Columns Archive

Does the Government Have a Role in Internet Connectivity?

Appeared in the Toronto Star on March 13, 2006 as Don’t Subsidize Web Providers

Toronto Hydro’s announcement last week of its plans to blanket the City of Toronto with wireless Internet access has sparked an important debate about the appropriate role for governments and public institutions in providing Internet connectivity. Significantly, it 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.

The major telecommunications companies can be expected to support that approach, though the CRTC decision illustrated that they typically only want to keep government out when it is a potential competitor. When government is prepared to provide what amounts to massive corporate subsidies, as Canada’s telecommunications regulator has decided to do, public involvement becomes far more attractive.

Meanwhile, supporters of public involvement point to compelling evidence that government must increasingly shoulder responsibility to ensure that the market features robust competition and that no Canadian communities are left behind.

Access to the Internet is no longer a luxury – for millions of Canadians it is necessity that serves as a foundation for education and life-long learning initiatives, access to knowledge, health care, government services, financial activity, entertainment, and communication.

Given the Web’s importance, 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.

Recent comments from a senior Canadian cable company executive, who last month informed a group of stock analysts that the Canadian market for broadband services does not face the same competitive pressures as those found in the U.S., foreshadows the prospect of steadily increasing consumer prices for high speed Internet access.

In fact, as leading Canadian ISPs institute new fees for services such as Internet telephony and as they lobby for the power to dispense with traditional network neutrality principles, the lack of competition is clearly having a negative impact on the marketplace that could expand the digital divide within Canada' s major cities.

In light of these developments, last week’s Toronto Hydro announcement should be welcomed as an opportunity to inject new competition into the Internet access market. Moreover, much like other municipal wireless initiatives in U.S. cities such as San Francisco, Philadelphia, and Tempe, Arizona, officials should use the connectivity to ensure that there is affordable access for all members of the community.

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.

Ottawa has been struggling with this issue for many years. In 2000, it established the Broadband Task Force, which recommended that the government address fears of a digital divide within the country by providing financial support for network development in rural communities. Those recommendations were never fully implemented as successive industry ministers failed to obtain the necessary support within cabinet.

The CRTC jumped at the opportunity to remedy the situation when it conducted hearings on how to distribute funds it held in trust on behalf of consumers who overpaid for their local phone service.  Last month it decided to allocate the funds, which amount to a staggering $652 million, toward rural broadband initiatives.  The money will be used to reimburse telecommunications providers for their "non-economic" costs (ie. unprofitable costs) of building rural broadband networks.

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.

By openly acknowledging the lack of competitive pressures in urban markets and their unwillingness to invest in rural networks without governmental support, Canada’s ISPs have sent a clear message to Minister Bernier. While the market should lead, the government must assume its share of responsibility to eliminate the Canadian digital divide.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at or online at

Comments are closed.