The Canadian Radio-television and Telecommunications Commission announced Tuesday plans to phase out nearly $116 million in subsidies for local telephone service in high-cost service areas over the next three years.
This stems from a 2016 decision to label broadband as a basic service, a move that shifted the CRTC’s focus to funding internet connections in rural and remote areas. Its preliminary view was that if a person can reliably access the internet, over which they can use voice services, there is no need to subsidize residential phone lines.
As it stands, telecommunications providers with more than $10 million in annual revenue must contribute to a national fund that is distributed to incumbent local exchange carriers serving rural and remote areas where the monthly costs to provide service are higher than revenue. The fund reached nearly $116 million in 2017, up from about $107 million in 2016, according to CRTC documents.
The CRTC still plans to collect the revenue, but it will go towards funding broadband services instead through a $750-million fund, the details of which have yet to be determined.
The subsidies will be phased out semi-annually starting Jan. 1, 2019 until Dec. 31, 2021. Carriers that receive subsidies include BCE Inc.’s Bell Canada and Saskatchewan Telecommunications Holding Corp. For Northwestel, which serves most of the Yukon, Northwest Territories and Nunavut, funding will dry up at the end of its 18-year-old service improvement plan on Dec. 31, 2020.
The regulator ended the subsidy despite opposition from some providers including SaskTel, Telus Corp. and Eastlink. They argued that they have the obligation to serve customers in high-cost areas, but without the subsidy could not do so with rates that are just and reasonable. They asked for compensation to offset any losses.
But the CRTC wasn’t convinced. It determined the parties did not provide sufficient data to prove significant financial losses and noted the incumbents can use the same wires to earn additional revenue from internet access.
“These services were not available at the inception of the local service subsidy and, all things being equal, due to the revenues they generate, subsidy amounts are likely overstated,” the CRTC stated, though it also launched a process where the companies will have a second chance to argue for compensation.