Canada’s Digital Connectivity Infrastructure in the Age of COVID-19

The COVID-19 pandemic has demonstrated the foundational importance of Canada’s digital connectivity infrastructure to support e-commerce, remote work, online education and services, and basic communications among family and friends. This profound experience has powerfully highlighted the critical role of digital connectivity infrastructure in modern life.

Although trends towards digitally-enabled commerce, communications, and services were already present prior to the pandemic, it is fair to say that they have been significantly accelerated over the past year. In particular, the pandemic has magnified two separate yet interrelated priorities:

• The first is the need to expand access to digital connectivity infrastructure to currently underserved households and communities
• The second is the importance of cultivating the newest and most advanced digital connectivity infrastructure in order to support Canadian competitiveness now and in the future.

The pandemic has, by virtually any measure, accelerated Canada’s digital revolution. We have come to shop, work, and learn online in unprecedented ways. It would be wrong to assume that our commercial and educational activities will revert back to pre-pandemic models. Indeed, 30 percent of businesses anticipate allowing at least 50 percent of their workforce to telework even after the pandemic. These behavioural changes are likely to be permanent and our policies related to digital connectivity infrastructure will need to adjust accordingly.

Sustaining the digital revolution presupposes that we have accessible and high-quality digital connectivity infrastructure. Digital connectivity infrastructure refers to the physical infrastructure that underpins our internet system – It is the fibre, the polls, towers, and all other pieces of necessary infrastructure needed to sustain the system. Further, it is the underlying infrastructure necessary for supporting these broader economic and social trends. As Canadian policymakers plan for a post-pandemic recovery, it will be crucial that the policy framework supports investment in digital connectivity infrastructure in order to build an inclusive and competitive economy for the future.

Competitiveness can be seen as adapting to the shift from the production economy to an intangibles economy (i.e., intellectual property, software and data) which depends on high-quality digital connectivity infrastructure to enable Canadian firms and innovators to compete globally. This shift from an “economy of things” to an “economy of thoughts” positions this modern form of infrastructure as fundamental to our economic future as roads, bridges and ports were in the twentieth century. The anticipated economic potential that can be unlocked from 5G technologies, which refers to fifth generation broadband technology that succeed 4G networks and began deploying worldwide in 2019, will only push us further in this direction.

Another development is the pandemic-induced rise of remote work and online education and prospect of long-term changes to where people work and live. The individual and collective benefits that can be derived from a future of remote work and more online forms of education will depend a great deal on geographical distribution of digital connectivity infrastructure. Over the past decade or so, Canadian governments have used different policy levers – including regulations and public subsidies – to try to extend high-quality digital infrastructure outside of our major urban centres and increasingly into rural and remote parts of the country. These efforts have tended to be carried out in the name of equity and fairness. But the potential for a permanent shift to remote work offers tremendous opportunity for regional development and improved quality of life.

A combination of public policy and market forces are advancing progress on these two goals of competitiveness and inclusion. Canada’s digital policy framework, which has historically assumed the centrality of large, well-capitalized facilities-based wireless companies in part reflecting our challenging geography, has contributed to significant infrastructure buildout across the country. Major carriers and some smaller regional carriers have collectively provided digital infrastructure that meets a common standard of 50/10 Megabits per-second (Mbps) to approximately 85 percent of the population. However, only 45.6 percent of rural households, and 34.8 percent of First Nations have access to 50/10 Mbps.

Market forces alone will not ensure that Canada’s digital connectivity infrastructure meets the country’s competitiveness and inclusion goals. There has been multi-partisan support for a mix of regulations and subsidies to extend accessible and high-quality digital connectivity infrastructure to rural and remote parts of the country. The federal government and some provinces have announced plans to support broadband buildouts in the name of both geographical and household equity. The goal has been to ensure access to high-quality digital infrastructure to as many Canadian households as possible. The policy imperative is sometimes characterized as closing the “digital divide.”

The most recent federal program is a good example. Its overarching framework, which is titled High-Speed Internet for All, involves different programs and initiatives including $1.75B in the Universal Broadband Fund. The ultimate goal is to achieve the delivery of 50/10 Mbps to all Canadians by 2030.

However, there remains a question of access and the answer is complex. Access includes two components – availability of the technology and affordability if it is available. An answer requires a combination of technical and normative considerations. It is not obvious, for instance, that 50/10 Mbps is the right target or the extent to which individual choices about where to live is a public good versus an individual decision that may or may not be in the realm of public policy. No matter how one answers these questions, there will be an ongoing role for public policy to support the expansion of digital connectivity infrastructure in cases where market failure leaves communities and households without access. The cause of the market failure here is the gap between capital costs associated with building digital connectivity infrastructure in these communities and the inability to recoup these investments due to their relatively small market sizes. Put simply: it is not profitable for facilities-based wireless companies to build and provide services in these communities according to market forces alone. We need to have a public debate about how far the government should go in order to address these accessibility challenges.

Additionally, while a conversation unfolds focused on expanding 50/10 Mbps to all Canadians, another conversation surrounding next generation technology, or 5G is also happening. 5G deployment has started in Canada but is focused squarely on urban centres and is being done exclusively by the major facilities-based telecommunications companies in Canada. 5G does provide a tremendous competitive opportunity for Canada both internally, and in a global context. However, it will be critical to understand the benefits of this technology and the extent to which geographic limits to its availability are acceptable..

The story of digital connectivity infrastructure in Canada is one of policy trade-offs. There are trade-offs between investment and competitiveness; between investment in capital and investment in operations; between affordability and accessibility; between government intervention and market forces; and trade-offs between speed and sustainability. These policy considerations inform an integrated policy framework; however, most areas are still up for debate.

Therefore, the question presented, and amplified by COVID-19 is: What investment, policy, regulatory and other measures are needed to enhance the digital connectivity infrastructure necessary for an inclusive, competitive and digital post-pandemic economy?

Public Policy Forum has convened an Expert Panel to answer just that. PPF has launched a results-oriented process on the future of Canada’s digital infrastructure. As far back as our October 2016 report Building the Future: Strategic Infrastructure for Long-Term Growth in Canada, PPF has been concerned that Canada broaden its interpretation of infrastructure into the digital realm which has been increasingly influencing future opportunity and prosperity. These concerns have only been amplified through our pandemic project, Rebuild Canada.