Two New Federal Funds Totaling $1,250M for Rural Broadband
Digital prosperity directly correlates to high-speed fibre broadband Internet access. Describing the economic benefits of broadband Internet adoption, the McKinsey Global Institute says: “[broadband] infrastructure, the backbone of the Internet ecosystem, is an irreplaceable prerequisite. It creates the platforms for users, and organizations to experience the Internet, and entrepreneurs and businesses to innovate.”
Superfast ultra-broadband access transforms local economies, businesses, households, and public services by improving performance of existing firms, and enabling new next generation businesses. It also opens global markets, providing new job opportunities, and boosting productivity. According to the Broadband Commission, a joint body of the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the International Telecommunication Union (ITU), every 10 percent increase in broadband penetration results in additional growth of 1.3 percent in national gross domestic product (GDP).
Canada is a traditional laggard when it comes to broadband. Canada ranks behind 33 other countries on a list of the world’s fastest download speeds, placing it behind most G7 countries including the United States, Russia, and Germany. The data comes from Ookla, a broadband research company using “research from its website SpeedTest.net.
Canada’s average download speed is 16.6 Mbps, faster than countries like Spain (14.4 Mbps) and Australia (12.75 Mbps), but slower than the U.S. (17.3 Mbps), and world-leading Hong Kong at 44.14 Mbps.
These speeds fail to compare too many municipalities in the US and Canada that are now implementing gigabit (1000 Mbps) broadband networks. The Canadian Government, through the recently announced funds described below, provide the opportunity for progressive municipalities and ISP operators to significantly improve the lives of their constituents.
CRTC Rural Broadband Fund
On December 21, 2016, the Canadian Radio-television and Telecommunications Commission (CRTC) and the Canadian Government’s Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development with a lot of fanfare, declares high-speed Internet a basic service. The CRTC set speed targets of 50 Mbps download and 10 Mbps upload and unlimited data plans for fixed broadband service including access to the latest mobile wireless technology in homes, businesses, and on major roads.
“They are ambitious targets but I think they’re realistic,” CRTC chairman Jean-Pierre Blais said, noting that the commission looked at similar targets set by Canada’s trading partners. “The U.S. is at 25 [Mbps], Australia’s at 25, Europe generally is targeting 30 and Germany is at 50.”
Blais also states, “High quality and reliable digital connectivity is essential for the quality of life of Canadians and Canada’s economic prosperity.”
The CRTC wants everyone in Canada to be able to access high-speed Internet, setting bold targets for speeds, and establishing a new fund investing up to $750-million over five years to expand broadband services to remote regions. In 2017, $100-million is available, with $90-million allocated to rural broadband and $10-million for satellite.
The CRTC fund supports projects in areas that do not meet the new targets. Applicants can submit funding proposals to build or upgrade infrastructure for fixed and mobile broadband Internet access services. The fund will:
- make available up to $750 million over the first five year
- be complementary to existing and future private investment and public funding
- focus on underserved areas
- be managed at arm’s length by a third party
Fund qualifying details will be available later this year.
Connect to Innovate Fund
On December 15, 2016, Honourable Navdeep Bains, Minister of Innovation, Science, and Economic Development declares, “high quality and reliable digital connectivity is essential for the quality of life of Canadians and Canada’s economic prosperity.” He announces the $500M Connect to Innovate (CTI) Federal Fund that focuses on backbone internet connectivity to rural and remote Canada connecting institutions like schools and hospitals with a portion of funding for upgrades and "last-mile" infrastructure to households and businesses.
The CTI program will invest $500 million by 2021, to bring high-speed Internet to rural and remote communities. These communities have challenging geography and smaller populations that present barriers to private sector investment in building, operating and maintaining infrastructure. All projects funded under the program must be open to third parties for dedicated capacity purchases on a wholesale or retail basis. Applications that exclude open access are ineligible.
This backbone infrastructure is often fibre optic-based, but can be a range of technologies including microwave and satellite service. Eligibility includes backbone capacity upgrades and resiliency, and last-mile infrastructure projects to households and businesses.
The CTI funds will also support "last-mile" connectivity projects to households, at speeds of at least 5 Megabits per second (Mbps), where gaps continue to persist. Last-mile infrastructure brings Internet access from the backbone to end users like households or small businesses through familiar wired or wireless technologies, such as cable, digital subscriber line (DSL), fixed wireless, or satellite.
How does CTI align with the CRTC Fund?
The CTI program extends broadband access to unserved and underserved communities across Canada. The program focuses on investing in backbone networks.
The fund complements expansion of last mile networks, through private sector investment, programs from other levels of government, or of regulatory decisions. The CRTC's decision notes its own efforts are complementary to the Federal Government's Innovation Agenda and broadband investments.
The CRTC plans consultations for 2017. The intake for submissions under CTI began January 16, 2017. The deadline for all applications is April 20, 2017 at 12 p.m. noon Eastern Time.
Who can apply?
Any entity other than individuals will be able to submit an application. Federal entities (including Crown corporations) are ineligible.
The applicant must identify who will build, own and operate the network, as well as who will manage the project. If the entity making an application to the program does not itself have a track record in operating Internet infrastructure, it will be asked to demonstrate in its application that appropriate resources with experience deploying and operating Internet infrastructure are part of the project team/contracted resources.
RDM Recommendation
This is likely a “once in a lifetime opportunity” for municipalities, cities, towns, first nations, and commercial ISP operators and to apply for funding and build out gigabit fibre broadband networks. Those entities taking advantage of these funding opportunities will economically prosper.
For further information on the CRTC and CTI Funds, or if you require assistance filling a CTI application, please contact info@rdmmanagementgroup.ca
Author
David Pickett, Director of Finance, RDM Management Group, dpickett@rdmmanagementgroup.ca
Subject matter expert in Finance & Business valuation relating to Telecom Media and Technology (TMT)