

My weekly Law Bytes column (Toronto Star version, homepage version) picks up on Toronto Hydro’s announcement last week of its plans to blanket the City of Toronto with wireless Internet access. I note that the announcement has sparked an important debate about the appropriate role for governments and public institutions in providing Internet connectivity, which comes on the heels of the CRTC’s recent decision to distribute $652 million to major telecommunications providers such as Bell and Telus to help defray the costs of implementing high-speed connectivity in rural Canadian communities.

These developments place the spotlight squarely on a critical question for new Conservative Industry Minister Maxime Bernier – what, if anything, should government do about Internet connectivity?

The starting position for a Conservative government might well be to argue that government has a very limited role to play here, concluding that this is strictly a marketplace issue and that the private sector has plenty of incentives to develop networks for consumer use.

Given the Web’s importance, I argue that government cannot adopt a hands-off approach, though it must recognize that its role differs in the urban and rural markets. In urban communities, most of which are serviced by a choice of two broadband options (cable or DSL), the focus ought to be on the competitive environment and the assurance that the entire community can afford access.

The governmental role in rural Canada ought to be a different one. In those communities, many of which lie on the outskirts of major cities such as Toronto or Ottawa, the concern revolves around connectivity, not competition, since there is often no broadband option available to local residents.

While its intent is laudable, the CRTC’s approach is an inappropriate way to solve the problem. Since the money comes directly from Canadian consumers, consumer groups rightly argue that it should be returned to those same consumers (each consumer would receive approximately $50).

The Commission’s decision has highlighted the need for governmental involvement, however, since the major Canadian ISPs informed the CRTC that without external support, there is no economic case for building high-speed networks in many rural Canadian communities.

The solution therefore lies not in simply handing over $652 million in economic assistance to the telecommunications providers, but rather for government to support local, community-owned networks that operate for the public benefit. While the telecommunications providers might be called upon to establish the services, publicly funded networks would remain in public hands, with the communities retaining the flexibility to offer reduced fees or alternate options.


  1. Here here! I love the idea of publicly owed ISP’s. That is a great idea that would greatly benefit rural areas of Canada.

  2. Having just moved to rural Ottawa (North Gower) in August 2005, I can share that our problem is not a lack of options for broadband connectivity (there are 3 wireless providers serving our area) but rather prohibitive start-up costs for obtaining the service. Wireless service requires a line-of-sight from an antenna on your property to the transmitter. While we live on a well-populated stretch of road, there are lots of tall trees between our house and the transmitter, which means we need a very high tower installed in our yard if we want the service. Rough estimate – $3000 to $4000. Our double-income-no-kids household can’t afford this, so I’m sure the multitude of kids that live on our street are missing out the Internet experience enjoyed by their urban friends – or even by their friends who live 10 minutes away but have access to cable.

    We would be thrilled to have access to the same types of services as those available in urban Ottawa, but if that isn’t going to happen any day soon then perhaps there is also a middle ground of public assistance required for rural connectivity – subsidies to allow people to access service that is available yet out of reach.

  3. Miles Muri says:

    Parallels with rural telephone and elect
    It seems to me that this same sort of thing happened when the telephone and electric networks were being rolled out. For the companies that ran these services there was, of course, no incentive to spend on deployment where the time to re-coup that investment was overly long (they were doing fine in the cities, thank you very much). In many jurisdictions, it was because of gov’t involvement that services were provided to rural customers at all.

    The same situation is proving true for broadband internet access. Here in Saskatchewan, there simply was no rural broadband until the depts. of Education, Health and Justice stepped in and said they wanted to create a network that included all communities where the three already provided services. Only at that point did SaskTel (smelling a cash cow) step up to the plate and begin providing service to rural towns (real rural customers i.e. farmers are still SOL as far as SaskTel is concerned).

    Of further embarassment to us residents of Saskatchewan is that the three departments concerned only got excited about the project after the announcement of our rich neighbour Alberta’s SuperNet (which creates a similar network in Alberta, but it actually puts fibre in the ground. Not quite so fast in SK…).

    In conclusion, I think the historical evidence would lead us to beleive that there would be little or no development of broadband services to rural customers were it not for government involvement of some kind. Which kind of involvement is best remains to be decided.

  4. Citizen
    I don\\\’t think the government needs to subsidize this at all. It is corporate welfare/extortion.

    I knew of a venture where they were going to provide wireless internet access to a town of 5000. Telus said it was far too expensive to service the area and wanted $200+ monthly and very expensive equipment. This was in 2004! Investors raised the capital, put the system in and 3 months later generated enough cash at $69/mo to begin to pay for loaned investment money.

    The story doesn\\\’t end hear, all of a sudden Telus can put it in for $29 and had a 3 months free access. Needless to say, the venture providing the initial internet access is now bankrupt and defunct.

    Telus prices then went up and no deals. Quality of service also has been an issue.

    There are lots of us who would provide good Internet service to these smaller communities but we need protection from the big elephants crushing our investments like bugs.