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Telecom Decision CRTC 2023-422

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Ottawa, 20 December 2023

Final 2023 revenue-percent charge and related matters

Summary

Canadians need access to reliable, affordable, and high-quality telecommunications services for every part of their daily lives. This includes a wide range of services, from home Internet and cell phones to services that enable people to conduct telephone calls using sign language. The Commission works to help connect all Canadians to high-quality telecommunications services.

One of the significant barriers to connectivity is the high cost of building telecommunications networks across Canada. Canada’s vast and challenging geography means that many Canadians—particularly those in rural, remote, and Indigenous communities—may not have access to high-quality services.

To address this challenge, the Commission requires large telecommunications companies to pay into a fund that is used to support network deployment in Canada. Historically, these funds have been used to support the deployment of telephone networks. Today, they are used to support Internet, cell phone, and video relay services.

The amount of funds collected every year is set by the Commission. In this decision, the Commission sets the final rate for 2023 contributions and the interim rate for 2024 contributions. These contributions are collected from all Canadian telecommunications companies that have more than $10 million in Canadian annual telecommunications revenues.

Introduction

  1. Through a series of proceedings and decisions during the 1990s, the Commission opened up various telecommunications markets to competition. This enhanced the Canadian telecommunications system and enabled Canadians to benefit from competition.
  2. In Decision 2000-745, the Commission introduced a national revenue-based contribution collection mechanism. As a result, telecommunications service providers (TSPs), or groups of related TSPs, that have $10 million or more in Canadian telecommunications service revenue pay contribution into a national fund called the National Contribution Fund (NCF).
  3. In Telecom Regulatory Policy 2014-187, the Commission determined that a national video relay service (VRS) would be implemented in Canada, with funding being provided through the NCF.
  4. In Telecom Regulatory Policy 2016-496, the Commission determined that a funding mechanism would be established to support the expansion of fixed and mobile wireless broadband Internet access and wireless voice services (the Broadband Fund). The Commission also determined that, starting in the first year of the Broadband Fund, the definition of contribution-eligible revenue would be expanded to include retail Internet access and paging service revenues in the calculation of the revenue-percent charge.Footnote 1
  5. In Telecom Regulatory Policy 2018-377, the Commission determined that the Broadband Fund would be introduced within the NCF and administered by the Central Fund Administrator (CFA).Footnote 2
  6. The Commission determined that 2020 would be the first year of operation for the Broadband Fund. As a result, the definition of contribution-eligible revenue was expanded to include retail Internet access and paging service revenues, effective January 2020.
  7. Each year, the Commission finalizes the final revenue-percent charge to ensure that the amount of money collected is sufficient to meet VRS and Broadband Fund requirements.
  8. In Telecom Decision 2022-341, the Commission set, on a final basis for 2022, a revenue-percent charge of 0.46%. The Commission set, on an interim basis for 2023, a revenue-percent charge of 0.46%.
  9. The Commission received a submission from the Canadian Telecommunications Contribution Consortium Inc. (CTCC)Footnote 3 that provided the information needed to finalize the 2023 revenue-percent charge.
  10. The Commission addresses the following matters in this decision:
    • the estimated national VRS and Broadband Fund requirement for 2023
    • the final 2023 revenue-percent charge
    • the interim 2024 revenue-percent charge
    • the excess NCF funds after the December 2023 data-month is processed

Estimated national VRS and Broadband Fund requirement for 2023

  1. The national VRS and Broadband Fund requirement is based on the sum of (i) the funding for VRS, (ii) the funding for the Broadband Fund, and (iii) the administrative and operational costs of the CTCC and the CFA.
  2. In Telecom Decision 2022-340, the Commission approved an application from the Canadian Administrator of VRS (CAV), Inc. (CAV) requesting $29.9 million in funding for 2023.
  3. In Telecom Notice of Consultation 2023-89, the Commission launched a proceeding to review the Broadband Fund policy. In that notice, the Commission considered that maintaining a cap of $150 million annually for distribution until the conclusion of the Broadband Fund policy review process would provide enough funding for funded projects and any new projects approved under the third call for applications. Therefore, a funding amount of up to $150 million will be available for 2023.
  4. The Commission received notification from the CTCC that the estimated CTCC and CFA administrative and operational costs would be approximately $1.1 million for 2023. This amount is included in the national VRS and Broadband Fund requirement.
  5. In light of the above, the Commission estimates the total 2023 national VRS and Broadband Fund requirement to be $180.9 million.

Final 2023 revenue-percent charge

  1. The revenue-percent charge is calculated using the ratio of the national VRS and Broadband Fund requirement to the estimated total contribution-eligible revenues of all TSPs that are required to contribute.
  2. The Commission considers that a final 2023 revenue-percent charge of 0.46% would be appropriate.
  3. Accordingly, the Commission approves on a final basis a 2023 contribution collection revenue-percent charge of 0.46%, effective 1 January 2023.

Interim 2024 revenue-percent charge

  1. In Telecom Decision 2023-421, the Commission approved an application from CAV requesting approximately $33.8 million in funding for 2024.
  2. As mentioned in paragraph 13 of this decision, the Commission considered in its review of the Broadband Fund policy that it will maintain a cap of $150 million annually for distribution until the conclusion of the Broadband Fund policy review process. Accordingly, the Commission considers that $150 million will be made available from the Broadband Fund in 2024 on an interim basis.
  3. Including the CTCC and CFA estimated costs of $1.1 million, the Commission estimates that the amount to be collected in order to meet VRS and Broadband Fund requirements during 2024 is $184.9 million.
  4. Taking into account the estimated contribution-eligible revenues of all TSPs that are required to contribute, the Commission considers that an interim 2024 revenue-percent charge of 0.45%, effective 1 January 2024, would be appropriate.
  5. Accordingly, the Commission approves on an interim basis a 2024 contribution collection revenue-percent charge of 0.45%, effective 1 January 2024.

Excess NCF funds after the December 2023 data-month is processed

  1. In Telecom Decision 2007-98, the Commission approved revised procedures for the operation of the NCF, which resulted in funds in excess of the CTCC’s requested minimum balance being retained by the required contributors as uncalled contribution, rather than being held by the NCF as a cash surplus. The Commission indicated that it would direct the CFA to release the uncalled contribution at year-end because these amounts would not be needed by the NCF in that year.
  2. While the Commission has made available a total of $525 million in funding for the first four years of the Broadband Fund, not all of that amount will be paid out by the end of 2023. Any uncalled contribution associated with the unpaid portion of the Broadband Fund needs to be retained by the NCF for future payments.
  3. In Telecom Decision 2019-383, the Commission approved the CTCC’s request for a $10 million minimum Prescribed NCF Balance.Footnote 4
  4. Therefore, the Commission considers that any uncalled contribution not associated with the Broadband Fund and in excess of the $10 million minimum balance after the December 2023 data-month is processed is not required by the NCF and can be released.
  5. Accordingly, the Commission directs the CFA to release any 2023 uncalled contribution that is not related to the Broadband Fund or the $10 million minimum balance after it has processed the December 2023 data-month.

Conclusion

  1. The Commission approves on a final basis a 2023 contribution collection revenue-percent charge of 0.46%, effective 1 January 2023.
  2. The Commission also approves on an interim basis a 2024 contribution collection revenue-percent charge of 0.45%, effective 1 January 2024.
  3. The Commission directs the CFA to release any 2023 uncalled contribution that is not related to the Broadband Fund or the $10 million minimum balance after it has processed the December 2023 data-month.

2023 Policy Direction

  1. The Commission is required, in exercising its powers and performing its duties, to implement the policy objectives set out in section 7 of the Telecommunications Act (the Act), in accordance with the 2023 Policy Direction issued under section 8 of the Act.
  2. The Commission’s determination to approve the revenue-percent charge of 0.46% on a final basis for 2023 and 0.45% on an interim basis for 2024 is consistent with the policy objective set out in paragraph 7(b) of the Act to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada.
  3. The Commission considers that approving the revenue-percent charge of 0.46% on a final basis for 2023 and 0.45% on an interim basis for 2024 is consistent with the policy objectives mentioned in paragraphs 2(c) and 18(a) of the 2023 Policy Direction:Footnote 5 2(c) to ensure that affordable access to high-quality, reliable and resilient telecommunications services is available in all regions of Canada, including rural areas, remote areas and Indigenous communities; and 18(a) continuing to administer a funding mechanism, making any adjustments that the Commission determines are necessary.

Secretary General

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