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Digital Divide Or Digital Disaster?

A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
July 6th, 2001

By Brent Holliday
Greenstone Venture Partners

"I recommend biting off more than you can chew to anyone
I certainly do
I recommend sticking your foot in your mouth at anytime
Feel free"
Alanis Morissette, You Learn

Last time, a random thought that I threw out about the federal government (Brian Tobin's Industry Canada, in particular) trial ballooning an idea to fund broadband to every home in Canada stirred a lot of feedback from you readers. I stated that the government should just stay out of this and that any effort to roll this out would be tantamount to a bail out of Nortel, whom would almost certainly receive the lion's share of the equipment contracts. This had me thinking and debating the topic with a few people over the past couple of weeks. In particular, there are two issues: 1) Should the government (taxpayers) pick up the tab, turning this into a gigantic public works project? 2) Going to a higher level, what do people get when they have broadband… what, exactly, is the benefit?

Here are a couple of the more passionate responses to what I wrote:

Response #1
You wrote: "Private market forces will dictate how best to efficiently deliver broadband to the rural areas of Canada (satellite? Telesat has a 2MB up and down technology in trial today)"

Nonsense. The cost of the satellite feed far exceeds what the average homeowner can afford. There is no shareholder value in servicing rural regions which is exactly the reason that Telus, Shaw et al are ignoring them today. What is needed is government funded, community owned, open access carrier neutral network infrastructures. That is the community owns the infrastructure private companies offer the services over that infrastructure. It is the cost of the infrastructure that has prevented the incumbents from offering services in remote rural regions to date. Broadband is the best hope that rural Canada has for a future and it is in the best interests of urban Canada to ensure those remote and rural regions have the ability to partake in the "New Economy" or else those same urban regions will be left to support their rural cousins on welfare etc. It is time for telecommunications infrastructure to be treated the same as roads. Publicly owned and equal access to all. Both are equally important to economic survival and prosperity.


Response #2
In your recent column, you said:
"Why not just give Nortel the money directly like they are doing for Bombardier and then scrap the idea of broadband to Alert, NWT?" A couple of comments seem in order. First of all, Alert is no longer in the NWT but rather in the new territory of Nunavut. On the issue of extending "broadband" telecommunications to remote communities, there are in fact a number of compelling reasons for building out a network to serve these communities. During the time that I worked for the government of the Northwest Territories (which then included Nunavut), I initiated and implemented an initiative to build a (relatively) high speed network to every community in the NWT (58 in all). The model for the network was a form of public private partnership with the GNWT as the anchor tenant and additional capacity being sold to other clients including the private sector. The successful bidder was a consortium (Ardicom) of the telephone company, NorthwesTel Tel, Arctic Cooperatives Ltd, an umbrella company for 4 retail cooperatives in the North which also ran a number of cable TV operations, and Northern Aboriginal Services Co., a joint venture of 4 major aboriginal development companies. The network is installed and operational. Many of locations are served by satellite connection. It provides T1 connections at the local level and variable band width over the intercommunity links as required by the needs at any point in time.

The network was justified and paid for on the basis of the support it could provide to education and health care in the communities as well as other government services. For example, the network was "specced" to support video conferencing at bandwidths necessary for typical telemedicine and distance education applications. While it is expensive in general to reach these small and remote communities electronically, they are also the ones which are the most difficult to service with traditional methods of service such as flying people out for medical diagnosis.

You are right to raise the issue of the potential for the initiative to be an expensive white elephant but in my view it is also possible to provide these services to such communities in way that is cost effective and ultimately in the best interests of the country as whole. You are also correct in noting the need for valid applications and content.

Oh, by the way, NorthwesTel did in fact select Nortel Magellan Passport switches to support this frame relay network, but that was their own business decision.

Although Alert is in the service territory it is in fact essentially only a military base and was not part of the project. Presumably they already have plenty of telecom capacity.

Gordon Robinson
Former Deputy Secretary, Audit, Budgeting and Evaluation for the Financial Management Board Secretariat (Effectively, CIO) NWT

{My apologies to all of my readers in Nunavut for mistakenly representing that Alert was still in the NWT. Zero on the geography test.}

These comments summarize nicely the emotional and practical responses to the issue of the "digital divide" as it has become known. DA has succinctly put to me that the rural technology have-nots will rise up and storm the cities with pitch forks in hand to eviscerate the un-caring urban digital elite who have turned their backs on their less fortunate brethren. Further, the nasty corporate profit seekers, like Telus and Shaw, should be equally gored to a miserable death because they see no profit motive to wire the small communities in Canada. Oh, the humanity.

I do agree, as DA has pointed out, that pure private sector build-out and maintenance of a huge network like this is probably not in the cards. Point taken. I should have been much more practical in how this really might work, as Gordon pointed out, "a public-private partnership". But, more on that later.

I really take issue with the hand-wringing "chicken littles" who warn of an impending social catastrophe because a large population does not have broadband access. Coming from a guy who tends to make broad sweeping generalizations, this broad sweeping generalization needs to be examined a bit more. What benefit does a person living in a small rural community in Canada get from having 1MB access to their home? Let's assume that they have no access today. They likely have a telephone (as 99% of Canadian homes do), they certainly have a television (as 98% of Canadian homes do), they likely have satellite or cable TV to get at least 60 channels (as roughly 70% of Canadian homes do) and they probably have a PC (as 60% of Canadian homes do). Pity the poor farmer in rural Saskatchewan with only 60 channels to watch and a few CD-ROMs to spin in his connectionless computer. He gets dial tone on his phone 99,999 times out of 100,000. Poor bastard. He's so cut off from the world. Here's what this person would get with broadband access: Porn, MP3s, books and frying pans from Amazon.com and all of the funniest ads on TV streamed from Adcritic.com. Of course, I'm being flip. But measure the downloaded bits from this fellow and those would be the most accessed types of enlightening, soul enriching benefits that make this fellow's life more complete because he could only get them with broadband access.

What he also gets with broadband access is access to government web sites, educational materials (ranging from straight information to curriculum tied resources and corporate training), and health care (again, from information to remote telemedicine). This stuff he can't access through any other medium in as quick and timely a manner as he can with broadband access. But his life is not in danger of being any less connected than the DSL enriched fellow in the West End of Vancouver. Not yet.

The main problem is that the content is not as good as the pipe. THIS is my biggest beef with rolling out access across Canada right now. The government services on-line suck. You can't apply for your driver's license, fill out your tax forms, receive and transfer payments to the government, effectively communicate complaints or concerns in real time. In education, there are many (mostly private, profit driven) sites with great content and curriculum. There are fantastic corporate training and course materials. But the masses do not yet use them. The urban elite are not yet getting their kids to do their homework or interact with distance educators effectively. There is a long way to go with educational content and the re-orientation of the teacher-student relationship using broadband connectivity (say hello to the teacher's unions, who are slowing this process down the most). And telemedicine is not in great use yet, other than on Discovery Channel. Once again, health care needs major procedural and structural changes to be effectively delivered or even slightly augmented using broadband connectivity.

Before we can effectively change the world of the rural or small community Canadian (heck, even the urban connected Canadian) with broadband access, we need to see major advances in what we are accessing that can directly benefit our lives: government services, education and health care. Gordon showed that the NWT government actually did the cost/benefit "spec" on these three main axes and decided that it should go ahead because the cost savings over time would dramatically outweigh the start-up cost today. So, Brian, stuff the trial balloon in your access port and do a proper analysis of what we need to have in the form of government services, education and health care on the Internet that would compel a user of broadband to feel that their life has been enriched. Make the argument that the cost savings of delivering these three key services over the Net will outweigh the costs of the buildout of high speed access.

Finally, when it comes to doing this, listen to the lessons of the public-private model that were learned in the NWT. The enormous costs of laying fiber, installing receivers and transmitters, installing access devices and providing end user hardware to actually use the broadband (remember, 40% of Canadian don't own a PC and I bet that hasn't been factored in yet) should be largely shouldered by the taxpayers when, and only when, we are convinced that the cost/benefit is there. Not just because we should, as the digital divide doomsayers are saying today. But the ongoing costs of training, support, marketing, upgrades and content improvement should be largely in the private sector in return for the revenue streams that would come from monthly access fees.

In fifteen years, we will live with broadband access like it is the reliable telephone service that we have today. I am a believer. But it will take time. Mr. Tobin and the folks like DA are mixing the doomsaying superlatives with the "Canada can lead the world in access" superlatives and rhetoric. Canada should lead the world in smart, efficient access to content and services that make their lives better. This starts with spending money and effort on the web sites themselves and not the pipe. Build the demand before you build the supply. Make it so the farmer in Saskatchewan is clamoring for access. Right now, he's watching Jerry Springer and he couldn't give a rat's ass.

What Do You Think? Talk Back To Brent Holliday


Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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