Data caps and overage fees perpetuate a spiral of digital inequality. The infrastructure is improving, but more attention to affordability is needed.
by Rob McMahon, Murat Akçayir, Bill Murdoch. Originally published on Policy Options
August 8, 2024
Impediments to internet access in Canada’s Northern, remote and rural communities will be the topic of this upcoming IRPP panel discussion in Ottawa on September 24, 2024.
Imagine streaming this year’s Stanley Cup finals and having to monitor how many minutes of the game you can watch before data overage charges kick in. Or cutting an online work meeting short because of the excessive costs of continuing a video call.
These issues – unfathomable to most people in urban Canada – have been a fact of life for people in rural, remote and Northern communities, where the cost of home internet can be prohibitively expensive.
These are regions where brick and mortar services are often unavailable, and people might only travel to an urban centre a few times a year. As more activities move online since the COVID-19 pandemic, internet access has become an essential service that many Northern households cannot afford.
Data caps and overage fees have combined with other facets of the digital divide to perpetuate a “spiral of digital inequality.” It costs more for children to learn online and for families to access telehealth. Businesses find it challenging to operate efficiently. Opportunities for remote work are significantly reduced.
Crucial investments in infrastructure are improving internet access in these remote areas. But more attention to affordability is required.
It’s cheaper to use two providers
In four NWT communities, we did surveys of 128 households in 2023-24, the complete results of which have not yet been published. In our preliminary review of responses, many respondents said they routinely incur overage fees, which range from $50 to $200 a month.
The high cost of data caps also surfaced in earlier research we conducted in the summer and fall of 2020, when we spoke with NWT residents in 11 small and rural communities.
To manage, Northerners told us they stop using high-bandwidth applications like videoconferencing or limit household access to streaming services halfway through the month. Some families set up a shared mobile hotspot, relying on cellular data to supplement household internet.
In communities with more than one service provider, people find it can be cheaper to subscribe to a second household internet connection than pay data overage fees charged by their primary provider.
Data caps frequently affect how they can use the internet, with 40 per cent of household respondents from 2020 surveys saying the caps are a key challenge. When we conducted additional interviews with 26 people, 15 of them said “pricey overages” are a main issue affecting internet affordability.
Some people go without home internet service, with the high cost of service being the main reason.
These findings demonstrate that the digital divide extends beyond availability. It is an issue of affordability and equity of access.
Where funding programs fall short
Government funding programs such as the Canadian Radio-television and Telecommunications Commission (CRTC)’s Broadband Fund and the Universal Broadband Fund help companies and nonprofits, including Indigenous service providers, build infrastructure in rural/remote regions.
But fewer policies consider affordability.
For example, a 2023 report of the Auditor General of Canada noted that the regulator and government have few indicators to measure progress on affordability, and tend to focus on price without considering household income.
It stated: “Connectivity, if unaffordable or of poor quality, is no more of an improvement to the lives of Canadians living on First Nations reserves or in rural and remote areas than having no connectivity at all.”
Existing consumer subsidy programs such as the Connecting Families Initiative are offered to low-income seniors and families receiving the maximum Canada Child Benefit. TELUS, Rogers and Bell are among the participating service providers.
But until recently, these programs were not offered in Northern Canada. NorthwesTel, the incumbent telecommunications provider operating in most of Northern Canada, is participating until March 2027. And this is an important point: Voluntary subsidy programs can be canceled by providers without warning.
They also offer only limited support to households and require significant outreach to sign up Northern subscribers. They may also undermine competition by requiring participants to commit to such plans for a period of time.
Furthermore, such programs do not directly address data caps and overage charges. These issues came up in recent proceedings on telecommunications services held by the CRTC.
During two phases of consultation, Northerners, territorial governments, First Nations, and public interest groups all told the CRTC that data caps are a significant barrier to their ability to access and use the internet in an equitable manner.
NorthwesTel suggested in these proceedings that data caps are not an issue – arguing the “vast majority” of its residential terrestrial internet subscribers have access to unlimited plans. It is important to note that satellite-served communities cannot access such plans.
NorthwesTel also characterized data caps and overage fees as necessary and widely used tools networks use to manage capacity. (See paragraph 185 in the file called Intervention Abridged). The company said its overage fees “have been approved by the Commission as just and reasonable, and there is no evidence to the contrary” (para 186).
The CRTC required NorthwesTel to file information detailing the number and percentage of terrestrial and satellite retail customers who paid overage fees, as well as revenues associated with such fees, but this information is redacted and not publicly available.
In interventions filed by the First Mile Connectivity Consortium, a national association of First Nations non-profit service providers, we challenged this assertion of “just and reasonable” overage fees. Drawing on our DigitalNWT research, we pointed out that households in rural and remote NWT communities pay a significantly higher percentage of income for internet services compared to their urban counterparts.
For instance, in Ulukhaktok, a small community on the west coast of Victoria Island in the Inuvik Region of NWT, the estimated monthly cost for basic internet services in 2022 was $215.69. This included estimated data overages and the mandatory phone-line. This amount represented 3.33 per cent of the median after-tax household income, which is $77,500 in that community.
In stark contrast, a similar service in Yellowknife cost about $62.95 per month, representing just 0.60 per cent of the median household income ($126,000), our analysis found.
We used the low-income threshold of $42,197 in our analysis. By this measure, low-income households make up almost one-quarter (22 per cent) of the homes in Ulukhaktok. For them, that cost almost doubles to an estimated 6.13 per cent of total monthly income. In some rural/remote NWT and Nunavut communities, one-fifth or more of households are below the poverty line.
This estimate does not include streaming costs, and considers only a single device. But many Northern households consist of large families and/or numbers of people living together, which suggests even higher data usage.
NorthwesTel has introduced an unlimited 50/10 mbps data package for residential customers in some NWT communities (e.g., Behchokǫ, Kakisa) for $129.95 per month. The package meets the CRTC’s basic-service target of 50/10 mbps (speeds for downloading and uploading) and unlimited data. But this rate is not affordable for many Northern residents. As well, it is not available in satellite-served communities such as Ulukhaktok.
NorthwesTel argues that: “Some subscribers would prefer to spend less money on their plan and control their usage. For these customers we continue to offer the option of subscribing to internet packages with capped usage, and we have given them the option of paying overage fees should they choose to do so, with the robust protections of the Internet Code in place to assist their bill management needs and avoid bill shock.”
We take issue with this assertion of protection and choice.
To our knowledge, NorthwesTel customers in NWT satellite-served communities do not have the option to subscribe to the company’s unlimited monthly plans.
In establishing the code, the CRTC said that in instances where data overage charges may be applied, “ISPs subject to the Internet Code must offer tools to these customers, at no charge, to monitor and manage their data usage.”
However, the CRTC’s Far North proceedings illustrate that Indigenous parties including the National Indigenous Economic Development Board and the First Nation of Na-Cho Nyäk Dun have characterized complaint mechanisms as confusing, time-consuming and inadequate.
Because the Internet Code lacks robust compliance and enforcement mechanisms, complaints may not deter problematic behaviour by providers. The Commission for Complaints for Telecom-Television Services has found limitations in the complaints process.
Understanding affordability
When determining regulations, the CRTC should adopt a more fulsome understanding of the factors that make up affordability – including equity measures such as relative income (as proposed in the auditor general’s report).
The commission should also revise the Internet Code to offer better protections to consumers in areas with limited competition, to avoid the challenges experienced by low-income people living in satellite-served communities like Ulukhaktok. A stronger consumer-complaints process should move beyond monitoring and management tools to prevent service providers from charging excessive data overage fees.
Additional consumer subsidies or financial assistance programs could also help alleviate the financial burden on households.
These matters are being covered in the CRTC’s proceedings on telecommunications in the Far North, which is considering whether to create a new consumer subsidy for Northerners.
Steps toward an Indigenous Broadband Fund are also underway, providing incentives for non-profit providers to consider offering services that could be more affordable for Northerners.
The market for telecommunications services in the North is also changing. Indigenous service providers like K-Net Services, Western James Bay Telecom Network, Eeyou Communications Network and Tamaani Internet are connecting residents in some Northern communities on a non-profit basis, allowing for lower service costs as well as local jobs.
Starlink, a competitive satellite provider that does not charge overage fees or impose data caps, has also began offering services in the North. The service is still quite expensive: $499 for the terminal (but only $99 in Quebec) plus $140/month. But its extremely rapid adoption (more than 400,000 customers according to the company) demonstrates the popularity of an unlimited data option for Northerners, including those in satellite-served communities.
As well, NorthwesTel recently announced a proposed acquisition by Sixty North Unity, a consortium of Indigenous organizations. However, little is known yet about the expected timing and completion of the deal, as well as the financing of the proposed $1-billion cash purchase price. While the news suggests improvements to internet speeds, there is no mention of any changes to data caps.
Bridging the digital divide is essential for ensuring equitable access to online opportunities and services for all Canadians. Ensuring that no community is left behind in an increasingly digital world is not just a matter of fairness but a necessity for social and economic inclusion.
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This article first appeared on Policy Options and is republished here under a Creative Commons license.