/Canada Infrastructure Bank explored launching public utility to compete with Rogers, Bell and Telus

Canada Infrastructure Bank explored launching public utility to compete with Rogers, Bell and Telus

The Canada Infrastructure Bank (CIB) considered creating a public utility to lower internet prices for consumers and compete with Bell, Rogers and Telus, The Logic has learned.

The bank also discussed fundamental changes to how telecommunications infrastructure is regulated so what one company builds would have to be shared with all other firms, according to a briefing note prepared for CIB CEO Pierre Lavallée.

The Liberals created the bank in 2017, giving it $35 billion and a mandate to partner with the private sector on infrastructure projects that provide significant economic benefits for Canadians. It has made few investments so far, and both the Conservatives and the NDP have promised to shut it down if they win the federal election.

The documents prepared for Lavallée, however, suggest a wide array of potential telecom investments, including 5G in urban areas, public Wi-Fi and Next-Generation 9-1-1 services.

The October 2018 briefing note, written by then-head of investments Nicholas Hann, was also sent to board chair Janice Fukakusa. It recommends that the government’s current spending on telecommunications — much of which subsidizes projects from the private sector — be entirely stopped.

“This existing spend could be used as the basis for a holistic public utility model which in turn could cheaply be expanded for retail consumer use,” reads the briefing.

In particular, the report argues, a public utility would be more efficient for building rural infrastructure than paying private companies to do so. The federal Liberals have allocated $536.6 million since 2016 to subsidize rural infrastructure built almost entirely by private telecommunications companies.

Pierre Lavallee, president and chief executive of Canada Infrastructure Bank, speaks during the International Economic Forum Of The Americas in Montreal in June.

Christinne Muschi/Bloomberg

“A scale approach accordingly renders economic rural infrastructure which under a profit maximizing ROI approach would not be built,” the briefing says.

CIB did not directly reply to questions regarding whether it plans to launch a public utility or is still interested in making any of the specific investments listed in the report.

“While we can’t comment on any specific project for commercial sensitivity reasons, we are open to governments and investors bringing forward proposals,” said Félix Corriveau, senior director of media relations at the bank. “This internal note is a year old by a former CIB employee and that context matters.” The report’s author, Hann, left in July after 10 months on the job. He did not have another job lined up when he left, and said he would be willing to return if things changed — a move some in the industry took as a criticism of the bank’s leadership. Hann did not reply to a request for comment.

Navdeep Bains, Minister of Innovation, Science and Economic Development

Jim Wells/Postmedia

Jonathan Dignan, a spokesperson for Innovation Minister Navdeep Bains, said the Liberal government has been working with the bank.

“We have met with representatives of the Canadian Infrastructure Bank to see how we could find synergies in our work,” said Dignan. “We look forward to the CIB helping to bring better connectivity and lower prices to Canadians across the country.”

The CRTC did not directly reply to questions about its relationship with the CIB.

Public utilities like Ontario Hydro and Hydro-Québec are relatively common in the electricity industry. Government-owned telecommunications companies used to be prominent in Canada, but have largely been privatized. Telus, for example, used to be a Crown corporation known as Alberta Government Telephones, but was privatized in 1990. Manitoba privatized the Manitoba Telephone System in 1997.

In addition to a public utility, the document suggests a “holistic” approach to telecom investing, which could yield “huge potential economic benefits.”

“The most basic policy question is should telecommunications infrastructure be a regulated public utility based on open access infrastructure,” the briefing reads.

“This would enable infrastructure to be common use and benefit from economies of scale including a low utility cost of capital. This in turn would allow broadband and potentially mobile coverage to extend into rural areas far beyond where a commercial carrier would typically cover without subsidy.”

The briefing warns that political, policy and commercial constraints make a holistic solution unlikely, but states that those principles should guide how the bank approaches the telecom sector generally. It suggests CIB make investments in the following areas: 5G for urban areas; upgrading 3G and 4G for rural areas; public Wi-Fi; telecommunications services for governments, schools and hospitals; public safety radio and LTE communications; and Next-Generation 9-1-1 services. The last feature allows people to send texts, photos and videos to emergency services.

The CIB report is one of several circulating that suggest there have been discussions in Ottawa about significant changes to the telecom sector. In November 2018, The Logic reported on a secret government analysis that found no downside to making Bell, Rogers and Telus compete with foreign firms. In July, The Logic broke the news that Google was asking the Canadian government to make it easier to set up a rival telecom.

The federal Liberals have also made a number of public moves to facilitate competition and lower costs in the sector. In their March 2019 budget, the Liberals directed the CIB to invest up to $1 billion over the next decade to increase broadband access for Canadians. In June, Bains ordered the CRTC to place consumer interests at the forefront of its decisions. During the federal election, the Liberals promised to cut cellphone and wireless bills by 25 per cent, working in cooperation with telecom companies.

The CIB report, by contrast, suggests a less collaborative approach to working with telecom firms, particularly when it comes to building 5G infrastructure.

5G infrastructure will require “intensive use” of often publicly owned infrastructure such as streetlights and “sidewalk furniture,” according to the report. “At full density 5G would require a radio transmitter on every 4th streetlight (200ft) connected to an underground fibre optic cable.”

Currently, municipalities provide telecoms access to public real estate, which the firms then use to build infrastructure and sell services to residents.

“Many municipalities large and small are frustrated with this dynamic, are starting to realize the full value of their real estate and the anti-competitive potential outcomes of giving up rights.”

The report notes Calgary and Ottawa as some cities “looking to build their own municipal broadband utility infrastructure often using municipal owned electric or water utilities.” Publicly owned broadband is running in a number of municipalities, including Stratford, Ont. and Campbell River, B.C.

The Logic

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