Access, Affordability and Universal Service on the Canadian Information Highway Information Highway Advisory Council January 26, 1995 This publication and other Advisory Council and Industry Canada documents related to the Information Highway are available electronically on the Internet computer network at: council@istc.ca. Anyone with the ability to use Anonymous file transfer (FTP), Gopher or the World Wide Web can access these documents. Below are the Internet addresses: Anonymous file transfer (FTP) : debra.dgbt.doc.ca/pub/info-highway Gopher: debra.dgbt.doc.ca port 70/Information Highway Advisory Council World Wide Web: http://debra.dgbt.doc.ca/info-highway/ih.html For information about the contents of this discussion paper and the consultation process, contact: Information Highway Advisory Council Secretariat 300 Slater Street OTTAWA, Ont. K1A 0C8 Tel.: (613) 990-4262 Fax: (613) 941-1164 Additional print copies of this discussion paper are available from: Distribution Services Industry Canada Room 208D, East Tower 235 Queen Street OTTAWA, Ont K1A 0H5 Tel.: (613) 947-7466 Fax: (613) 954-6436 Companion documents, The Canadian Information Highway: Building Canada's Information and Communications Infrastructure; Privacy and the Canadian Information Highway; Copyright and the Information Highway; and Progress Report of the Information Highway Advisory Council, are also available from the above address. The Information Highway Advisory Council would like to acknowledge the contribution of Angus TeleManagement Group in the preparation of this discussion paper. Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 1. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Physical Connection . . . . . . . . . . . . . . . . . . . . . . . . .6 Access to Information/Content Services. . . . . . . . . . . . . . . .8 Access for Service and Content Providers. . . . . . . . . . . . . . 10 Access from Rural and Remote Areas of Canada. . . . . . . . . . . . 11 Access for Canadians with Special Needs . . . . . . . . . . . . . . 13 2. Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 What Canadians Afford Now . . . . . . . . . . . . . . . . . . . . . 16 Paying for the Information Highway. . . . . . . . . . . . . . . . . 17 3. Universal Service . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The Changing Definition of Universal Service. . . . . . . . . . . . 21 What Else Should Be Included in Universal Service?. . . . . . . . . 21 4. Possible Approaches for Canada. . . . . . . . . . . . . . . . . . . . 23 5. The Roles of Government, Industry and the Public. . . . . . . . . . . 26 6. Public Comment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Annex: Access to What? . . . . . . . . . . . . . . . . . . . . . . . . . 29 Examples and Possibilities for the Information Highway. . . . . . . 29 Preface The Information Highway is the advanced information and communications infrastructure that is essential for Canada's growing information economy. This "network of networks" will link Canadian homes, businesses, governments and institutions to a wide range of interactive services -- from entertainment, educational and cultural products to social services, data banks, computers and electronic commerce. It is these services that will constitute the raison d'etre and sustaining force of the Information Highway. In March 1994, Industry Minister John Manley created an Information Highway Advisory Council to assist the federal government in developing and implementing a strategy for the Information Highway. Among other issues, the Council will examine the following: * How can an advanced information infrastructure improve the growth and competitiveness of Canadian businesses? * How can we ensure universal, affordable access to essential services for all Canadians? * How can we develop an appropriate balance between competition and regulation? * How can we promote the development and distribution of Canadian culture and content? The Council has established five working groups: Access and Social Impact; Canadian Content and Culture; Competitiveness and Job Creation; Learning and Training; and R&D, Applications and Market Development. This paper was prepared at the Council's request to promote public awareness about the issues of access, affordability and universal service on the Information Highway and to encourage public comment. It was approved on January 20, 1995, by the Council. Written submissions and/or comments are invited from all interested parties on the issues presented, or on any portion of this discussion paper. Written submissions should be addressed to: Parke Davis, Director General Information Highway Advisory Council Secretariat Room 640, Journal Tower North 300 Slater Street OTTAWA, Ont. K1A 0C8 Electronic submissions may be sent via the Internet to: council@istc.ca The Advisory Council may be reached at: Tel: (613) 990-6692 Fax: (613) 941-1164 All submissions must be received on or by March 3, 1995. Introduction The Information Highway, in our view, is not so much about information as it is about communication in both its narrowest and broadest senses. It is not a cold and barren highway with exits and entrances that carry traffic, but ... a personalized village square where people eliminate the barriers of time and distance, and interact in a kaleidoscope of different ways. -- David Johnston, Chair of the Information Highway Advisory Council, October 1994 Electronic networks and services are putting the world's information and entertainment resources at our fingertips. They are transforming the ways we work and do business, the ways we study and do research, how we educate our children and retrain ourselves, and how we bank and pay our taxes. Networks and information services are vastly increasing the options available to us in education, health care, government services, and cultural and community activities. The Information Highway is a metaphor for the host of possibilities involved in the capture, storage, transmission and reproduction of information, whether it is text, visuals or sound. Through the rapid innovation of digital technology -- the computerized manipulation of data at high speeds -- written information is not limited to the medium of paper; sound recording is not limited to vinyl records; and audio- visual storage is not limited to film or videotape. These different methods for the storage and transmission of information have been replaced by the same digital codes used in computers. Computer and compact disks have become a new medium for text and audio transmission. Video will soon follow. What does this mean? It means that producers of information services, whether voice, text, video or multimedia, have the potential to transmit information by a variety of communications networks -- telephone, cable, satellite or other wireless technologies. Coupling this potential with the interactive design of computers means rethinking and restructuring our traditional telecommunications, broadcasting and cable industries. It means a revolution in how we entertain ourselves, how we are educated, how we receive and create our news, and how we interact with each other, business and government. It means an enormous choice among entertainment and information products, new opportunities to create business, social and cultural alliances, and new possibilities to strengthen the participatory nature of our democratic heritage. Canada, with its vast geography and thinly spread population, can benefit from technological advances which reduce the effect of distance on economic, cultural and social activities. Network-based applications and services can also enable economic and social growth in small towns and rural areas as well as in cities. New technologies and new media will present new opportunities and new challenges in the way we disseminate and access information and content. The Information Highway will enhance communications and information exchanges among Canadians, and between Canadians and the rest of the world. However, the Information Highway must be developed in a way that ensures Canadians have access to the services they want and need. To realize these benefits, some key policy issues need to be resolved: * Access: What kinds of physical access connections to networks and content will we need to ensure that all Canadians have the opportunity to exploit the economic, social and cultural benefits of the Information Highway? How do we ensure that there is viable and sustainable competition offering access and universal and affordable services to Canadian households? How do we provide open and equitable access to all service and content providers while still securing a prominent place in the new system for Canadian content and service providers? How do we ensure that Canadians with special needs as well as Canadians in rural and remote communities have access to Information Highway services? * Affordability: How do we ensure that all Canadians can afford to use the Information Highway? * Universal service: What kinds of information and services should be available to every Canadian? How should our definition of essential services evolve over time to reflect changing needs and service options made possible by new technologies? And how should we pay for these services? Extending electronic network services to the broadest possible range of Canadians will make commercial, government and other public information services more viable. Canada as a whole will suffer if there are many Canadians who are unable to participate fully in the Information Highway. On the other hand, we may miss key economic, cultural and social opportunities and fall permanently behind if progress in making network services available lags behind that of other countries. No one today knows exactly how the Information Highway will evolve, what services will be popular or what technologies will be most successful. The Advisory Council's task is not to predict the future, but to provide advice to the government that will allow Canadians to take advantage of advanced technologies and services as rapidly as possible. Public input will help to ensure that the right questions are being asked and that the answers reflect the needs and concerns of Canadians. Your comments on this paper will assist the Council in offering balanced and well-informed advice to the government. This paper uses the term "information" in its broadest sense, to include such diverse content as movies, data bases, messages, pictures, music, programming -- anything available on our communications network. Sources of information include the government, libraries, universities and other cultural institutions, broadcasters, commercial information providers and individuals. 1. Access Access to the Information Highway really involves two aspects: * physical access -- connection to communications networks * access to information -- the content and services communicated through the network. These are different things, but they are related. Without physical access, there is no access to content. And if no content is available, there is no point in having physical access. Access is a critical issue for both consumers and information providers. Individuals need access to the information and services of their choice. Providers need open access to networks so that they can reach and be reached by their customers. This applies equally to commercial service providers, public information providers and individual users who create information. Physical Connection Physical access to communications networks is necessary in order to have access to the information and content services on the network. It can and will include both wired and wireless technologies. The nature of the physical connection can limit the kinds of services which can be used. For example, telephone party lines are not suitable for fax or data transmission, and users with rotary dial telephones cannot use information services which require touch-tone signalling. Over-the-air or wireless broadcast distribution can provide very high transmission capacity to extremely large areas on an instantaneous basis. However, signals generally flow in one direction only -- outward. In Canada, over-the-air radio and television broadcasting systems already have the capacity to reach the public with one-way information and entertainment services. Over 99 percent of Canadians have access to national broadcast signals via local terrestrial transmitters or satellites. Many thousands of Canadian television viewers have also opted to purchase satellite receivers that increase their choice of services, especially in remote areas. The capacity of all of these broadcasting facilities will increase dramatically as current services are converted to digital transmission. Telephone and cable television are today's most commonly used wired electronic networks. These two wireline infrastructures reach the vast majority of Canadians and will play a critical role in making sure that all Canadians have widespread access to and choice of networks that offer a range of affordable services. Nearly 99 percent of Canadian households are connected to the telephone network. Cable television service currently runs past 95 percent of households in Canada and has connections into some 75 percent. To provide a full range of Information Highway services, however, each will require substantial upgrades: * Most local telephone lines cannot readily transmit the signals required for video and high-capacity data services; they were designed for two-way voice communication. * Current cable television networks cannot carry two-way communication, or calls from one subscriber to another; they were designed for one-way video communication. Neither the regular telephone network nor the cable networks currently provide a communications access that would allow households or businesses to exchange video messages or multimedia files. Both are now actively examining ways to upgrade their networks to incorporate these functions: * Telephone companies are considering adding coaxial or fibre optic cable connections to homes and businesses, to provide more capacity or bandwidth for multimedia files. * Cable companies are installing fibre optic cable, adding equipment that would allow two-way transmission and increasing the total capacity of their television networks. How do we ensure that there is viable and sustainable competition offering access and universal and affordable services to Canadian households? In addition to -- or instead of -- the telephone and cable television networks, the Information Highway will likely use other access technologies. For example, most observers expect great expansion of wireless access services in the near future. Over 1.5 million Canadians already have cellular phones; they will be joined by others using satellite broadcast and two-way satellite services, low-power portable communicators for voice, data and paging, and other wireless technologies. Wireless access can provide both mobile and fixed-location connections. These may be particularly attractive in remote areas, where the cost of installing new wired connections is prohibitive. They are also absolutely necessary to achieve mobility and ubiquity in the provision of Information Highway services. Personal communications services (PCS) is a next-generation cellular telephone technology that promises to deliver the "anyone, anywhere, anytime" flexibility increasingly seen as essential to business and consumers. The new PCS can be useful in extending coverage, at low cost, to various rural and remote areas currently not served by wireline services. In urban areas, PCS provides a first step toward a competitive local telephone service. It is also the forerunner of a personal telephone system based on a personal telephone number which the subscriber takes along wherever he or she goes. The various connection methods will not be true access alternatives until they can reach all subscribers and services from anywhere along the Information Highway. This requires functional interconnection and interoperability between networks, so that a customer with only a wireless connection, or only a cable connection, could reach a customer or a data base connected to the telephone network, and vice versa. It is this ubiquity that will give users access to the full range of choices available on the Information Highway. Interconnecting the different networks nationally and internationally will require the development of standards to ensure full interoperability. In this regard, standards play an important role in the advancement of public policy objectives such as universal access, economic growth in the domestic market, and the capability to compete internationally. This is the "network of networks" vision. Most of Canada's telephone, cable television, and wireless carriers and broadcasters say that this vision is achievable, and they are willing to work toward it. In practice, it may take years to accomplish, and vestiges of parallel and independent access systems will be with us for some time. Access to Information/Content Services Some aspects of Canadians' right to information are defined in the Access to Information Act and the Privacy Act and by government policies about access to and the dissemination of public information. These deal primarily with individuals' legal rights to information about themselves, and to various kinds of government information. It is important to think more broadly than this, however, when speaking of individuals' and organizations' access to content and services on the Information Highway. In Canada, the exchange and dissemination of information is considered essential for full participation in democratic society. The ability to communicate with whom we wish and to share ideas and information is a basic freedom of expression guaranteed by the Canadian Charter of Rights and Freedoms. In an information-based economy where information is increasingly treated as a commodity that is bought and sold, how do we ensure the availability of socially and politically useful information for all Canadians? When should such information be provided free of charge, and when should users have to pay? Should Canada ensure that some kinds of information -- for example, information held by libraries, museums, national archives and other not-for-profit organizations -- are available to everyone? What measures are necessary to reduce disparities between information haves and have-nots? The Internet, which originated in the United States as a national research and development network, has evolved into a worldwide electronic communications system. It is now a federation of some 45 000 networks linking three million to four million computers and connecting at least 40 million users internationally, including approximately one million in Canada. Access to the Internet is provided via publicly funded networks and commercial service providers; telecommunications carriers are also beginning to provide Internet services.The number of networks and host computers connected to the Internet is estimated to be growing at the rate of 6 percent each month. In Canada, the CA*Net is a publicly funded network providing access to the Internet and interconnection with 10 provincial networks. The federal government has announced that it will support Phase II of the Canadian Network for the Advancement of Research, Industry and Education (CANARIE) by investing $80 million over the next four years. As part of this program, CA*Net will be extended to the Yukon and Northwest Territories by the end of 1995, and its speed will be increased to true multimedia capacity. Electronic community networks or freenets, organized for non-profit and educational purposes, have also sprung up across Canada, the United States and abroad. Telecommunities Canada, the national umbrella organization representing freenets in Canada, currently has some 11 operating and 33 organizing freenets as members; the operating freenets alone have over 150 000 users. The popularity of the Internet and freenets illustrates some of the interest, excitement, and enthusiasm that individuals and organizations share when it comes to communicating and exchanging information with one another. How do we design an advanced information and communications infrastructure that will respond to the diverse individual and social needs of Canadians, as well as their economic and commercial interests? There are powerful reasons to consider access to information as part of our overall economic infrastructure, many of which complement traditional Canadian policy objectives: * Regional and rural economies can be strengthened if businesses, organizations and individuals can access the same or similar information services that are available in large urban areas -- or if they can be providers of such services. * Access to distance education programs and other opportunities for lifelong learning may allow Canadians, regardless of where they are located, to adjust more quickly to changes in the job market. * Children in school today will be productive citizens tomorrow. Canada cannot afford to underequip rural or poor children, or those with disabilities, for the jobs that they will need to fill in the future. * The more we can know about our own country, the better citizens we will be. Access to Canadian cultural products and access to Canadians from other parts of our country will stimulate interest and awareness of ourselves and each other. There are also societal benefits flowing from greater participation by individuals and communities in electronic networks. Publicly accessible networks, if properly designed, can revitalize greater democratic participation in public decision making, advance a variety of cultural and multicultural objectives by tailoring their services to the needs of specific audiences, and provide more efficient and economical community support mechanisms to individuals and organizations. They pose new opportunities for individual enterprise, community and regional development, and the potential to improve our society and democracy. Access for Service and Content Providers Access for service and content providers is a federal policy objective. The Telecommunications Act states that no Canadian carrier can unjustly discriminate against or give undue preference toward any person in the provision of telecommunications services. The effect of this is that any person or persons can access the networks of any Canadian common carrier in order to transmit non-programming content. The Broadcasting Act does not specifically address non-discriminatory service, primarily because of the nature of the content. There are public policy issues that need to be considered, such as the need to ensure cultural sovereignty. As a result of these policies, the distribution of programming services has been regulated in a manner that promotes the maximum possible exhibition of Canadian content and programming services. Furthermore, the cable networks until now have been somewhat limited in the number of services they carry as a result of capacity limitations. In 1987, the Canadian Radio-television and Telecommunications Commission (CRTC), the regulatory agency of the federal government, noted: "Since they provide in fact the primary vehicle for the exhibition of television programming in Canada, cable licensees have a responsibility to ensure that Canadian services are provided fair and equitable access to their cable systems" (Public Notice 1987-260). In 1994, the CRTC asked the Canadian cable industry to revise its access guidelines to respect the fact that subscribers should be the ones who, by their choices, determine the popularity and success of individual programming services (Public Notice 1993-74). Given that the Information Highway in all likelihood will lead to a convergence of broadcasting and telecommunications distribution methodologies, questions arise regarding the best way to establish and maintain a balance between the non-discriminatory access provisions that apply to telecommunications and the cultural sovereignty requirements placed on the broadcasting sector. Should the Information Highway carry all content services, regardless of point of origin and/or content? How can we ensure there is adequate diversity of services? How can we ensure the continued exhibition and distribution of Canadian cultural content? Should there be priority carriage of Canadian services? Many service and content providers, including multimedia developers, are concerned about the increasingly high cost of clearing rights or worse, of not being able to obtain the appropriate rights to various works for use in a digital environment. Will copyright make it more difficult to have Canadian content available on the Information Highway? How do we provide open and equitable access to all service and content providers while still securing a prominent place in the new system for Canadian content and service providers? Access from Rural and Remote Areas of Canada Modern communications can reduce the negative effects of distance and geography. They can help to revitalize regional economies and reduce dependence on single industries. They can help bring consumers and businesses in Canada's small towns and rural and remote areas into the mainstream of economic and cultural activity. These possibilities are limited, however, if fewer services are available in remote areas or if the cost of using the services is substantially higher. Although most Canadians have some type of wired telephone network connection, a significant number (275 000 in August 1994) have only party-line telephone connections. Carriers argue that the cost of extending single-line service in rural areas is often prohibitive, unless customers themselves pay the cost. These costs, often in the many thousands of dollars for a single customer, act as an effective barrier to upgrading. It is worth noting, however, that SaskTel now provides single-line service to all subscribers in Saskatchewan. This program was specifically undertaken to meet the needs of agri-business and other rural subscribers who need to use modems and faxes. Manitoba Telephone System plans to convert all party lines to single lines in 1996. And other telephone companies have similar plans for service extensions in their own territories. Although cable television service runs past most homes, there are still many Canadians -- primarily in rural and remote areas -- who rely on off-air signals and satellite service for their program delivery. The licensing in 1981 of Canadian Satellite Communications (CANCOM), a private company distributing broadcast signals via satellite, has successfully brought a variety of private broadcasting services to hundreds of previously underserved communities. Cellular telephone service is an access option for some remote users, although cellular usage prices are still significantly higher than wired telephone network rates. Satellite transmission can extend television and data and even telephone services to many remote areas. Other wireless services may further expand network access available in rural Canada, although price will be a significant factor in determining how widely they are used. Telecommunications network upgrades -- including digital and high bandwidth access -- are likely to happen first in major cities, where the cost of upgrades is lower and revenues to carriers will be higher. Similarly, the conversion of the Canadian radio and television broadcasting system to digital transmission and the further upgrading of the cable television networks is expected to proceed initially in the major urban markets. Because such services will be less profitable in rural areas -- and may never be profitable at all -- there will be delays in upgrading rural access networks, unless governments or regulators require or provide incentives for such upgrades. The federal government announced in November 1994 that, as part of the SchoolNet Community Access Project, it will assist up to 1 000 rural communities to connect to the Information Highway. Communities will compete for inclusion, and will be expected to provide the sites, local project management, and financial support and services from local business, community groups and government. But even if there are economical ways to obtain local access in rural areas, some services may not be available in the local calling area. Long distance charges for out-of-area calling may be a significant barrier for rural and small-town businesses, schools, hospitals and consumers who wish to use information services based in cities. Canada's long-term interests lie in the ability of regional economies to be self-sustaining. Limitations on access to Information Highway services will affect potential job creation as well as social and cultural opportunities. What mechanisms or safeguards, if any, are necessary to ensure that businesses, organizations and individuals in remote and rural areas can access the same or similar information services available in large, urban areas? Or, if they choose to do so, how can they become providers of these services? Access for Canadians with Special Needs People with Disabilities Communications and information technology can help bring Canadians with disabilities into the mainstream of society. In some cases, technology can enable them to hold jobs that would otherwise not be open to them. The same government services and information sources made available to the majority of Canadians over the network could be of equal benefit to Canadians with disabilities when equipped with the appropriate technological aids to manipulate and manoeuvre information. However, special access issues face individual Canadians with disabilities in using the tools of the Information Highway: * Individuals who are blind or visually impaired cannot read computer screens nor view images or video signals. Text-to- speech conversion technology can allow them to access text -- a computer "reads" the text aloud. Speech-to-text conversion aimed primarily at the mobility and learning impaired, while complex, is rapidly gaining acceptance. The growing use of graphics and the trend toward multimedia content, however, could exacerbate access issues for these individuals. * People who are deaf or hearing impaired can use text or other visual information sources. To understand spoken language or other information transmitted by sound, however, most people who are hearing impaired require a conversion into text or sign language. Television programs close-captioned for the deaf partially overcome this barrier, but many information and entertainment sources are not close-captioned. * Individuals with limited mobility may have difficulty in using keyboards. It can take much longer for such an individual to compose a keyboard message or to respond to on-screen instructions. This is a significant disadvantage when using time- limited on-line services, or services which charge by connect- time. * People with learning disabilities or short-term memory deficits may have special difficulties in using software, manoeuvring through menus to find the desired data base or service, or replying to on-screen messages. In some cases, specialized software or devices have been developed to cope with these difficulties. This is an area of opportunity for Canadian research and development. Seniors Senior Canadians could be among the greatest beneficiaries of network-based information services. They may now need more information about government services than earlier in their lives. Travelling or standing in line to obtain those services may be more difficult for them. Services which improve communications with family or with community service providers could help reduce seniors' social isolation. Other types of content services -- entertainment, investment information, cultural material -- could also be helpful. On the other hand, many seniors are not at ease with using unfamiliar devices such as computers and modems, though they may be quite comfortable with telephones or television sets. This suggests that new information services aimed at seniors should be made as easy to use as possible. Services accessible by phone or in public places where assistance is available may be the most useful. Likewise, some new services might best be delivered to seniors via their television and radio. Experience with Senior Net in the United States, for example, indicates that once seniors are given training and hands-on learning opportunities, they learn quickly and become enthusiastic users of new information services. More than half of all Canadians over age 65 have some form of disability; about 15 percent of seniors are severely disabled. As a result, some of the challenges and opportunities facing people with disabilities also apply to services for older Canadians. People with Special Language Needs Canadian broadcasters and cable television companies provide conventional, specialty and pay programming for Canadians who speak a variety of languages. When it comes to text-based information sources, however, there is little if any such support. For example: * Many text messaging services and other types of software routinely strip accents from material written in French and other languages. * Native Canadians cannot readily exchange written materials in their own languages over the network, since the symbols used to write them have no counterparts in the digital code used by most computers and networks. 2. Affordability Affordable telecommunications and broadcast services are federal policy objectives, but affordability is not defined in legislation. Inevitably, it is a relative concept. Network and service providers need to attract investors and must pay employees with the skills necessary to develop innovative services. They cannot do either if access rates charged to businesses, organizations and individuals do not cover costs and provide an appropriate return on investment. If rates are too low, the incentive to develop and provide services will not exist. On the other hand, if rates are too high, many Canadians will be excluded from access to Information Highway services. This would have negative consequences for the whole economy, as well as for those most affected. Also, if rates are comparatively higher than those of our trading partners, Canadians will be unable to effectively compete in the global market place. What Canadians Afford Now In order to get some sense of the limits on affordability, it is useful to look at current levels of Canadian information services and costs: * Telephone service: The very high penetration rate of telephone service (99 percent) suggests that basic telephone service is affordable to most Canadians. Of course, this is not an infallible test -- it may simply mean the service is so essential that consumers sacrifice other needs to meet this one. * Broadcast services: Over 99 percent of Canadians have access to over-the-air television and radio services. Individuals buy their own equipment, but have no direct service costs. * Cable television service: The high percentage (75 percent) of Canadians subscribing to basic cable service suggests that these rates too are affordable. However, there is consumer resistance to increases in cable rates for basic and extended basic services. * Satellite television service: Thousands of Canadians in rural and remote areas pay directly for satellite delivery of television services that are otherwise provided via cable systems. The new Direct to Home/Direct Broadcast Satellite (DTH/DBS) services will also extend this option to urban areas. * Cellular telephone service: Although nearly 88 percent of Canadians live in areas where cellular service is available, this is perceived as a relatively expensive option. Cellular and other wireless carriers believe rates must fall dramatically to achieve greater penetration. Chargeable information and entertainment services that many Canadians enjoy now and that might be delivered in the future via digital broadcasts through the Information Highway include: * Video rentals: Many Canadians rent one or more movies each week; cable television networks already provide optional pay- per-view movie channels and telephone companies intend to compete vigorously for this market. * Pay-per-view: Such programs cover major events, such as hockey, football games, rock concerts, etc. * Video games: Many Canadians have video game units, and the availability of more games and hardware is increasing. Recently, a cable television video game channel was granted a license by CRTC. * Newspapers and magazines: Many Canadians regularly buy or subscribe to at least one newspaper or magazine. On the other hand, Canadians also have experience with "free" information -- or, more precisely, with information and entertainment services for which they pay by other, indirect means. These include libraries, government information and publications, community networks and freenets, and most radio and television broadcasts. In some cases, taxes pay for some or all of the services -- so in fact individual Canadians are funding them when they pay taxes. In other cases, revenues come from advertisers, and individuals fund them when they buy the advertised products or services. Paying for the Information Highway It will cost money -- lots of it -- to develop Canada's Information Highway and to get Canadians on-line. Electronic equipment in Canadian homes (e.g. televisions, video cassette recorders, computers, etc.) represents a substantial investment already made by consumers. This equipment will need to be upgraded to take advantage of the new technologies and to gain access to the new networks. Which services consumers choose is likely to depend on the ability of suppliers to tailor a service or package of services and its price to individual needs. The basic access unit -- whether it is an "intelligent television," a "black box" connected to the television, or a modem-equipped personal computer -- will require an initial expenditure (if not rented as part of a service package). As a result, upgrading will not only take time, but also require a certain level of disposable income that some Canadians may not be able to meet. To make sure that all Canadians have the opportunity to exploit the economic, social and cultural benefits of the Information Highway, there will be a need for low or no-cost access centres in every community. Affordable community access could be made available in a variety of locations such as schools, libraries, shopping malls, airports or other transportation terminals. The question is: Who should pay, and for what? End users, including businesses, institutions, and consumers? Information providers? Advertisers? Carriers? Government? The answer is probably "all of the above": * There seems to be a consensus among industry and government that many of the costs of upgrading Canada's networks should be paid for by the carriers and industry, and that the investment risk -- and returns -- should be borne by their investors. * Similarly, many types of information and content services will be developed by commercial ventures, who will fund the development wholly or in part, hoping they will recover the investment from eventual users. * Clearly, individual and corporate users will also pay, probably through combinations of basic rates and additional fees for optional services. Arriving at pricing and service philosophies which both suppliers and users are willing to accept will require compromises and flexibility (and, probably, a variety of ways in which services are packaged). Some users will be willing to pay more than others for a higher level of service. Others will accept some inconvenience or reduced level of service if it means that prices are kept low. Many observers believe that government should provide funding only when investment is needed to further public policy goals and no one else is willing to pay. This could apply to extending service to remote and rural communities or to people with disabilities, for example. Should this funding come from general tax revenues or from special tariffs on the users and providers of Information Highway services? If such an approach is adopted, we must decide which policy goals should be furthered, and which ones should take priority if funds are limited. Historically, Canadian telephone companies have subsidized rural and remote service with revenues from urban areas. This is true not only for local service rates, but also for long distance. "Route averaged pricing" keeps the cost per mile of long distance calls constant, whether the route is high density or low density. These urban-to-rural subsidies have been supported by public policy. In a more competitive environment, however, there is increasing pressure to bring prices in line with the cost of providing services and to reduce or eliminate cross subsidies. In an effort to move toward greater reliance on market forces in telecommunications, a recent decision by the CRTC authorized the increase of local monthly telephone tariffs. Consistent with this pro-competitive approach, the CRTC also opened up local telephone service to competition by cable television, satellite, cellular and other service providers. This move acknowledges the potential cost benefits to individuals and businesses by allowing other competing technologies to supply a larger share of Canada's communications requirements. Although the proposed tariff increase is under review at the request of the federal government, the government is not necessarily opposed to some rate rebalancing. It is critical to sustainable competition, however, that the Canadian regulatory regime provide a level playing field to both established players and new entrants and that any rate rebalancing take into account the particular circumstances of individual companies and the impact on consumers. 3. Universal Service The concept of universal service has been applied to both broadcasting and telecommunications services in Canada. There has always been a public policy objective of ensuring universal service in the Canadian broadcasting system, and the Broadcasting Act states that "a range of broadcasting services in English and in French shall be extended to all Canadians as resources become available." Both the Canadian Broadcasting Corporation and the private broadcasting sector in Canada have made remarkable progress, with the help of public and private funding, to ensure that virtually all Canadians have access to off-air radio and television services. Universal access to the telephone network is a legislated policy objective. The Telecommunications Act states that one of Canada's telecommunications policy objectives is "to render reliable and affordable telecommunications services of high-quality accessible to Canadians in both urban and rural areas in all regions of Canada." This policy has been very successful. We have one of the highest telephone penetration rates (99 percent) in the world. In the United States, by contrast, over 6 percent of households are without telephone service. There is general consensus in Canada that telephone service is an essential service and should be universally available. Canada's very high level of telephone penetration has been achieved by requiring telephone companies to provide phone service to anyone who wants and can pay for it, and by keeping basic rates and rural rates artificially low. The telephone companies are now asking why they must continue to meet these obligations when their competitors are free to adjust prices and offer service as they choose. Cable television service, on the other hand, has not been defined or treated as an essential service. Its extensive infrastructure, however, offers potential access to 95 percent of Canadian households. Viable and sustainable competition by different delivery mechanisms will be of paramount importance to ensure that Canadian households have access and choice of networks offering universal and affordable services. It is not clear that legal and regulatory obligations are necessary to ensure widespread deployment of new network services. Cellular companies, for example, are not required to offer service everywhere. Because there is competition, however, the carriers have found it in their interest to extend service as widely as possible. The Changing Definition of Universal Service It is one thing to seek universal service. It is quite another to decide what should be universally available. The concept of universal service has evolved over time. * A few decades ago, most Canadians were served by multi-party lines, touch-tone telephone service did not exist, and long distance calls required assistance from an operator. Today, most households are served by single-party lines. Touch-tone service is rapidly becoming the norm, and direct-dial service is almost universally available for domestic and international long distance calls. * In the early days of broadcasting, households that owned a radio or television were limited to receiving only those local signals available to them off-air. Today, three out of four Canadian households subscribe to cable television. And all Canadians can purchase satellite dishes through which they can receive a multiplicity of domestic and foreign programming and information services. The level of service which was considered appropriate for everyone in 1950 would be unacceptable today. We must expect that the definition of "universal service" will continue to change and expand. Rapid innovation and introduction of new services means that the variety of available services will be constantly changing. It is not possible for us to forecast which group of services will be considered essential in the future, so any redefinition of universal service should be open to evolution and change. What Else Should Be Included in Universal Service? It has been argued that the concept of universal service should go beyond simply access to a physical network and include access to additional services such as emergency 911 services, Internet access, certain programming and entertainment services, libraries, universities and other cultural institutions, and government and community information services. Federal government policy supports a "network of networks" -- interconnection between networks to allow subscribers on any network to reach information services and subscribers on any other network. In October 1994, Cabinet directed the CRTC to undertake a public review of a number of issues including the interconnection of telephone and cable television systems. An environment of network interoperability could be considered part of today's revised universal service goal, one still to be achieved. Having access to a variety of carriers and information providers, where possible, could also be considered part of the universal service concept. In some cases, several suppliers might compete to offer parts of universal or essential services; in other cases, where no supplier wants to offer a service, some form of government intervention might be required. Some types of service might be considered more "universal" than others. Some might be required to be provided at nominal charge to everyone, through a device at home: for example, 911 services. Other services might be available as an option, either at home or in a public location. Any definition of universal service should be open to change as technology and societal needs evolve. Immature and emerging services should not be prematurely defined as part of a universal service package, though they may eventually achieve widespread penetration and become part of a new standard of essential service. One step toward a broader form of universal service might be public access terminals located in libraries, schools or shopping malls. They could provide access to information services for people who do not have connections at home or at work. Such terminals might be free, or they might be pay-for-use terminals, similar to pay phones. More than 4 000 Canadian schools are already connected to the Internet through SchoolNet, a joint federal, provincial and territorial initiative. The federal government has agreed to contribute $13 million annually over the next four years to connect all 16 500 Canadian schools and 3 400 public libraries to the Information Highway by 1998. 4. Possible Approaches for Canada The following are some approaches Canada might take in order to achieve broad access by all Canadians to Information Highway services. Other approaches are possible, and elements from various approaches could be combined. Government and/or regulator to define universal service "basket" and control prices for it: This approach would be closest to the method we use now, with the difference that the "basket of services" would be expanded to include certain types of content services as well as network access. It might include various levels of service bundles, with some considered the minimum requirement and others optional. Carriers or information providers who wish to connect to public networks might be required to provide the full bundle of services, or portions of it, as a service requirement or interconnection agreement. Advantages: This would allow a baseline level of common services to be defined as essential for all users, eliminating the risk that some areas or users will remain underserved. Disadvantages: A defined "basket of services" would tend to be static and might inhibit innovation; adding new services to the mix would require specific action by the government or regulator. Unbundling/rebundling of services: This approach would reverse the bundling of services, to allow users to choose the mix of services they want. The unbundling and pricing might be based on market demand, or could be required by the government or regulator. Users could be offered a selection of services and pricing when choosing the types of fee they prefer. Advantages: This approach would allow users to define for themselves, in a dynamic fashion, the services they deem to be essential. Disadvantages: It could result in an uneven deployment of services across Canada, particularly if prices in low-density areas rise to meet costs. Subsidies/cross-subsidies/contributions: There are a number of possible variants in this approach, both in the sources and the recipients of the subsidies or contributions. Governments at various levels could provide targeted subsidies from general tax revenues; or suppliers could cross-subsidize within their own services, charging less for some and more for others; or all providers whose services can be reached through local networks could contribute to a "universal service" fund, which would be used to keep rates for essential services down. Subsidies might flow directly to consumers as individuals, or to institutions such as schools and hospitals. Or subsidies could go to service or network providers as direct payments or tax credits; or they could go to content providers. Advantages: This approach provides a mechanism for putting broad policies on access and essential services into effect across Canada and to all users, reducing the market tendency to "clumping" of new services in high-density areas. Disadvantages: Contribution fees and subsidies are complex to administer, subject to disputes over who should pay and who should receive, and how much. Partnering between various participants: There are many partnering possibilities which might speed up deployment of advanced networks and services. Governments at various levels could partner with each other, or with providers or customers, to support specific types of developments. Carriers, broadcasters, cable television operators and information providers could partner to reduce the cost of network construction or to bring together a variety of capabilities and strengths they do not have individually, or to attract investment. Public institutions could partner for joint development of specific network capabilities or information sources. Groups of users and institutions in remote locations could partner to lease or build high-capacity networks connecting them to an urban centre, or to finance and manage local Internet nodes. Advantages: Groups with common interests can act together, reducing costs and giving them greater influence in the market than they could have individually. This can benefit both users and suppliers. Disadvantages: Establishing co-operatives and partnership arrangements is time-consuming, and requires leadership and up-front funding before benefits are obtained. Supplier partnerships, in some instances, can lock out competitors and reduce consumer choice. Government procurement to help offset development costs: Federal and provincial governments spend hundreds of millions of dollars each year on computer and telecommunications services, and on information creation. They could make purchases conditional on receiving suppliers' commitments for certain types of development or support to underserved areas. Advantages: Large procurement contracts can "make or break" a supplier's decision to develop new services by ensuring that development costs will be recovered. These services, once developed, can then be extended to other markets and customers. Disadvantages: Government purchasers may end up awarding contracts to higher-cost suppliers in exchange for compliance with other government goals. For suppliers, competing for a large procurement contract is costly and time-consuming; those who lose the bid cannot recover the resources invested in the proposal process. 5. The Roles of Government, Industry and the Public It is not possible or desirable for governments or regulators to predict which technologies and providers will be "winners." Instead, government should foster an environment that encourages innovation and a greater reliance on market forces, institute safeguards for the privacy of individuals, and come to terms with the ways in which the Information Highway can have a positive impact on public participation and the democratic process. There are situations, however, where market forces alone will be insufficient, or will work too slowly, to meet the public interest. There will be an ongoing role for government and regulators in setting direction in those instances. Extending service to remote areas may be an example of this. The complex of industries affected by the Information Highway -- carriers, information and service providers, broadcasters, writers, network administrators, application designers, technology developers -- will need to forge ahead to find innovative ways to provide the needed services cost-effectively in a competitive market. This will be a tremendous challenge, and opportunity, for Canada's entrepreneurs and creators. The public's role -- as individuals, organizations or interest groups -- is to inform government and suppliers of their needs as they perceive them. There are bound to be differences of opinion; that is inevitable, and even desirable. The public faces a further challenge: to explore the ways in which advanced networks and services -- the Information Highway -- can improve their productivity and effectiveness. This will have impacts going far beyond the purely technical: * Schools need to think of retraining teachers, determining their software requirements, making hardware investments. How will curriculum be affected? Teaching techniques? Professional training? Administration? Can the technology be used to involve parents more closely? To create multi-school projects? * Educators and governments need to rethink how the distance learning tools and opportunities available on the Information Highway can be used to meet the lifelong learning and retraining needs of Canadians. * Information and content providers will need to find ways to maximize their creative and revenue-generating potential using new technologies and new distribution methods. They will need to adapt quickly to the changing needs of their customers and exploit new export opportunities. * Libraries, hospitals, and other public institutions need to set priorities and set "substitution strategies" to fund the transition from current modes of operating to more effective methods enabled by networks. They may be able to create new revenues by becoming information providers -- or they may wish to partner or share with other institutions. * Individuals in a wide variety of organizations, including but not limited to business organizations, must consider how advanced communications and information technologies can influence their performance. Can these technologies help them to reach their goals and objectives? What priority does implementing these technologies have? What changes will the organization need to make? 6. Public Comment This paper is a contribution to the discussion on access, affordability and the provision of essential services on the Canadian Information Highway. It is written to encourage response, not to offer definitive solutions. Submissions may be made by individuals and organizations, and by both the public and private sectors -- all are encouraged to participate. We invite your comments on the following issues, or on any portion of this discussion paper: Access: What kinds of physical access connections to networks and content will we need to ensure that all Canadians have the opportunity to exploit the economic, social and cultural benefits of the Information Highway? How do we ensure that there is viable and sustainable competition offering access and universal and affordable services to Canadian households? How do we provide open and equitable access to all service and content providers while still securing a prominent place in the new system for Canadian content and service providers? How do we ensure that Canadians with special needs as well as Canadians in rural and remote communities have access to Information Highway services? Affordability: How do we ensure that all Canadians can afford to use the Information Highway? Universal Service: What kinds of information and services should be available to every Canadian? How should our definition of essential services evolve over time to reflect changing needs and service options made possible by new technologies? And how should we pay for these services? Please forward your comments on or by March 3, 1995, to the address shown in the Preface. Annex: Access to What? Examples and Possibilities for the Information Highway The term "Information Highway" has been applied to many things, including video-on-demand, 500-channel television, the Internet and home shopping. While each of these will play a role, they are only part of the picture. The most useful way to think about the Information Highway is to think about what it will allow us to do. Following are a few examples and possibilities. Some refer to commercial activities; others describe ways we will be better served by institutions; still others describe the use of "public space" on the network to enhance personal and community activity. Business Applications Businesses will use network services to reach a wider group of customers and to improve customer service -- for example, by allowing customers to place orders or to check on the status of orders, by dialling in anytime day or night. Networks will enable companies to reduce costs by ordering supplies and inputs as they are needed and by selecting from a wider group of suppliers. Ad hoc work groups can be put together for a specific project -- for example, to develop a new software product or marketing plan -- without requiring individuals to sell their homes and move to another city to take part. Both large and small businesses will develop new network-based services (banks' automated teller machines are an example, as are on- line travel agents). These effects will reach into every sector, not just "high-tech" industries. For example, Calgary has a "virtual stockyard": sellers ship information about cattle for sale; and the cattle themselves are shipped directly to the buyer when the sale is made. Customers in several small New Brunswick towns, too small to support a local pharmacy, now have access to "virtual pharmacy" kiosks, which allow people to speak directly to a pharmacist in another town by videophone, and place their prescription orders for delivery. Broadcasting Services Radio and television broadcasting are by far the most commonly used of all communications services in Canada. The average Canadian uses television 23 hours each week, and radio 22 hours. It is natural then that this form of communications be considered a logical and necessary part of the new Information Highway. This will become even more appropriate once the planned technology conversion to digital transmission begins to move at a faster pace within the broadcasting and cable industries. Over-the-air broadcasters are in a position to provide a considerable capacity for wireless delivery for all future service providers. This can include traditional broadcast programming, new forms of programming such as pay-per-view, or new ancillary services such as traffic data delivered to moving vehicles. In fact, any information or entertainment data that must be delivered one-way over a wide area to fixed, portable, or mobile receivers may be eligible for transmission via the wireless broadcast lane on the Information Highway. Telework Individuals will be able to use the Information Highway to work more flexibly. Telework reduces commute time (as well as reducing traffic and pollution) and can allow individuals to schedule their work and personal schedules more flexibly. People may work from home, or in client offices, or from their trucks and cars, using the network to stay in touch with the office and with colleagues and co-workers in other locations. Work at home may be on behalf of a single employer, or may be contract work on behalf of a variety of employers or clients. Individuals will use the network to search for work, as well as to perform work for employers located in another city or even another country, without relocating. Education and Training Students of all ages will have access to information, quality teaching, and other resources which are simply not available otherwise. Distance learning programs and other network-based educational services can allow people to continue to learn and retrain throughout their lives. Innovative programming can tailor education to individual needs, levels, pacing, and time constraints. Scarce teachers for specialized subjects can be shared by students in several locations. Students and teachers may communicate with their counterparts in other schools (even in other countries) to share experiences and learn from each other. They can use on-line encyclopedias, library indexes, newspaper data bases, and may be able to "tour" faraway museums, art galleries and historical sites beyond the reach of a bus trip. Health Care Network services can reduce costs within the health care system and improve the quality of care by enhancing administrative functions as well as actual health care delivery. Possible applications include electronic transfer of records between doctors, hospitals and clinics, teleconsultation and remote diagnostics to provide specialist support to remote hospitals, ongoing professional training for doctors and other health professionals, and data bases providing current research and information on diagnosis and treatment. Patients as well as health professionals could obtain current information on possible drug interactions and other health-related topics. Government Networks and information services can reduce the costs of government -- both administrative and service-related -- and improve governments' responsiveness, making government services more accessible to people. Information about government services, as well as some of the services themselves, can be provided electronically. For example, individuals could renew licences or apply for government programs from terminals at home or at work, or from kiosks in public locations. Other Public Services Libraries and many other not-for-profit organizations, whether supported by government funding or other sources, will play a significant role in the development of the Information Highway. They may assemble or create information (data bases, digital displays, indexes, catalogues) as well as providing convenient ways for individuals to find and use that information. Freenets and other community networks are appearing in a number of Canadian cities to provide access to e-mail, the Internet and other services to users in their community. Personal and Community Communications One of the most popular aspects of the Internet and other on-line services is communications between individuals. People who are separated by geography, shift work or other barriers nevertheless participate in common activities and exchanges in the "public space" enabled by such services. For example, the Information Highway may provide enhanced communications between the many First Nations communities. Entertainment, Leisure Activities On-demand access to movies, interactive games and other leisure activities is one of the aspects of the Information Highway which is often featured in media reports. A number of suppliers believe that there is a large potential market for such services, and that revenues from these services -- derived either from subscribers or from advertisers -- will be the driver for extending broadband networks to residential communities. Many of the applications enabled by the Information Highway will involve two-way interaction. The network should allow all users, if they wish, to be creators of information as well as recipients. For example: * Software developers, advertising writers, engineers and others may wish to send multimedia files from their desktops to those of clients or colleagues in other cities. * Museums may provide live electronic tours of their holdings, ready for any remote "visitor" to browse and ask questions. The Canadian Museum of Civilization in Hull has wired all of its displays with fibre optic cable to support precisely this type of service. * Maintenance staff in remote mines or other work sites may exchange video images of malfunctioning components with a specialized technician at another location, thus reducing costly downtime and maximizing the effectiveness of technical advisors. * Public school students may want to exchange videotaped dramatizations, written stories or diagrams of science fair displays. * Doctors may send digitized X-rays and three-dimensional images of body scans. * Individuals will exchange text messages, but may also send videotapes and digitized sound recordings to family and colleagues.