Sometimes the politics of this place are mystifying. A few weeks ago, with the alarming result of under funding long term care hitting TV screens, the government announced it will spend another $120 million on higher speed rural internet. What are the Liberals thinking, I wondered?
A lack of capacity in nursing homes leaves elderly patients to linger in hospital beds, stranding those who need those beds stuck in emergency or worse – in an ambulance parked outside, waiting to be admitted to backlogged ERs. You might think that kind of televised evidence of crisis would spur a government to action, especially a government boasting an unexpected surplus of around $240 million. Surely a plan to address the crisis in long-term care would follow?
It was not to be. A couple of days after paramedics said sitting at emergency with stranded patients instead of being on the road was putting lives at risk, Stephen McNeil announced that the government would dip deep into the surplus to once again spend big on the internet. But there was not an extra dime for long-term care or other pressing needs – such as an immediate increase in income assistance rates pending completion of the slow-as-cold-molasses plan for “transforming” the welfare system.
To me, the optics of this seemed stunningly bad. The government of a small province is willing – even eager – to spend millions to subsidize a highly profitable and deeply unpopular telecommunications oligopoly. And it is prepared to subjugate its primary responsibility for the health of its citizens to dabble in an area – telecommunications – the regulation of which the federal government wrested from the province years ago. But if the Liberal government’s political acumen left me nonplussed, I was flabbergasted by the reaction of the media and the opposition parties, all of whom seem to agree that subsidizing rural internet is an okay way to spend an unexpected bonanza.
The internet – nemesis of among others, newspapers, liberal democracy and department stores – has been elevated from decidedly mixed blessing to a flat out necessity. Faster, more reliable downloads have leap-frogged over dignity in old age and adequate income support on the hierarchy of things we should expect from our provincial government. It’s as if after letting social services deteriorate and stripping them of their voices on health and education governance the government is saying of those living in the less settled areas – “Let Them Watch Netflix.”
Far be it from me to argue against the proposition that all Nova Scotians – citizens and business- should have access to reliable broadband communications. As a middle class city dweller I have it, and I would not want to be without. My quarrel is with the way in which provincial governments, past and present, have approached the problem. We’ve gone this way before, with questionable results, but seem to have learned nothing from past experience.
The precedent for the province getting involved in subsidizing high speed internet dates back to 2006 when it was a vote pandering election promise by the Rodney MacDonald Conservatives. There followed the Broadband for Rural Nova Scotia (BRNS) program, a plan to use fixed wireless technology to make internet service with a download speed of 1.5 megabits per second (Mbps) accessible to every Nova Scotia home and business.
It was announced as a $74 million program, with the service providers putting up $41 million, the federal government $14 million and the provincial government $19 million. Most of the government subsidy went to Seaside Wireless to serve eastern Nova Scotia. Significantly smaller amounts went to Omniglobe for Halifax county and Eastlink for the Annapolis valley, the south shore and the southwest.
The province’s contribution went over budget, swelling to $26 million, and the initiative also spawned a lawsuit in the Supreme Court of Nova Scotia over a breach of confidence by government functionaries. Evidence at the trial revealed that the province did not have the in-house technical knowhow to oversee such a project. When the project ended in 2011 it was reported that BRNS had provided access to 93,500 homes, bringing overall coverage to 99 per cent. But there were complaints about quality from some of those newly-served, as well as the one per cent left with no access.
The latter issue exposed a flaw inherent when the provincial government spends to do things that are the responsibility of the federal government. Eastlink took advantage of a loophole in its contract to skip some hard-to-serve areas leaving pockets of the province without service. As Eastlink is licensed and regulated by the CRTC, the provincial government was left with no leverage to force it to serve those areas. More problematic – and potentially expensive – was the fact that the 1.5 Mbps on which governments had spent at least $33 million wasn’t deemed nearly fast enough: the paint was barely dry on the BRNS program when talk turned to speeds in the 50 to 100 Mbps range.
Subsidies without end?
That revolution of rising broadband expectations is behind this latest push, which follows a report from Toronto-area consultants, Brightstar Canada. The Brightstar report calls for construction of a fibre optic spine ( or “middle mile”) that will make possible 50 Mbps download speeds throughout the province – at a cost up to $500 million. But based on history, by the time 50 Mbps is reached there could well be expectations for higher standard, such as 100 Mbps that the United States has established for rural internet. Some may even expect the province to pitch in for the infrastructure to accommodate the “lightning speed” downloads (and driverless car controls) promised by 5G (for fifth generation) wireless technology. The thing is that the internet – sometimes known as the electronic highway – is similar to the traditional highway system. You can’t just build it and move on, there are constant demands for maintenance and upgrades. Once the province gets into subsidizing the internet the adage “in for a penny in for a pound” comes into play.
So before another penny is spent, we need to re-think roles and responsibilities. Nova Scotia has been much too quick to let the telecommunications giants and the federal government off the hook on rural broadband. In the old days, before neoliberalism took over the world, provincial taxpayers were not expected to forego improvements in social services to fund rural communications services. Up until the late 1980s, when the courts handed full jurisdiction to the federal government and the Canadian Radio Television and Telecommunications Commission (CRTC), provinces like Nova Scotia regulated telephone service while Ottawa had jurisdiction over broadcasting. Nova Scotia, like most other provinces, took its regulatory role seriously, recognizing the importance of reliable and accessible phone service to the social and economic wellbeing of rural communities.
Telephone companies were required to serve all customers at standard rates, averaging costs across the system so that essential services were available even in remote and hard to serve areas, the way electricity and other utility services are still provided in Nova Scotia and elsewhere. The CRTC adopted the same philosophy when it came to telephone, but not broadband. Even as broadband became increasingly important the CRTC left service decisions to the providers who would only extend the service if there was a “business case” – i.e. only if they could make a profit on it.
Pressure the feds
Nova Scotia governments seem to have accepted this philosophy without question. Taking Care of Business Minister Geoff MacLellan explained last week that inadequate internet service in rural Nova Scotia is the result of “market failure,” which he is gung-ho to remedy with a healthy injection of provincial money. “Quite frankly, there’s no private sector business case for anything we’re about to do, vis-à-vis $500 million of work, (sic) so this falls to the government, it falls to the taxpayers of Nova Scotia”, he told the legislature.
Where the minister sees market failure, someone with a longer view may see political and regulatory failure. Even the CRTC has given belated token recognition to the error of its past ways. The agency announced in late 2016 that broadband, like local telephone, is a basic telecommunication service and its extension to rural and remote areas should be the primary responsibility of the carriers.
But as has been the case throughout its 50-year-history, the CRTC will go easy on the industry. The federal regulator has set modest goals – access to 50 Mpbs service to the two million Canadian households without it by about 2030 supported by a levy on broadband. The levy, amounting to 0.53 per cent of internet revenues, will make barely a dent in telecomm profits – profits amassed from the use of the radio frequency spectrum, which is of course public property.
The new fee is supposed to raise $750 million over five years to improve internet service to rural and remote areas.Part of the rationale the McNeil government has provided for this latest mad dash down the electronic highway is that Nova Scotia may be able to leverage funding from the feds. But in the unlikely event that Nova Scotia is somehow able to leverage twice its per capita share of the fund – about $40 million – it would cover just a fraction of the $300-$500 million cost of the project.
If the province insists on subsiding the internet there is a need for more transparency, oversight and public input on the nature of arrangements with the private carriers. As MLA Claudia Chender argued during a brief late night legislative debate on the subject, if the province is going to put up so much cash, there is a case to be made for public ownership of the “middle mile.” But before getting into any of that, Nova Scotia needs to demand more from the money-spinning telecomm industry and from the federal government. The feds were eager to take over telecommunications regulation from the provinces but they have done a poor job of regulating the in the public interest – especially the interests of those living in rural areas.
 The latest income numbers from StatsCanada, released in mid-March, show Nova Scotia retaining its position as the province with the highest percentage of persons in low income – 16.1 per cent, compared with a national rate of 13.0.
 When it comes to profits, the telecomm industry dominated by Bell, Rogers, Telus, Shaw, Videotron and Eastlink, is right up with the banks. According to Statistics Canada (CANSIM 180-0003) the operating profit margin for telecommunications companies in 2016 was 19.2 per cent, about double the all-industry profit margin.
 According to evidence in the Supreme Court case, between 2007 and 2015 the province provided grants totalling $23.8 million to Seaside and $2.2 million to Eastlink. Whether that outlay included some of the $14 million in federal funding mentioned in the original announcement is not clear.