CRTC Changes Likely To Benefit Canada’s Telecoms

After months of deliberations, the Canadian Radio-Television and Telecommunications Commission (CRTC) has ruled that high speed internet is a basic service, something all Canadians have a right to have.

It ruled on Wednesday that Canada’s major telecom companies will have to help fund telecom infrastructure spending for remote communities. The CRTC hopes to collect $750 million over the next five years as it phases out subsidies to voice service and adds them to internet.

The CRTC will require all Canadians have access to 50 megabytes per second of internet speed, up from the current five-megabyte-per-second standard today.

Incumbent telecoms Telus Communications (TSX:T)(NYSE:TU), Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) and BCE Inc. (TSX:BCE)(NYSE:BCE) will be responsible for paying the vast majority of the $750-million cost. They do have the option of passing on these costs to customers.

The CRTC will then use the money to fund expansion in rural areas, with a particular focus on communities in the three northern territories.

To access cash from the CRTC fund, telecoms must apply to upgrade existing internet networks in rural areas. As long as the plan is sound, capital will be available.

Canada’s three largest telecoms are positioned to benefit from these changes. It allows them to enter remote communities that weren’t previously cost-effective. The benefits aren’t just from getting these remote internet customers. It could also allow them to build brand awareness, which bodes well for keeping these customers once they move into more competitive areas.

Ultimately, however, the major telecoms are just too big for any expansion into rural areas to really have an impact to the bottom line.