By: Tyler Mattheis

Eastlink justifies its decision by appealing to its obligation to provide base service, and only base service, as per a provincial contract signed in 2007 as part of the Broadband for Rural Nova Scotia initiative. That initiative — ambitious and continent-leading at the time — was supposed to deliver high-speed Internet service to all Nova Scotians by 2009.

That has clearly not happened.

Meanwhile, Seaside Communications, the other company contracted for the same service in northern Nova Scotia, is not considering any such cap and is instead embarking on a $15-million upgrade of its infrastructure to attain 15 megabits per second (mbps) — 10 times the performance targeted in the original initiative. This investment is facilitated largely by a $6-million federal government investment — 40 per cent of the upgrade cost.

Government contracts, planned monopolies, ad hoc taxpayer investment and still no access to base utilities for rural Canadians. Sound familiar?

In his July 14 online opinion piece, Marco Navarro-Génie of the Atlantic Institute for Market Studies in Halifax rightly warned of the pitfalls of setting artificial prices and severing the economic relationship between provider and consumer.

Any attempt to do so will be akin to government-sponsored whack-a-mole, where any well-intentioned intervention will merely exacerbate other market conditions. This reality does not indicate ill-advised or inadequate regulation, but the wrong delivery model altogether.

The provision of modern utilities to rural and sparsely populated areas is not a new challenge in Canada. The provision of public infrastructure such as transit, highways, electricity and natural gas is more difficult and expensive in non-urban areas using traditional methods.

A tried and true solution applied successfully to utility services in rural Canada over the last 100-plus years has its roots deeply ingrained in Nova Scotia: the co-operative. The co-op empowers, compels action from and grants ownership to those who benefit from the implementation of the service. It grants a monopoly not to those who can profit most, but to those (all of those) who are in need of the service.

Rural residents across western Canada in particular are familiar with natural gas co-ops that remain a dominant feature in the Prairies, and electrical co-ops are in the recent memory of many. They provided the infrastructure and services decades before such an enterprise was economically feasible for a corporation to provide.

In pro-business Alberta, natural gas co-ops remain the dominant delivery model for energy through the rural areas. In these instances, the provincial government compels transportation companies (the large pipelines) to provide access to those main lines to co-ops and municipalities.

Fedgas, the “co-op’s co-op,” is an energy broker for all the smaller entities, and purchases gas directly from the producers on long-term contracts. The large pipelines then transport that gas to the smaller co-ops. Those smaller co-ops then distribute gas to their members in the local area.

The member-owned natural gas co-op model allows the members (who are both owners and customers) to access gas at an affordable price by taking advantage of volume buying just like a large corporate entity. But rather than producing profit for shareholders, that profit is instead distributed to the members in the form of cost savings. Providing savings to all members instead of profits to a few owners and protection of the co-op through guaranteed access to the raw commodity to ensure volume savings are the keys to rural utility provision and affordability without continued government subsidy.

Though electrical co-ops have largely faded from the Canadian utility landscape, they can be credited for the accelerated development of service in rural Canada. The long distances between customers made a traditional corporate model far too expensive and out of reach for rural residents in the early and mid-20th century.

Like natural gas, government regulations ensured that organized co-operatives had access to larger transmission lines and the electricity they carried, and the co-ops model enabled affordable and universal access in the absence of direct government subsidy or contracts. Pipelines, power lines and fibre-optic cables all require a critical density of customers for a corporate model to work. Successful instances throughout the country include Epcor, BC Hydro, Enmax, Hydro-Québec, Telus and Bell.

Interestingly, most of these companies grew out of municipal and provincially owned companies operated largely like, you guessed it, a co-op. Like a co-op, municipalities distribute services on a cost-recovery model for the benefit of their citizens, with any profits used for lowering taxes or offsetting other community expenses.

The trend in Canada has been to work from a co-op or Crown-corporation monopolized service while these utilities remain un-economical for private for-profit ventures, and then to graduate to a more traditional corporate structure where population densities and economies of scale allow a competitive market to function.

In Nova Scotia, it seems, the strategy was to skip right to a for-profit monopolized solution propped up by ad hoc government contributions and contracts such as the Broadband for Rural Nova Scotia initiative and the federal Connecting Canadians program. While these initiatives have had some success as demonstrated by Seaside Communications, it remains to be seen if that success can be continued as government programs come and go, and technology evolves despite the best-laid plans and political promises.

A co-operative model ensures community involvement and investment instead of half-hearted and non-binding consultation and the pursuit of a “social licence.” A co-operative model requires business planning and execution by leaders scrutinized by all those affected, not just investors demanding a steady return. And a co-operative model is not threatened by political action or inaction for the provision of essential infrastructure for full participation in our culture and economy today.

Unbeknownst to many, there is a strong foundation in Nova Scotia from which to build a strong, modern, accessible and world-class telecommunications infrastructure. The Valley Community Fibre Network (VCFN) is jointly owned by five municipal units, Acadia University, and the Nova Scotia Community College and provides a high-capacity fibre-optic backbone for communities from Halifax to Middleton.

For-profit companies such as Rogers Communications and Internetworking Atlantic Inc. (IAI) benefit from this well-constructed publicly provided infrastructure along with non-profits and institutions.

New wireless Internet service providers (WISPs) will soon see the benefit of this tremendous asset, which currently uses less than one per cent of its potential capacity. “We know about roads, electricity, and pipelines for economic development,” says VCFN board member Terry Dalton. “Today’s economy requires a (public) fibre infrastructure.” Expanding successful public fibre infrastructure partnerships such as VCFN and developing a regulatory regimen to create and foster rural broadband co-ops is a logical step for Nova Scotia.

Successful existing private-sector ventures not currently dependent on direct government subsidy will benefit, business models dependent on direct subsidy today will have powerful infrastructure to use as they adjust their operations to a new reality, and new enterprises such as WISP providers will be empowered to develop effective solutions we can’t even yet imagine.

Today, the taxpayer continues to guarantee corporate profits for the provision of subsidized substandard Internet access for rural Nova Scotians. The definition of insanity is often described as repeating the same thing and expecting different results. Therefore, the time is past due to try something bold, decisive and effective.

Co-operative and public-sector provided fibre-optic infrastructure should be seriously investigated and the monopoly be granted not to corporate interests coupled with sporadic and unplanned taxpayer injections, but to community interests supported by a comprehensive solution designed to provide real Internet service and the opportunity for rural Nova Scotia to participate in the modern economy.

Tyler Mattheis of Milford Station is senior business development officer for the Municipality of East Hants and former executive director of AdvantageHOPE in Hope, B.C. The views expressed here are his own.

This article originally appeared in the Chronicle Herald.