A couple of years ago, when thanks to a year-end windfall the McNeil government stashed $120 million into a slush fund for high speed internet expansion, I questioned why a province – with social spending needs that ran the gamut – would make such a choice. It seems my qualms were very much in the minority. A few months later, when the books were closed on the 2017-18 fiscal year the windfall turned out to be even bigger than expected and the McNeil government added another $73 million to the pot – formally known as the Internet Funding Trust.

Last week Develop Nova Scotia revealed how it intends to spend that first tranche of cash from the Trust. As feared, the announcement shows that this province is intent on splurging to pay for services that should be the responsibility of the private telecoms and the federal government. Instead of expecting the telecoms and feds to do their jobs, the province is letting them off the hook. More than half of the $100 million to be spent on the announced projects is coming from the province ($45 million) and municipalities ($9 million). The operators are putting in about 42 per cent, the feds just 2.5 per cent.

The mighty Bell Canada, which recently announced net earnings for 2019 were up nearly ten per cent to $3.2 billion, is getting at least $12 million in public funding, as well as some portion of another $12.7 million, to connect up to 20,000 customers.[1] Ma Bell is only putting in $15.8 million of its own money, according to Develop Nova Scotia documents.

Xplornet, an up-and-coming New Brunswick outfit specializing in servicing rural areas, is getting $22.6 million from the province while putting up $19.9 million of its own cash to potentially connect 16,000 homes and businesses in Colchester and Cumberland counties. It is also in line for an additional $6 million from local municipalities to hook up another 8,000 addresses. If the latter deal comes through, Xplornet will be getting provincial and municipal subsidies for 58 per cent of the cost of reaching a potential of 24,000 paying customers.

New Brunswick contrast

On that score, Xplornet must love doing business in Nova Scotia. Last summer the company announced an expenditure of a $120 million to provide 83,000 rural homes and businesses in New Brunswick with “access to the latest 5G-ready Internet technology capable of providing dramatically faster Internet services with unlimited data.” According to Xplornet’s July 25, 2019 press release, the company was putting $80 million (66.7 per cent) of its own money into the project, with $40 million coming from the feds.

Put another way, for Explornet, investing $1 in New Brunswick attracts 50 cents in federal subsidies. In Nova Scotia, $1 potentially fetches almost $1.50 in provincial and municipal subsidies. Develop Nova Scotia has stated a goal of spending as little as possible from the Trust by “leveraging all avenues of funding” for broadband expansion. Like Archimedes, Develop Nova Scotia should be looking for a more perfect lever.

Taking the Xplornet New Brunswick announcement at face value, it approximates how things are supposed to work – service providers and the feds sharing the cost of hooking up subscribers in hard-to-serve areas. For better or worse, high speed internet (high speed a constantly expansive definition) has become essential in all parts of this very large country just as voice communication was in the old days. The issue is the poor response of those responsible for ensuring this essential service is provided.

Policy failure

To digress to history, up until the 1970s, carrier services were provided by monopolies, regulated by the federal government in Ontario and Quebec and by provincial governments elsewhere. In return for their monopolies and a nice rate of return on investment, the phone companies were expected to provide service to everybody in their franchise area, at standard rates.

But around 1980 the federal government changed the rules. Beginning with Trudeau the First, the federal government decided that these regulated monopolies, with their mandate to serve everyone at standard rates, were passé, just like public ownership of an airline or railway. The feds did two things. They used the courts to strip provincial governments of regulatory authority. And they encouraged the cable companies to compete with Bell and the other phone companies for the full range of telecom services – phones, cable and eventually, internet.

But in this new environment of competition and deregulation the obligation to serve every community or every customer went by the wayside. In the brave new de-regulated world, the telecoms would only provide service where they could make a profit. This outcome was expected. The proponents of de-regulation were clear that if was unprofitable to serve some communities, the responsibility rested with government, not with the telecoms, operating in a competitive environment. And with the federal government’s seizure of jurisdiction over telecom regulation from provinces like Nova Scotia, it would follow that the responsible government would be the one in Ottawa. But successive governments have dropped the ball. They have allowed development of an urban-rural, rich-poor digital divide. Regulatory oversight has been lax. And subsidy programs have been too little, too late.

Remedies inadequate

The CRTC, after doing little for 40 years, has created a five-year $750-million Broadband Fund, financed by the telecom companies, to address rural service needs. But the Fund just started receiving applications and even if Nova Scotia were to receive its per-capita share, it wouldn’t amount to $5 million a year. For its part, the federal department of Innovation, Science and Industry had its $500-million Connect to Innovate program but the money has already run out.

Nova Scotia scored $17 million from Connect to Innovate, most of it going to the riding of former cabinet heavyweight Scott Brison. When Brison stepped down in January 2019 his successor as Nova Scotia’s cabinet rep was Bernadette Jordan, appointed to the newly created ministry of Rural Economic Development. She was billed as someone who would be “leading the roll-out of broadband and infrastructure investments in rural Canada.”

It’s not clear how much rolling out Jordan accomplished in the portfolio. Following the last federal budget’s announcement of $1.7 billion over 13 years for broadband, she talked a lot about that subject in the run-up to the fall election. As nearly as can be determined, no infusion of federal money for Nova Scotia broadband resulted and Jordan is now the Minister of Fisheries.

Responsibility for rural development and internet rolling out has been parcelled to two ministers – Navdeep Bains from Toronto and Maryam Monsef from Peterborough. There was no mention of the $1.7 billion in their mandate letters. Perhaps the spring budget will offer some clarification. In any event, $1.7 billion over 13 years – the Liberals do love to throw around big numbers for spending that stretches beyond several political horizons – is not a large increase from $500 million over five years in the Connect to Innovate Fund. And that was used up in three years.

Cupboard depleted

Bottom line is that there may not be a great deal of federal money for Nova Scotia to lever from either the CRTC or the Bains and Monsef tag team. As for the remote possibility of industry suddenly waking up to its responsibility to extend service, the Trudeau Liberals are pushing the players in the opposite direction. They’ve decided there are more votes in bringing down mobile telephone costs than in extending service into the boondocks and have told big telecom to lower rates or face increased competition.

The catch is the competitors wouldn’t have to build any new infrastructure but would be allowed to rent spectrum on existing systems. Big telecom – Bell, Rogers, Telus – and not so big Eastlink, have responded by threatening to scale back expansion plans in anticipation of losing revenue to competition from resellers piggybacking on their equipment.

However that skirmish unfolds, it does not suggest that industry players with the deepest pockets will be rushing in to help Develop Nova Scotia in creating a place where, according to its February 7 announcement, everyone has “access to reliable, high-speed internet service, so they can live where they choose while staying connected and helping to grow our economy.”

Of course, those who “live where they choose” may need, besides internet, access to stuff like health facilities, schools, and transportation, some of the services that may be short-changed because the cost of creating our new wired utopia will be disproportionately borne by Nova Scotia.

But perhaps I protest too much. At least these gifts to business should lead to better broadband service for up to 42,000 households and businesses in the province. The $80 million gift to corporate tax payers announced by the Premier this week will help mainly shareholders and executives. As vanity/legacy projects go, maybe blowing up to $193 million on internet is not the worst choice.



[1] Bell is involved in three projects – two in western Nova Scotia and one in Cape Breton – where it is splitting by some undisclosed formula the $12.7 subsidies with other service providers.