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To say that we are living in unprecedented times would be cliché. The entire world seems largely shut down. The digital infrastructure of the world has become our lifeline, our entertainment, our business and our education. The debate over better connectivity for all should be over. It’s time for action.
Around the world, governments are throwing everything they have into staving off “The Greater Depression.” Trillion-dollar support packages in the USA, and right here at home, the Canadian Government has tossed about $200 billion on the table in a matter of weeks.
So, the neglect of broadband in the past has come home to roost. Just in the 2019 Canadian Federal budget, rural broadband was allocated $6 billion over 10 years. To those of us with an understanding of what it takes to build rural networks, $6 billion over 10 years is not enough. Fast forward to April 2020. Nearly $200 billion for support of the economy was tossed on the table with little debate.
To be clear, this pandemic needs a strong response, and I’m not saying the $200 billion isn’t needed. It is….fast.
What I am saying is this, broadband is no longer a nice thing to have. It’s as essential as clean water, wastewater treatment, electricity, and telephone. So, suppose we went further and took this time to make the investments we sorely need?
What I think would be a great start is to add about 10 percent to those stimulus packages. So, in Canada, that would be nearly $20 billion. Make that funding available to non-dominant carriers in the form of long term, zero interest loans. Also, frame those loans in such a way as to forgive a portion of the loan based on where the infrastructure is built. Suppose a company wishes to build a fiber backbone across Toronto. None of the loan is forgivable, but it is still interest free and can be taken out for a long term, say 25 years. No payment deferments.
Same company wants to build a network backbone into Northern Ontario from, say, Toronto. Direct pipe from Northern Ontario into the heart of the Canadian fiber networks. Zero interest, 25 years, no payments for 12 months after the network is finished. A large chunk of the loan can be forgiven if the business plan that secured the loan is adhered to and all the stated metrics are achieved. Obviously there needs to be checks and balances. Companies with good credit histories should be eligible. Solid business plans with attainable goals. Realistic costing. Revenue models that make sense.
Those assets funded by this loan program cannot be sold until fully paid. If a dominant carrier wishes to purchase the assets that were funded by this program, they cannot for a minimum of five years after the loan is fully paid. A dominant carrier cannot have a controlling interest in any company that accesses these loans. No dominant carrier may hold a controlling agreement over any assets funded by this loan program, other than a fair and just access agreement to the assets.
Another one of the checks against abuse could be that a crown corporation could be formed, with the operational board made up with representatives from the group of non-dominant carriers in Canada. If a company defaults on a loan, the assets are taken over by the Crown Corp. These assets are then connected to form an open access network that all companies can access, even the incumbents. The Corporation could be the “backer” of the loans, and as such could seize them for loan non-payment.
Access to this network is open and at fair and just rates. Those fees charged can be used to maintain and upgrade any assets the corporation owns. The corporation could be restricted in that it cannot build new facilities. It can acquire facilities from loans that are distressed or in default. It could be allowed to acquire access rights to any network in Canada, based on sound business practices, and with fair and just rates.
I say make an additional 10 percent of whatever support measures are passed for the greater economy to be allocated to broadband infrastructure loans. Use the BDC/EDC and the charter banks as the vehicle to get these loans out there. Incumbent carriers do not qualify for them, only the smaller carriers. You want more competition? Giving the large incumbents more money and more opportunities isn’t going to help.
Give the smaller carriers a chance and watch the magic. There is a reason that larger companies buy out smaller ones, that’s where the innovation happens.
By Howard Small, President/CEO Crave Technologies, New Brunswick
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