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Telecom Decision CRTC 2021-251

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References: 2019-372, 2019-372-1, and 2019-372-2

Ottawa, 4 August 2021

Public record: 1011-NOC2019-0372

Broadband Fund – Second call for applications – Introductory decision regarding the third round of project funding approvals

The Commission established the Broadband Fund to help close the digital divide and ensure that broadband Internet services are available to all Canadians. The second call for applications was open to all types of projects in all eligible geographic areas in Canada. Given the large number of applications it received and Canadians’ immediate need for improved access to broadband infrastructure, the Commission is issuing multiple rounds of decisions related to this call. The individual funding decisions that accompany this introductory decision represent the Commission’s determinations on a subset of fixed access projects and combination projects that include fixed access and mobile wireless components.

In these decisions, the Commission is allocating up to nearly $20.5 million towards building new broadband infrastructure to introduce or improve broadband Internet access and mobile services in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, and Ontario. The funding is for 10 projects that will target 45 rural and remote communities representing up to 3,625 households, including 16 Indigenous communities.

Information on the funding awarded for each of the applications is available in the accompanying funding decisions, which are being issued concurrently with this decision.

Background

  1. In Telecom Regulatory Policy 2016-496, the Commission established the universal service objective, namely that Canadians, in urban areas as well as in rural and remote areas, have access to voice services and broadband Internet access services, on both fixed and mobile wireless networks.
  2. To measure the successful achievement of this objective, the Commission established several criteria, including that Canadian residential and business fixed broadband Internet access service subscribers should be able to access speeds of at least 50 megabits per second (Mbps) download and 10 Mbps upload (50/10 Mbps), and to subscribe to a service offering with an unlimited data allowance. Furthermore, the Commission found that the latest generally deployed mobile wireless technology (currently long-term evolution [LTE]) should be available not only in Canadian homes and businesses, but on as many major transportation roads as possible in Canada.
  3. In order to support the development of a telecommunications system that can provide Canadians with access to these basic telecommunications services, pursuant to subsection 46.5(1) of the Telecommunications Act (the Act), the Commission established the Broadband Fund. The objective of the Broadband Fund is to help achieve the universal service objective and close the gaps in connectivity in underserved areas by providing necessary financial support to projects that (i) will build or upgrade access and transport infrastructure for fixed and mobile wireless broadband Internet access services, and (ii) would not be financially viable without funding assistance.
  4. The Commission determined that for the first five years of the Broadband Fund, a maximum of $750 million would be distributed as follows: no more than $100 million in the first year, which would increase by $25 million annually over the following four years to reach an annual cap of $200 million. Monies for the Fund are collected from contributions made by telecommunications service providersFootnote 1 whose total annual Canadian telecommunications service revenues amount to over $10 million.
  5. In Telecom Regulatory Policy 2018-377, the Commission addressed matters related to the Broadband Fund, including its governance, its operating and accountability frameworks, and the criteria the Commission would use to evaluate proposed projects. It also stated that it intended to conduct a review of the Broadband Fund in the third year, 2022, to ensure that it is managed efficiently and is achieving its intended purpose. The incremental increases in the fourth and fifth years (a total of $75 million) are contingent on the results of that review.

Second call for applications

  1. In Telecom Notice of Consultation 2019-372, the Commission issued its second call for applications for funding from the Broadband Fund (hereafter, Call 2) for all types of projects proposing to serve all eligible geographic areas of the country.Footnote 2 Call 2 included an Application Guide and closed on 1 June 2020.
  2. In response to Call 2, the Commission received 586 valid applications. Given the volume of applications and the immediate need of Canadians for improved access to broadband infrastructure, the Commission is issuing multiple rounds of decisions related to this call. In Telecom Decision 2021-43, the Commission announced the first round of funding decisions related to Call 2, allocating up to $26.7 million to five projects to improve broadband connectivity in British Columbia, Ontario, and Saskatchewan. The Commission announced the second round of Call 2 funding decisions in Telecom Decision 2021-103, allocating up to $57.7 million to seven projects to improve broadband connectivity in British Columbia, Ontario, and Quebec.
  3. The current decision and the accompanying funding decisions make up the third round of decisions related to Call 2. The applications discussed in these decisions are for fixed access projects and combination projects that include a fixed access component. Access services, also known as last-mile services, connect households to broadband infrastructure. In Telecom Regulatory Policy 2018-377, the Commission identified fixed access infrastructure projects as ones that may be prioritized as part of its selection considerations. The combination projects in this round also include a mobile component. Mobile services, also called mobile wireless services, provide a connection to the Internet without the use of phone or cable lines. Additional details regarding project type are provided below, in the section entitled “Selection of projects to be funded.”

Commission’s analysis and determinations

  1. The Commission has considered the applications submitted as part of this proceeding in light of the eligibility and assessment criteria established in Telecom Regulatory Policy 2018-377 and listed in the Application Guide.

Eligibility criteria

  1. All the applications selected for funding satisfied each of the relevant eligibility criteria. The funding recipients have complied with the rules governing (i) their acceptable legal structure, experience, and financial capacity; (ii) the type and scope of the project; and (iii) the services to be offered. In addition, the funding recipients (i) demonstrated their ability to secure the amount of investment they committed to, and (ii) filed evidence that they had consulted or attempted to consult, either directly or through community representatives, with communities affected by the proposed project. Requirements regarding the scope of the projects and services to be offered were specific to the type of the proposed project, as set out below.
  2. Successful funding recipients for projects with an access component demonstrated that they met the eligibility requirements
    1. to build or upgrade infrastructure in an eligible geographic area, defined as a 25 km2 hexagon where there is at least one household but where no household has access to broadband Internet access service at download and upload speeds that are at the level of the universal service objective (50/10 Mbps);
    2. to offer broadband Internet access service at minimum speeds of 25/5 Mbps;Footnote 3 and
    3. to include a list of various broadband Internet access service packages, with rate, speed, and capacity levels that address different customer needs, including those of low-income households. These packages must include rates that are identical to or lower than those of reasonably comparable packages offered by a facilities-based service provider in a major urban centre or community located in the project’s province or territory.
  3. Successful funding recipients for projects with a mobile component demonstrated that they met the eligibility requirements
    1. to build or upgrade mobile wireless infrastructure in an eligible geographic area, defined as either (i) a 25 km2 hexagon where there is at least one household but where no household has access to coverage by the latest generally deployed mobile wireless technology or (ii) part of a major transportation road that does not have access to coverage by the latest generally deployed mobile wireless technology;
    2. to use, at a minimum, the latest generally deployed mobile wireless technology; and
    3. to include a list of various mobile wireless service packages, with rate, speed, and capacity levels that address different customer needs, including those of low-income households. These packages must include rates that are identical to or lower than those of reasonably comparable packages offered by a facilities-based service provider in a major urban centre or community located in the project’s province or territory.

Assessment criteria

  1. Applying the assessment criteria, the Commission identified the projects proposed by each of the successful recipients as high quality. In doing so, the Commission considered each criterion such that no one criterion in isolation determined whether the application was of high quality.
  2. The assessment criteria included consideration of the technical merit of each project. This was to ensure that the project is efficient, sustainable, and likely to continue meeting the broadband service requirements of the underserved eligible geographic areas over the long term. The technical assessment took into account the project’s feasibility (i.e. the appropriateness of the network technology and infrastructure); scalability (i.e. the technical ability of the project to meet or exceed the universal service objective using the proposed infrastructure); sustainability (i.e. the short- and long-term viability of the chosen technology); and resiliency (i.e. the proposed network’s capacity to maintain acceptable levels of service during network failures).
  3. In its financial assessment, the Commission examined each project’s net present value, internal rate of return, and business plan, including the risk assessment and risk mitigation plan. The Commission considered the potential financial success of the proposed project, as well as the project’s long-term financial viability and sustainability. It also considered the extent to which the applicant had successfully secured funding from other sources, based on the percentage of the amount requested from the Broadband Fund compared to the total project costs.
  4. In addition, the Commission considered the quality of the applicant’s consultations with affected communities and the level of demonstrated community support at the assessment stage.
  5. As with the eligibility criteria, additional assessment criteria specifically applied to each type of project. The assessment criteria for access projects included the number of households that would be served by the project, the proposed level of service, the Broadband Fund cost per household, the retail service pricing and service packages that would be offered, and the current gap between the available service level and the universal service objective level.
  6. For mobile projects, the assessment criteria included the level of improvement between the service and capacity that are currently offered in the eligible geographic area(s) and those offered as a result of the proposed project; the extent of the geographic footprint where universal service objective-level mobile wireless service would become available, including how many kilometres of major transportation roads would be covered by the project; and the number of households in eligible geographic areas that would be able to access universal service objective-level mobile wireless service as a result of the proposed project.
  7. These criteria established a high threshold to help ensure that funded projects are likely to succeed, that is, that the recipients will build the funded infrastructure and provide fixed broadband Internet access services and/or mobile wireless services to Canadians and businesses in targeted underserved areas.

Selection of projects to be funded

  1. In accordance with the approach set out in Telecom Regulatory Policy 2018-377 and the related Application Guide, when deciding which high-quality projects to select, the Commission, keeping in mind the telecommunications policy objectives set out in section 7 of the Act, considered not only whether individual projects would contribute to meeting the universal service objective, but also whether they would have a significant positive impact on Canadians.
  2. In Telecom Regulatory Policy 2018-377, the Commission determined that when selecting projects for funding, it will give special consideration to the efficient use of funds and may give special consideration to a number of other factors, including the selection of projects in multiple regions of Canada, whether the communities affected by proposed projects are Indigenous or official language minority communities, and the type of project.
  3. An assessment of the efficient use of funds includes consideration of the amount of funding required for each project, when such funding would be distributed, and the amount of funding available. Additionally, the Commission considered it appropriate to distribute funds in a manner that does not cause overlap between projects or overlap with alternative funding sources.Footnote 4 When selecting projects, the Commission also considered the amount of funding available for distribution for the first five years of the Broadband Fund. On the basis of all these considerations, the Commission concluded that funding the selected projects would be an efficient use of funds.
  4. With respect to the regions and communities in Canada to be served, the projects selected for funding are located in multiple regions of Canada and therefore represent a diverse regional distribution. In addition, five of the projects involve building infrastructure in Indigenous communities.
  5. With respect to project type, the Commission determined in Telecom Regulatory Policy 2018-377 that it may give special consideration to fixed access infrastructure projects over mobile wireless infrastructure projects. Fixed broadband infrastructure projects will likely enable broadband services to be provided to more Canadians over the long term than mobile wireless infrastructure projects, and will help achieve the objective of the Broadband Fund more quickly. For these reasons, the Commission concluded that it should give priority to projects with a fixed access component when making its funding decisions in this round.Footnote 5

Conclusion

  1. In light of the above, the Commission has approved a total of up to nearly $20.5 millionFootnote 6 in funding from the main component of the Broadband Fund for 10 access and combination access/mobile projects serving areas in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, and Ontario.Footnote 7 The funding will be allocated towards building new broadband infrastructure in these regions, enabling broadband Internet access and mobile services to be introduced or improved in 45 communities representing up to 3,625 households, including 16 Indigenous communities.Footnote 8
  2. Details of the specific projects are included in individual decisions for each approved application, which are being issued concurrently with this decision. As noted in those individual decisions, the funding approvals are subject to the directions and conditions set out below. In the event that the recipients whose projects are approved in the individual decisions are unable to accept funding as awarded or do not claim the entire amount they were awarded, such funding will be reallocated to other projects submitted in Call 2 or in future calls for funding.

Statement of work

  1. To be eligible to receive funding, each recipient must obtain approval from the Commission for its statement of work. This will ensure that the planned work will be undertaken to implement the project as described in the application and approved for funding by the Commission.
  2. The statement of work must be submitted in the format provided by the Commission and include detailed information on the project plan, such as detailed project information (e.g. logical network diagrams, network descriptions, service designs, project sites, equipment details, specific costs, and an updated project budget). In addition, the project plan must set out a project implementation schedule, including project milestone dates that will include key construction and implementation dates to monitor the project’s progress. Up-to-date project mapping must also be provided. Following approval of the statement of work, in order for the recipient to receive funding, any changes that materially affect the project to be delivered must be approved by the Commission. 

Directions

  1. The Commission’s approvals set out in each of the individual funding decisions that accompany this introductory decision are subject to the conditions that, for each project, the recipient
    1. confirm in writing, within 10 days of the date of this decision, its intent to submit a statement of work package to the Commission and to proceed with the project; and
    2. file for Commission approval, within 120 days of the date of this decision, a completed statement of work package in the format provided by the Commission, which includes an accompanying workbook that sets out the project budget, key project dates and schedules, and detailed project information, such as logical network diagrams, network descriptions, service designs, project sites, equipment details, maps, specific costs, and milestones.
  2. As established in Telecom Regulatory Policy 2018-377, project construction must not have begun prior to the date of this decision and should be completed within three years. As set out in the Application Guide, the recipient may not apply for reimbursement of its costs until its statement of work for each project has been approved by the Commission. Any eligible costs incurred prior to Commission approval of the recipient’s statement of work but following the issuance of this decision are at the recipient’s risk and will not be reimbursed if the statement of work is not approved.
  3. If it receives any additional funding for the project from any source, the recipient must notify the Commission in writing as soon as possible and no later than 10 days after receiving confirmation of the funding. The Commission may proportionately reduce the amount of funding it has approved.
  4. In order to receive funding, the recipient must obtain Commission approval for (i) any material changes to the project, as set out in the approved statement of work; and (ii) any changes to the recipient that would materially affect the legal or financial documents it provided during the application process. In order for the Central Fund Administrator to be able to distribute funding, the recipient must sign the National Contribution Fund Administration Agreement if it has not already done so.
  5. The Commission will hold back 10% of the claimed amounts of funding until after project construction is complete. Holdback funds will be released only once the Commission is satisfied that the recipient has offered broadband services for one year according to the conditions of service set out below (see paragraphs 36 to 39).

Funding conditions

  1. In Telecom Regulatory Policy 2018-377, the Commission determined that it would impose a series of conditions on each funding recipient (i) that must be met before it will release funding, and (ii) that ensure that the service to be provided using the funded infrastructure meets the promised service levels. The Commission indicated that funding conditions would include conditions related to project timelines, reporting, auditing, and material changes. Conditions imposed under section 24 of the Act would be used to set the requirements for the ongoing operation of the network, including the speeds and capacity of services to be provided, pricing, and any reporting or measurement requirements. In addition, all existing regulatory obligations will continue to apply to the provision of services using funded infrastructure.Footnote 9
  2. Following Commission approval of the statement of work for each project, the Commission will direct the Central Fund Administrator to release funds to each recipient, provided that the recipient is in compliance with the following conditions:
    1. The recipient must file a progress report, in the format provided by the Commission, outlining the progress made in the implementation of the project and any variances in the project schedule included in the statement of work. This report is to be filed every three months beginning on the date established in the statement of work and continuing until the Final Implementation Report is submitted.
    2. The recipient must file with the Commission every three months a Broadband Fund claim form certified by its chief financial officer, or by an equivalent authorized official of the recipient, along with supporting documentation demonstrating to the Commission’s satisfaction that all costs claimed were actually incurred and paid and are eligible costs related to the activities described in the statement of work. Each claim form must be accompanied by a progress report.
    3. With respect to eligible and ineligible costs, as described in Telecom Regulatory Policy 2018-377, the recipient must
      1. include eligible costs in a claim form submitted within 120 days of the costs being incurred, unless the costs were incurred after the date of this decision but prior to the approval of the statement of work, in which case the costs must be claimed on the first claim form submitted after the approval of the statement of work;
      2. ensure that all goods and services are claimed for reimbursement at amounts not greater than fair market value after deducting all trade discounts and similar items. Only the fair market value of the goods and services acquired is eligible for reimbursement; and
      3. measure and claim all goods and services received from related parties, as defined under International Financial Reporting Standards, at cost, with no profits or markups from the supplier.
    4. The recipient must not claim in excess of 25% of the approved amount for costs incurred after the date of this decision but prior to the approval of the statement of work.
    5. The recipient must ensure that its travel costs, such as meal per diems, comply with the National Joint Council Travel Directive.
    6. Where a risk of adverse impact on an Aboriginal or treaty right becomes known following the approval of the statement of work and a duty to consult exists, the recipient must advise the Commission within 20 days and submit a plan detailing the form and process for fulfilment of the duty. Release of any additional funding will be contingent on demonstration that any necessary consultations were held to the Crown’s satisfaction.
    7. The recipient must notify the Commission in writing as soon as possible and within no more than five days of becoming insolvent.
    8. The recipient must file its annual financial statements with the Commission upon request. The financial statements would accompany the next progress report filed after the annual financial statements are completed and approved.
    9. The recipient must ensure compliance with the Government of Canada’s national security requirements to address any potential risks related to the overall integrity of network security.
    10. The recipient must file for Commission approval a Final Implementation Report within 90 days of completion of the final milestone in the statement of work. In the report, the recipient must confirm that project construction is complete and that broadband services are being offered. The date on which the Final Implementation Report is submitted will be considered the project completion date. The recipient must also demonstrate in the report that the project has met the requirements set out in all related decisions. The report is to be in a format specified by the Commission.
    11. The recipient must file a project Holdback Report one year after the project completion date demonstrating to the Commission’s satisfaction that the recipient has offered broadband services for one year in accordance with the conditions of service established in this decision and described in the approved statement of work.

Section 24 conditions

  1. In Telecom Regulatory Policy 2018-377, the Commission determined that it would impose, pursuant to section 24 of the Act, certain conditions regarding the offering and provision of broadband services using facilities funded through the Broadband Fund that would apply once the infrastructure is built. These conditions relate to the speeds and capacity of broadband services provided and the level of retail pricing, reporting, and associated open access service offerings. The conditions imposed on the offering and provision of broadband services will apply to the recipient and to any other Canadian carrier operating the funded infrastructure.
  2. The Commission may conduct periodic audits and require measurements of each project’s performance to verify compliance with the conditions of funding and the conditions imposed pursuant to section 24 of the Act on the provision of services using the funded infrastructure. To that end, as a condition of offering and providing telecommunications services using the funded infrastructure, the Commission requires, pursuant to section 24 of the Act, that the recipient, or any Canadian carrier operating the funded infrastructure, (i) retain all books, accounts, and records of the project, including administrative, financial, and claim processes and procedures, and any other information necessary to ensure compliance with the terms and conditions of this decision, for a period of eight years from each project start date; and (ii) provide the Commission with measurements of the performance of each of the recipient’s implemented projects within five years of the project’s completion date using methodology that the Commission may determine. The Commission may request that external auditors or a Commission-approved auditor certify any related report, form, or documentation, or that a third-party professional engineer certify any required measurements.
  3. In addition, pursuant to section 24 of the Act, as a condition of offering and providing telecommunications services using the funded infrastructure, the recipient, or any Canadian carrier operating the funded infrastructure on behalf of the recipient, must,
    1. for transport projects, provide transport capacity at each eligible point of presence (PoP) funded by the Broadband Fund with total capacity no lower than that proposed in the application and described in the approved statement of work;
    2. for transport projects, offer and provide, in a fair, transparent, timely, and non-discriminatory manner, wholesale and retail open access to the transport infrastructure at each eligible PoP funded by the Broadband Fund. Terms and conditions that are the same as or better than those applied to the services of subsidiaries, affiliates, or partners must be applied to other service providers requesting access to project sites. Such wholesale and retail open access services must be offered at rates no higher, and a capacity no lower, than those proposed in the application and detailed in the approved statement of work;
    3. for access projects, offer and provide fixed broadband Internet access service packages to customers served by the funded infrastructure at a rate no higher, and at speeds and with a capacity no lower, than the ones proposed in its relevant application and described in the relevant approved statement of work. The packages must be provided for a minimum of five years following the date of the relevant Final Implementation Report (i.e. the project completion date). The recipient, or any Canadian carrier operating the funded infrastructure on behalf of the recipient, must publicize, including by publishing on its website, the packages offered to subscribers as a result of each project, including the service speeds, capacity, prices, and terms and conditions; and
    4. for mobile projects, offer and provide mobile wireless service packages to customers residing in eligible hexagons served by the funded infrastructure at a rate no higher and with a capacity no lower than the ones proposed in its relevant application and described in the relevant approved statement of work. The packages must be provided for a minimum of five years following the date of the relevant Final Implementation Report (i.e. the project completion date). The recipient, or any Canadian carrier operating the funded infrastructure on behalf of the recipient, must publicize, including by publishing on its website, the packages offered to subscribers as a result of the project, including the service speeds, capacity, prices, and terms and conditions.
  4. Conditions 38(a) and (b) above do not apply to any projects approved in this round of funding decisions, as none of those projects include a transport component. Condition 38(c) applies to the projects approved in Telecom Decisions 2021-252 (which encompasses several individual funding decisions), 2021-256 (which encompasses several individual funding decisions), 2021-262, and 2021-263, all of which have an access component. Condition 38(d) applies to the projects approved in Telecom Decision 2021-252 (which encompasses several individual funding decisions), all of which have a mobile component.

Policy Directions

  1. The 2006 Policy DirectionFootnote 10 and the 2019 Policy DirectionFootnote 11 (collectively, the Policy Directions) state that the Commission, in exercising its powers and performing its duties under the Act, shall implement the telecommunications policy objectives set out in section 7 of the Act, in accordance with the considerations set out therein,Footnote 12 and should specify how its decisions can, as applicable, promote competition, affordability, consumer interests, and innovation.
  2. The Commission considers that its determinations to approve funding from the Broadband Fund for the 10 projects identified in this introductory decision and described in detail in the accompanying funding decisions are consistent with the Policy Directions.
  3. As discussed in each accompanying funding decision, there would be no business case for these projects without funding from the Broadband Fund. These decisions to approve funding to build and upgrade infrastructure in order to introduce or improve fixed broadband Internet access services and mobile wireless services in 45 communities across Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, and Ontario will help to close the gap in connectivity in underserved areas. Funding these projects will enable up to 3,625 households to access significantly improved voice and Internet services, and thus respond to the social and economic needs of consumers. In so doing, the accompanying funding decisions will implement the telecommunications policy objectives, including those set out in paragraphs 7(a), (b), and (h) of the Act.Footnote 13

Secretary General

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