4.4 Sources of Financing for Infrastructure and Content

Since digital infrastructure needs to be upgraded if Canada is to compete in the top echelon of digital economies, investments in infrastructure and content need to be financed. Providing universal access to broadband and broadcasting services raise issues about what kind of public funding is required. Furthermore, as outlined earlier, traditional market support of content creation is eroding and new ways to finance content have to be developed.

While the sources of financing could differ from those allocated to improving service accessibility, it could be advisable to review them altogether as part of a national digital strategy. Potential sources for financing include the proceeds from forthcoming spectrum auctions, securing direct funding for targeted initiatives, and extracting funds from the high-speed access transaction in some way.

Proceeds of spectrum auctions as sources of financing

Broadband wireless is the new frontier for all kinds of applications. However, the high price tag of the 2008 Canadian spectrum auction process has raised issues about depletion of the private investment capital needed to put the infrastructure in place to make use of that spectrum. There are calls to rethink how the federal government uses the proceeds of the spectrum auction – which now “disappears” into the government‘s Consolidated Revenue Fund. Some would maintain that it is imperative now to begin the process whereby a portion of the funds to be raised from the next spectrum auction can be earmarked specifically to the ends of a national digital strategy. The uses and applications of these funs could include incentives to expand broadband coverage and to invest in Canadian digital content and applications.³⁰ Whether the funds generated by these auctions could be redirected toward the financing of programs designed to extend access and foster innovation should be on the agenda of a national digital strategy.

Direct funding of infrastructure initiatives

As described earlier, a benefit of extensive broadband infrastructure is potentially greater efficiency in the delivery of government services. In fact, the federal government has committed some direct funding for certain service delivery initiatives. In its 2009 budget, the federal government allocated $500 million to the Canada Health Infoway to encourage the greater use of electronic health records. At the same time, $225 million over three years was allotted in the 2009 budget to develop and implement a strategy on extending broadband coverage to underserved communities – generally located in regional and remote areas. It is not clear whether the latter amount is sufficient to serve the target communities or whether its focus is too narrow.

Funding through ISP levy

Another alternative funding strategy that has been suggested for content is one that is certainly not favored by ISP carriers, but was seriously considered by the CRTC in the Canadian Broadcasting in New Media Hearing (2008-11). A levy on ISPs to help finance Canadian digital content would roughly parallel the method for financing television programming through the Canada Media Fund. The CRTC decided not to proceed in this way, but it did refer the matter to the courts to determine if the CRTC had the jurisdiction to do so. If that mechanism is not appropriate, then the issue becomes whether other measures are more effective.

It is likely that a mixture of financing mechanisms will be employed to fund the improvement of Canada’s digital infrastructure and digital content. Exactly what that mixture will be should be an important issue in the design of a national digital strategy.