Broadband as a legal right (part 2)

Why is this (Finnish) man smiling?

Finland’s new classification of broadband doesn’t just confer a legal right on consumers – the hook for all the news reports I’ve read. It also imposes a legal obligation on Finland’s ISPs to extend service to everyone in their licensed territory – and not just in rural areas. As FICORA (the Finnish Communications Regulatory Authority) puts it, July 1 is the date when “telecom operators’ new universal service obligations enter[ed] into force.”

The regulator has given 26 operators their marching orders, apparently without having to spend years in court and Cabinet backrooms fighting appeals. This was accomplished by way of an amendment to the Communications Market Act.

In Canada, the Tory digital consultation paper (Improving Canada’s Digital Advantage) gets as far as observing that good ideas are being talked about in other jurisdictions: “The application and impact of measures such as universal service obligations is also being discussed in many countries […]” (pp.18-19).

Rates and expenditures mandated

The Finnish announcement not only spells out bandwidth requirements, but also what FICORA deems to be “reasonable” rates for access. What’s striking about this commitment to affordability is that FICORA does not regulate retail prices – but looks after consumers anyway:

“FICORA monitors the pricing of the broadband universal service provided by universal service providers and draws comparisons to the price level of other communications services. In FICORA’s view, a monthly fee of 30 to 40 euros would be reasonable in most cases.”

That’s about $40 to $50 in Canadian dollars – not cheap (NB: in USD PPP). In fact, on the OECD measure of average monthly price per Mbit/s, Finland ranks only five places above Canada – 20th ($10.46) versus 25th ($11.85). While the Tory market forces doctrine has made affordability disappear from regulatory discourse, however, Finland has operationalized the concept of “reasonable” costs, including those passed through by an ISP for construction:

“Because the aim of the legislation is to ensure everyone the right to a 1 Mbps subscription, FICORA maintains that even the acceptable construction expenses must be priced at such a level that residential customers can actually obtain the subscription. Thus, a universal service provider cannot automatically charge all expenses incurred from the construction from the user, but only a reasonable share of it. FICORA monitors the implementation of universal service obligation and if necessary, steps in case-specifically if pricing is unreasonable.”

In Finland, the proof of affordability or reasonable cost is in the pudding. If subscribers can’t afford it, they can’t afford it – and FICORA wades in to adjudicate. This introduces an empirical test of the Finnish policy. Is there a means test to go along with it? Is there slippage? I don’t know. But these policymakers can at least get a sense of whether their program is working without relying solely on what the ISPs tell them.

And further to the subject of money, FICORA has already determined that the 100 Mbit/s service promised for 2015 will be achieved by cost sharing among all the parties. The commercial operators will have to support what FICORA says is “at least 34% of the costs” – while the balance will be covered by the central government, municipalities and the EU. And remember, Finland is building these connections to all businesses, not just homes.