Canada's Information Highway Angus TeleManagement Group · Decima Research TABLE OF CONTENTS EXECUTIVE SUMMARY 1 SUMMARY 3 Introduction 11 What is the information highway? 12 The promise 14 The challenge 16 Federal initiatives 17 2 Objectives and Approach 19 Study objectives 20 Network suppliers and information providers 20 Network users 21 3 Evolving the 'Network of Networks' 23 A multi-level view of networks 24 Canada's current networks 30 Suppliers' readiness for network interconnection 34 Where are we heading? 38 Industry evolution 41 4 New Services in the Convergence Environment 49 Services in rapid evolution 50 Business services 55 Consumer services 57 Public services 58 5 Access and Affordability 61 Access: a necessity, not a luxury 63 Access to the Internet 66 Access from remote communities 72 Access for special constituencies 75 Impact of rates on network use 83 Rating options for special constituencies 86 6 CANARIE 87 What is CANARIE? 88 The CANARIE/CA*net network 90 CANARIE funding to network products, services, and application development 97 Focus group participants' perceptions of CANARIE 99 Broadening access to CANARIE's network and programs 102 7 Industry's Role 103 1. Technology development and deployment 104 2. Investment and risk 104 3. Market development 105 8 Government's Role 107 Legislative context 108 Two focus areas for government leadership 110 Policy setting in the public interest 110 Government as model user 112 9 The Public's Role 113 Education community 114 Health care community 115 Business users 115 Community groups 116 10 Policy Issues 117 Public access and universal service 118 From monopoly to competition 119 Role of regulation 120 The "unclaimed territory" 122 Canadian content 124 Copyright protection 125 Support for CANARIE and network users 125 Subsidies to special groups 125 Privacy and network security 126 Conclusion 127 Appendices A. Individuals interviewed for the study 131 B. List of suggested policy guidelines 135 C. Interview guide & focus group briefing document 139 D. Policy objectives from Telecommunications Act, Broadcasting Act 147 E. ONet Acceptable Use Policy 153 F. Position Paper on Regional Networks 157 G. Free-Net Organizing Committees in Canada 161 H. CANARIE Projects awarded funding February 1994, & CANARIE Board Members 165 I. Glossary 175 J. About the authors 181 List of Tables Network levels and highway equivalents 29 Some bandwidth comparisons 30 Comparing telephone and cable networks 39 Competitive trends: the "unclaimed territory" 42 CANARIE funding (business plan projections) 89 List of Diagrams Multi-level view of networks 24 Today's telco and cable systems 35 Tomorrow's network access options 36 Free-Net topology 70 Vertical model of information networks 82 Canada's Information Highway Angus TeleManagement Group · Decima Research EXECUTIVE SUMMARY This report is based on interviews and focus groups, conducted between December 1993 and February 1994, with a wide range of network suppliers and network users, many of whom will become key players in the development of Canada's information highway. The study objectives, as set by Industry Canada, were to identify and assess policy issues relating to services in a convergence environment, and access and affordability to networks for users of computer and information networks. The findings from these interviews and focus groups provide the basis for a national action agenda for Canada's information highway. Based on the findings of this study, as part of a national strategy on the information highway the federal government must develop an integrated policy which: . redefines "universal service." To participate in the information highway, all Canadians need single-party, digital access lines, and electronic access to government services and public information databases. . supports the interconnection and interoperability of all public networks, making Canada's infrastructure open and accessible to all users and service providers on a non-discriminatory basis. . supports increased and fair competition in networks and services, taking into account the objectives of both the Telecommunications Act and the Broadcasting Act. . establishes clear guidelines and criteria for government support of network users and user groups, positioning the CANARIE program within a rounded program of support to network users and developers. . supports increased access to high bandwidth interactive network capacity by all users, in particular by small business and institutional users in regional economies. . supports measures to rapidly extend network access connections for all schools and health care institutions, including special rates as needed to make information networks and services affordable for the education and health care sectors. Canada must resolve these questions quickly if we are to reap the benefits of the ubiquitous networks and services which are within our reach. If we fail in this task, we will indeed fall behind those countries which are able to marshal the will and courage to proceed into the information age. In a global economy, countries with a rapid development of new technologies and communications advances will have more successful economies, and will be able to provide a better quality of life for their citizens through bringing these technologies to bear on social, economic, and cultural issues. So Canada has a choice - to be a leader, or to fall behind. In a competitive world, time is the most precious commodity. We cannot afford to wait for "someone else" to accomplish the information highway on our behalf. This must be a national goal for Canada. Achieving it is not inevitable. But by working together, we can achieve it. Canada's Information Highway Angus TeleManagement Group · Decima Research SUMMARY What is the Information Highway? The term "information highway" has emerged to describe the infrastructure - the complex of technologies and services - needed to transport the vast array of databases, images, conversations, multimedia files, and other electronic signals which will carry our economy forward into the information age. The information highway is not yet fully defined, and may never be. However, major components of the highway already exist in Canada. These components are in rapid evolution, driven both by new technology and by the changing needs of Canadian businesses and consumers. In contrast to the physical highway system, which is publicly owned, most electronic networks are built and owned by private companies. As a result, developing policy for the information highway requires a balancing of public and private interests. The January 1994 Speech from the Throne highlighted the Information Highway as a key priority for the Canadian government. The government has since announced three key policy objectives central to development of this highway: . create jobs through innovation and investment in Canada; . reinforce Canadian sovereignty and cultural identity; . ensure universal access at reasonable cost. The government has also commited itself to four operating principles for the development of the information highway: . an interconnected and interoperable network of networks; . collaborative public and private sector development; . competition in facilities, products and services; . privacy protection and network security. In March 1994, the government announced the creation of a broadly representative Advisory Council on the Information Highway, to assist in shaping an effective set of policies for this evolving constellation of technologies and industries. Evolving the Network of Networks The concept of a "network of networks" includes the full interconnection and interoperability of existing and planned public networks (including cable, broadband and narrowband telephone networks, satellite and wireless networks) as well as value-added computer and communications networks. Canada's intercity telephone networks, operating over high-capacity fiber and microwave links, currently carry electronic traffic - voice, data, and image signals - at speeds up to 2.5 Gigabits (billions of bits) per second. By the end of the decade, further technological development will allow these intercity networks to operate at up to twenty times this speed. These networks are capable of transmitting very large amounts of information virtually instantaneously. They can potentially give every Canadian access to the wealth of the world's information. They can revolutionize our economy, our work lives, our learning opportunities, and our leisure time activities. They can make government services more accessible and, at the same time, less costly to deliver. A superhighway needs access ramps Most limitations on network use - by consumers or business organizations - reflect limitations of the local access and distribution networks. These are the "driveways," the "local roads," and the "on-ramps" to the information highway. The majority of Canadian homes are connected into at least two local communication networks: the local telephone network and the cable TV network. In addition, cellular access is available in most cities and in many rural areas. Other wireless access methods - satellite and the about-to-be-launched PCTS (public cordless telephone service) - offer additional, though limited, local connectivity. . Over 98% of all Canadian homes, and virtually all businesses, are connected to the telephone network, primarily by analog circuits over copper wires connecting them to a local telephone company switch and thus to various intercity and international telephone and computer networks. . About 71% of all Canadian homes are connected to a cable TV network. The connection into the home is usually by a coaxial cable, connecting to the cable company's head end server through a combination of coaxial and fiber optic cables. The telephone companies' local copper loops can transmit only limited amounts of information at any given time. Though there are technologies which allow the transmission of digital signals (and even, over limited distances, high-bandwidth video or multimedia signals) over copper wire, these technologies are not widely deployed. The cable companies' coaxial cable connections have considerably more carrying capacity than copper loops. Technological changes planned for the near future will increase the cable networks' capacity even further. However, cable networks are currently local, or at best regional. Furthermore, they are not designed to provide two-way high bandwidth transmission, or to transmit calls from one subscriber to another. Thus we face a bottleneck in local access. We have islands of networks rather than a network of networks. We have high capacity intercity networks, but most subscribers can only access them through narrowband copper loops. We have higher bandwidth connections provided by the cable companies, but these do not connect either with each other or with the intercity networks. Canada is in a good position to move forward quickly to solve this problem: . Our telecommunications and cable networks are technically among the best in the world. . Our federal government has committed itself to achieving a network of networks. . We have recent telecommunications and broadcasting legislation which provides government with the necessary levers to forge ahead. If we don't quickly solve the problem of local access, we will by default become a nation divided into information "haves" and "have-nots". The "haves" will be the lucky few who have access to high bandwidth connections and advanced networking services, through which they can reach individuals, databases, and other services located anywhere in the world. But the information economy cannot be achieved on a piecemeal basis. Canada as a whole cannot move into the global information age unless advanced networking services are available, and affordable, to individuals and organizations in every region of the country. A single functional network We need to make maximum use of the infrastructure we now have, and of the investments which will be made in these networks in the future. Subscribers, and providers of services and information, need to be able to reach each other easily, using the most appropriate infrastructure available. To achieve this goal, all parts of the network infrastructure, including the cable and telephone company networks, need to be interconnected into a single functional "network of networks." No single industry or entity should control the entire network, either in the access network or in the backbone circuits. Canadians should benefit from competitive suppliers' ingenuity in deploying advanced network technologies and services. A 1992 report on local network convergence said that Canada should work towards "a mosaic of innovative service providers, interconnecting and sharing elements of their infrastructures wherever it permits the delivery of more efficient and advanced services." The authors argued that industry should lead the development of standards for the integration and interconnection of telephone, cable, and other communications networks. Very little progress has been made on these recommendations in the intervening two years.Government and the CRTC have the authority to order network interconnection and the establishment of interoparability standards. They can also order that network facilities be made available for sharing and resale, so that all service providers have available to them a variety of delivery vehicles. It is time for government to use these powers, to establish a clear policy direction which can make the "network of networks" a reality. Services in a Convergence Environment As a result of increasing technical similarities, telephone companies and cable companies are increasingly able to compete with each other in the services which they deliver.The cable companies say they are open to competition in what they call the "unclaimed territory" between current cable TV and telephone service. This territory would include services such as telemetry, home banking and home shopping. However, it is clear that competition is already growing in the "claimed" territory as well, particularly in the provision by telephone companies and others of video-on-demand service. Technology is blurring the distinction between the services which may be offered by the broadcasting and telecommunications industries. There is currently no clearly defined boundary between delivery of programs and provision of access to databases (including video and multimedia databases). Entertainment services, whether offered by cable companies or telephone companies, are not the only services which will grow with the evolution of a "network of networks." For example, many consumers, and many current or potential providers of information and cultural products, would consider the following to be at least as important as movies or video games on demand: . educational services: distance learning, access to information databases around the world, communications with students, teachers, and researchers in other jurisdictions; . electronically-delivered government services, to make governments more accessible and at the same time reduce costs; . health services: teleconsultation, professional training, more effective administration of medical records; . community information services, available through libraries, Free-nets, or commercial providers; . Internet access; . services supporting telework initiatives, such as mobile access to corporate databases and messaging services; . interactive banking and shopping services; Electronic Data Interchange and other electronic commerce services; . electronic "publishing" products equivalent to magazines and encyclopedias, making use of multimedia services and technology. Virtually all the suppliers interviewed for this study say that, in their opinion, the network of networks will result in new services, and will generate new jobs and revenues.The range of possible services will be limited only by the imagination and ingenuity of network suppliers and users in the future. Access and affordability For most network users, access refers to more than the physical connection between them and the wider network. Users primarily want access to services. Depending on their interests and needs, they may want access to various of the services listed above, or others. Many users interviewed for this study said that having a high-speed network is worthless unless we have access to services and applications which effectively utilize the network. The high penetration of basic telephone and cable service shows that these are affordable to most Canadians. But many other other network services, or services available through the network, are not. In interviews and focus groups conducted for this study, respondents expressed great concern about the difficulty of obtaining access to services which would meet their needs, at rates which they can afford to pay. Rates, for both access and usage, are in many instances a significant barrier to network use. This is particularly true for people in remote communities. In a country as large and thinly populated as Canada, it is important that we maximize our use of technology to reduce regional disparities. It must become more affordable for businesses, libraries, schools, and hospitals in both urban and rural communities to communicate electronically with suppliers, customers, and colleagues elsewhere in the country and the world. Competitive supply: lower rates, more consumer choice Most industry representatives and network users interviewed agree that expanding the competitive market is the most effective mechanism to assure that Canadians have access to the best network services at appropriate rates. In a competitive market, suppliers are driven to eliminate unnecessary costs, and to pass savings on to consumers. They also have an incentive to deliver new services ahead of their competitors. Above all, a competitive market fosters experimentation and innovation by suppliers. Though policy making in such an environment of uncertainty is challenging to government and regulators, the end result is far more likely to meet consumer needs, cost-effectively, than any attempt to pre-determine the best course for industry development. Leadership The evolution of the information highway cannot be accomplished by any one group in society. In fact, leadership must come from several directions: Industry: The communications and information technologies industries, along with information providers and the cultural industries, will lead in the development and deployment of technology.They will also shoulder the bulk of the investment and risk as they roll out new services and develop markets. Government: The federal government is responsible for setting policy directions in the public interest. Its task is to protect users' interests, and ensure that Canada has an appropriate environment to support competitive industry development and deployment of the infrastructure needed by all sectors. Government should also use the technology to improve its own services, and use its procurement activities where possible to leverage effective technology deployment. In many areas, collaboration with provincial and municipal governments will be required to implement the required policy directions. The CRTC, as the federal regulator of broadcasting and telecommunications, is responsibile for ensuring that the objectives of the Telecommunications Act and the Broadcasting Act are met. It is empowered to determine when a given market has evolved to the point where ongoing regulation of services or classes of carriers is no longer required to meet these objectives. The Public: Users of the technology also have a key role to play. They need to inform suppliers and government about their requirements and concerns. In particular, the education, health care, and business communities have special needs and insights to contribute to the evolution of the information highway. Various community groups - library associations, consumer groups, groups concerned with questions such as privacy or public access, users of community networks or Free-Nets - all have a role to play if new services are to meet the needs of all Canadians. Recommendations Universal service redefinition Increasingly, the mix of services to which Canadians should have access will be provided by multiple providers in a competitive envrionment, not by a single provider. People in every part of Canada should have available to them: . a choice of network access suppliers, providing connection from residential and business locations to the telephone network, the TV cable network, or wireless network access services, and from there to a variety of public or private networks. . an interconnected network of networks. This means, at a minimum, there must be physical and channel interconnection between the telephone, cable, and wireless network infrastructures. . single-party access lines. Nearly 300,000 two-party and multi-party telephone lines were still in service in Canada in January, 1994. These should be eliminated as quickly as possible. . digital connection to the network of networks, provided by at least one of the available access suppliers. This should be, at a minimum, the 64 Kbps connectivity which narrowband ISDN would provide. . two-way high bandwidth connections to the network of networks. This goes beyond mere provision of digital access connections, to allow enough bandwidth to allow the transmission of video or multimedia files, both incoming and outgoing. . electronic access to government services and public information databases, whether from homes or businesses, or from public terminals located in shopping malls, community centers, libraries, or schools. Standards The Canadian public agenda should include the development of common North American and global standards for functional interconnection between physical networks, including cable and telephone networks;feature and service interoperability across different physical networks and overlay networks, using non-proprietary connecting devices. Cable and telephone company interconnection and convergence Cable companies and telephone companies should be required to interconnect their networks, in such a way that continuous circuits can be established between their infrastructures to function as a single functional network. No single entity or industry should control this network of networks. The content and carriage functions of the cable companies should be separated from a regulatory point of view. Both cable companies and telephone companies, in their carriage function, should be required to allow sharing and resale of circuits on a non-discriminatory basis (to each other, to subscribers, or to non-affiliated service providers). Cable and telephone companies competing in each others' core businesses should be subject to the same regulatory standards and legislation as the core providers of that service. . Telephone companies (or other service providers) engaged in broadcasting must comply with the Broadcasting Act. . Cable companies providing telecommunications services must comply with the Telecommunications Act. The government, or the CRTC, must move quickly to clarify areas where the boundary between broadcasting and telecommunications has been blurred by changing technology. For example, the question of whether video -on-demand is a broadcasting service urgently requires clarification. Competition To prevent increased monopolization of local access networks, Canadian telephone companies should not be permitted to control cable companies in their own serving areas, or vice-versa. For the Stentor member telephone companies, this restriction should apply to the serving area of any other Stentor telco as well. Special Rates In the public interest, educational and health care institutions should be considered as urgent candidates for special rates to reduce their cost of network access. Such special rates could be the result of unbundling and repackaging of services, or could incorporated subsidies provided by carriers or by government. Facilitation of shared bandwidth Business, community, and public sector organizations in remote areas should be encouraged to share bandwidth and network services to maximize the benefit to their community of networks connecting them to government services, to the Internet, or other electronic services. CANARIE/CA*net Industry Canada should clarify the ongoing role of CANARIE in the evolution of Canada's information highway. For example, will CANARIE be the preferred vehicle for all federal network funding initiatives (including assistance to Free-Nets, school-nets and other community networks)? Through CANARIE and CA*net, and in collaboration with provincial governments, the federal government should encourage regional computer networks to harmonize their Acceptable Use Policies, particularly on the question of commercial use. It should also assist them to increase their user base and thus reduce CA*net's requirement for government subsidies. Canada's Information Highway Angus TeleManagement Group · Decima Research One INTRODUCTION "Prince Edward Island is geographically located on the fringe of Canada. However, when an Islander can sit at his or her computer and reach colleagues, access databases, participate in electronic conferences, and be as up to date in his field as anyone in central Canada, his or her perspective changes. Instantly, Prince Edward Island is at the center of Canada with the world's information arrayed around him to use and to which he or she can contribute.... We are moving toward a universal, all-pervasive communications network that will be at the heart of a global information-driven economy." - Jim Hancock, University of Prince Edward Island, submission to CRTC Regional Hearings, Charlottetown P.E.I., February 1991. "We now can at last create a planetary information network that transmits messages and images with the speed of light from the largest city to the smallest village on every continent." - Albert Gore, Vice President of the United States, calling for a "global information infrastructure," United Nations conference on telecommunications, Buenos Aires, March 1994. Communications will be increasingly important in achieving Canada's goals in fields as diverse as education, research, health care, culture, and manufacturing. As Canada moves into the information age, it is important to ensure that our communications and industrial policies facilitate the development of our information highway, rather than hindering it. The term "information highway" - popularized by U.S. Vice President Al Gore, among others - has emerged to describe the infrastructure needed to support our economy's transition to the information age. The information highway is not yet fully defined, and may never be. Some of its components already exist; some are being built now; some have yet to be imagined. This report - based on extensive interviews with Canadian network suppliers and users, conducted between December 1993 and February 1994 - reviews the current state of networks in Canada, and identifies policy issues which must be resolved to encourage the rapid evolution of today's networks and services into those of the future. What is the information highway? The information highway has been the subject of a great deal of attention recently, both in the media and in the wider community. In February 1994, the Information Technology Association of Canada (ITAC) organized a major conference in Toronto, "Powering up North America", which focused on the information highway. Nearly 1,000 people attended this conference, indicating extensive interest in the topic. But it is often unclear just what is meant by references to the information highway. In the popular media, the term usually prefaces coverage of such topics as: . video on demand . 500-channel TV . the Internet . interactive home shopping . distance learning . medical imagery linking remote hospitals Each of these will be part of the information highway. They may even be indispensable to it. But they are only part of the picture. Knowledgeable individuals in the industry - people employed by the suppliers of the networks, services, and databases which will make up the highway, as well as members of those groups who currently use networks to support their activities - agree that Canadians need an interactive, high-speed network, over which they can access a wide variety of services. Most would add that their vision includes equitable access to this network, for users and for service providers. Media coverage of the information highway (or the "electronic superhighway") often suggests that this will be a new infrastructure - something still to be built. This is misleading. New developments will be necessary, of course, but we are not starting from scratch. Far from it. Major components of the highway already exist in Canada. Furthermore, these components are not static. They are virtually all in rapid evolution, driven both by new technology and by the changing needs of Canadian businesses and consumers. The term "information highway" is a metaphor, not a literal description. But it is a useful metaphor. Just as in traditional transportation systems, the true value of the information highway lies not within itself, but in what it does for those who use it: . Businesses and organizations in every sector will use it to become more efficient and effective: to place and receive orders more quickly, to reach wider markets, and to provide better service and support to their customers and clients. . Consumers will use it for personal applications - the electronic equivalent of visits and tourism - and will use services delivered over the network. They will also use it to work more flexibly: to work at home, or from client offices, or while travelling, able to access corporate databases and share work with colleagues in other locations. Just as with traditional transportation industries, the industry that provides the information highway will grow as a result of the services it provides. Precisely because they provide the enabling technologies for the rest of the economy, the Communications and Information Technology sectors will flourish. They will provide jobs to network designers, assembly workers, software programmers, information providers, and people in a host of other fields, some of which don't even exist yet. They will also be a source of exports, as Canadian equipment, software, services, and expertise find markets around the world. Network of networks The information highway has been described as a "network of networks." The concept includes the full interconnection and interoperability of existing and planned public networks (including cable, broadband and narrowband telephone networks, satellite and wireless networks) as well as value-added computer and communications networks. The network of networks will be seamless and transparent to those who use it, allowing them to transfer information across networks easily and efficiently. Through any one network, Canadian businesses and consumers - in urban as well as rural areas - will have affordable access to all of Canada's public communication networks and to services offered on these networks. The evolution of the network of networks will stimulate the development and introduction of competitive, advanced services that will mark the new economy. The promise The vision of the information highway encompasses two key benefits: 1. It will strengthen our economy. Regional systems for transportation of physical goods were essential for our agricultural, resource, and manufacturing-based industries, and continue to be so. But increasingly, businesses in all sectors - new information-based industries as well as traditional ones - are facing global competition for supplies and for customers. Effective telecommunications - of comparable quality and cost to that available anywhere in the world - is essential to our economic survival in today's world, let alone tomorrow's. If our networks evolve more slowly than those in other countries, our whole economy will fall behind. This would affect the standard of living of every Canadian, just as surely as the decline in cod stocks off Newfoundland has affected the lives of people in that province. Conversely, advancing our network evolution can reduce our regional dependence on single-product industries. 2. It will enrich our lives. Network-based services can reduce regional disparities, eliminating geographic and physical barriers to participation in many work or leisure activities. Participants in the interviews conducted for this study repeatedly mentioned three important areas of everyday life which can be improved by electronic communications: . education: Students of all ages can have access to information, quality teaching, and other resources which are simply not available otherwise. Distance learning programs and other network-based educational services can allow people to continue to learn and re-train throughout their lives. Innovative programming can tailor education to individual needs, levels, pacing, and time constraints. . health care: Network services can reduce costs within the system, and improve the quality of care. . government: Networks and information services can reduce the costs of government - both administrative and service-related -and improve governments' responsiveness, making government services more accessible to people. Some of the benefits of easy access to electronically delivered services include the ability to: . "visit" libraries, museum displays, universities and other information databases, no matter where they are located. . exchange views with people with similar interests in distant parts of the world, creating communities of interest without regard to geography. . search for work remotely, and even work remotely. . participate in life-long learning programs: university and college courses, professional upgrading and training, delivered electronically. . access many government services without standing in line. . choose from a wide selection of entertainment, including movies, games, and perhaps other services not yet invented. Reflections from network users Research for this study included interviews with current network users across Canada. Their views, reflected in more detail later in the report, are important to developing a policy approach which meets the needs of all Canadians. The researchers sought in particular to explore the concerns of early users of the information highway: individuals who regularly use information databases, electronic mail, and other electronic data applications in their everyday work and personal lives. In interviews and focus groups, these users expressed a commitment to - and need for - an electronic highway which links individuals and communities of interest in a truly interactive communications system. They view it as a new form of communication, which makes possible new ways of performing mundane tasks, trading information or doing one's job. To these respondents, information networks provide a unique opportunity to interact with their world in a new and meaningful way. Examples include teachers in British Columbia who use the Victoria Free-Net, a computer bookstore operator in Halifax who has begun a mail-order business on the Internet, and large business users who connect their establishments through dedicated data networks. Often, these users have overcome a number of obstacles in order to "get connected" and pursue their interests. That they have done so is testimony to the benefits they derive from using information networks, even in the case of unsophisticated text-based services running at relatively slow speeds. Some of the concerns frequently expressed by participants deserve mention at the outset of this report: . Many users expressed the view that Canada lags behind as a nation in building the electronic data network. They feel, with some urgency, that Canadian networks and services need to catch up to the competition in the U.S. and abroad, so that we can compete more effectively in the global economy. . A number of participants said that perhaps it is already too late for Canada to catch up. They said that by the time we have caught up to where the US is at right now, Americans will have had two more years of development and be that much further ahead of us. . Furthermore, many of the participants perceive the Canadian government as lagging behind the U.S. government, in that Americans have found champions at the highest levels of government - including Vice President Gore - for their information highway initiatives. Interviewees often mentioned "leadership" and "vision" when speaking of Mr. Gore, and lamented the lack of the same qualities among Canadian leaders in both government and business. Though the interviews and focus groups in which these views were expressed took place before the government announced the creation of the Advisory Council on the Information Highway - which may have had an impact on perceptions of the government's commitment - it is clear that Canadians are concerned. The U.S. is apparently forging ahead with bold initiatives, with a commitment to "hook up" schools and other public institutions, and with an administration whose members have personally championed the network concept and use it. As many Canadians see it, we have no such bold initiatives. We seem to them to be languishing: waiting, as some perceive it, to be led along the highway by our neighbors to the south. The irony of Canada - a country which has prided itself on its leadership position in telecommunications - failing to make commitments to the information highway was noted by several participants. The challenge Despite the fears of some, it is not too late for Canada to catch up with the U.S. on the information highway. We are in a good position to move quickly: . Our telecommunications and cable networks are technically as advanced as those anywhere in the world. We have a strong Information Technology industry (including strong communications suppliers), committed to rapid upgrading and development of Canada's networks and services. . Canada has recently revamped both its telecommunications and broadcasting legislation, providing a framework which can readily be built upon with new policies to support development of the information highway. . Canada has a single federal regulator with jurisdiction over broadcasting in the entire country, and telecommunications in almost all of it. This could make it much easier, for example, for Canada to implement new measures to ensure affordable access and redefine universal services. (In the US, such measures will have to be implemented by regulators in each state, in addition to any federal decisions.) But the information highway won't just happen. To harness the potential of the technology, to ensure that it strengthens all our regions and empowers all Canadians, we need conscious leadership of the process. Some of that leadership will come from the Information Technology industry itself. Engineers, network designers, service developers and marketers are actively exploring ways to match technical capabilities to their customers' needs. They have to - that is how they stay in business. Some leadership will come from users of the technology. Businesses, educators, medical workers, consumer groups, and others must participate in the process, to ensure that societal needs - which may not be entirely met by the results of market forces - are kept on the agenda. Leadership needed from: · industry · users · government However, users and suppliers alike look to government to show leadership in this process. The federal government, in particular, has a special responsibility to make the information highway a priority, and to facilitate its development. Some of the challenges to be addressed by government include increasing the diversity of suppliers providing network infrastructure and services, ensuring equitable and affordable access to these networks and services, and supporting individual privacy and Canadian culture. There must be co-operation between federal, provincial, and municipal governments, to ensure that initiatives at every level are complementary, and that the insights of a wide range of suppliers and users in every jurisdiction are brought into the process. Several municipal and provincial governments have identified telecommunications as key to economic development in their areas. A number of visionary and insightful reports have been issued, and important initiatives are under way in many areas to support improved local and regional networks and new application development projects. Suggested Policy Guideline: A comprehensive communications policy must take into account other government objectives which are affected by access to telecommunications, such as: · regional development · improved education and health care · improved delivery of government services. Federal initiatives The Canadian government's efforts in this area are now moving to center stage. The current study was launched by Industry Canada in the fall of 1993. Most participants welcomed the study as a significant federal initiative. A common response, from both supplier and user participants, was "We're glad the government wants to hear our views on this. It's about time. This topic is so important!" In the January 1994 Speech from the Throne, the federal government announced its intention to implement a Canadian strategy for the information highway. At the February 1994 ITAC conference, mentioned earlier, the federal government announced three key policy objectives central to development of the information highway: to create jobs through innovation and investment in Canada; to reinforce Canadian sovereignty and cultural identity; and to ensure universal access at reasonable cost. The federal government has established four operating principles which will characterize Canada's information highway: an interconnected and interoperable network of networks, collaborative public and private sector development, competition in facilities, products and services, and private protection and network security. Policy Objectives 1. create jobs through innovation and investment in Canada. 2. reinforce Canadian sovereignty and cultural identity. 3. ensure universal access at reasonable cost. Operating Principles for the Information Highway 1. an interconnected and interoperable network of networks. 2. collaborative public and private sector development. 3. competition in facilities, products and services. 4. privacy protection and network security. In March 1994, the federal government announced the creation of a broadly representative Information Highway Advisory Council. This high-profile Council will assist the government in developing and implementing a strategy to move Canada forward into the information age. "Our goal is to build the highest quality, lowest cost information network in the world in order to give all Canadians access to the employment, educational, investment, entertainment, health care and wealth creating opportunities of the Information Age. In short, our vision is to make Canada number one in the world in the provision and utilization of the information highway, creating substantial economic, social and cultural advantage for all Canadians." - Information Highway Advisory Council, Terms of Reference, 1994 The authors hope that the current study, incorporating input from a broad range of Canadians - suppliers and users of the information highway - will assist the Council in this task. "...perhaps more than ever in the course of our history, our prosperity and well-being depend on our ability to exploit the potential of telecommunications and information technologies." - New Telecommunications: Legislation for Canada. Companion publication to Bill C-62, 1992. Objectives and Approach Canada's Information Highway Angus TeleManagement Group · Decima Research Two OBJECTIVES AND APPROACH Study objectives This study was launched in November 1993. It was undertaken to assist the federal government in developing a broader set of policy principles and an integrated communications policy, one which will facilitate greater interconnection and interoperability of Canada's communications networks, stimulate the development of innovative services; and ensure greater access to the public network. The goal was to survey a broad range of opinions and views - among suppliers in a sector where industry boundaries are rapidly blurring, as well as among users of the technology - to help the federal government to better understand the environment within which policy must be developed. The study was intended to familiarize a broad audience with the issues as characterized by today's suppliers and users. Accordingly, the research was divided into two parts. The first part addressed issues relating to development of the information highway and related services. The second addressed issues relating to use, in particular barriers to access and affordability. The study is not intended as an analysis of current legislation, or an exhaustive itemization of all issues associated with the information highway. Rather, the goal throughout was to identify policy issues which should be addressed in order to remove any identified barriers and clear the way for rapid development of the information highway. Throughout the report, suggested policy guidelines are highlighted in the margin, and are also presented together in Appendix B. Network suppliers and information providers The researchers interviewed senior representatives of a wide range of companies which provide networks and information. These included technology research firms, telecommunications carriers, cable TV companies, wireless service providers, and tertiary network providers (which lease facilities from carriers to provide their own network services), as well as representatives of the cultural, broadcast and publishing industries and libraries. A list of the people interviewed appears in Appendix A. The questions identified for examination in this part of the study included: 1. How ready and capable are the various network industries - telecom carriers, cable TV providers, and others - to interconnect with each other, and to provide new services, either jointly or in competition with each other? 2. What opportunities does the information highway offer to other providers, such as cultural agencies, broadcasters, libraries, publishers, and other information service providers? Are they aware of these opportunities, and do they have plans to develop and offer new network-based services? 3. In the view of industry representatives, what issues need resolution in order to accomplish seamless network interconnectivity, and to provide new services for the information highway? 4. How can the information highway stimulate development and use of electronic commerce (EDI, electronic mail, bar coding, smart cards, electronic funds transfer, value added networks, and facsimile transmission)? 5. Will the information highway generate new services and new revenues, or will it simply re-distribute existing revenue streams? 6. Are new incentives required to encourage investment by the carriers and other industries in providing new services? Network users Between December 1993 and February 1994, the researchers conducted ten focus groups with network users across the country. The sessions were held in the following cities: . Halifax (Nova Scotia) . Sherbrooke (Quebec) . Montreal (Quebec) . Rouyn (Quebec) . Ottawa (Ontario) . Toronto (Ontario) . Sudbury (Ontario) . Winnipeg (Manitoba) . Calgary (Alberta) . Vancouver (British Columbia) Every effort was made to recruit experienced network users to the focus groups. Some, like the representatives from smaller communities, were recent and occasional dial-up users of electronic mail and information services. Others, such as those representing large educational institutions, corporations or businesses, have experience with complex and long-standing network applications in areas such as Electronic Data Interchange and Electronic Funds Transfer, as well as other services. In addition, individual interviews were held with a number of individuals who had special insights to contribute, or who could not attend a focus group. Over 150 people participated in the user focus groups. Each was selected to represent a community of interest, from major industries and businesses to individuals who were identified as having strong interests in the topic. This included public schools, teachers, post-secondary institutions, hospitals, libraries, cultural institutions, community colleges and CEGEP's, large and small businesses and industry, private individuals, municipal governments and others. All participants had direct familiarity with networks and were either regular, occasional or "would-be" users of this technology. Focus group participants represented the best-informed and most involved Canadian network users: people with hands-on and day-to-day responsibility for working in or administering information networks in Canada. They represent the "innovator" or "early adopter" group for this technology. Source lists for participants came from a number of sources: the CBTA (Canadian Business Telecom Alliance) member list, regional data network administrators' lists of clients in each centre, private mailing and resource lists maintained by the researchers, contacts within the industry, and others. Every attempt was made to distribute representation in an equitable fashion, both geographically and among types of users. Individual participants in the focus groups and user interviews were guaranteed that they would not be identified to the study's sponsors, in order to encourage a frank and open discussion of the topic. In particular, individuals with strong connections to the various telecom providers and to the CANARIE initiative were asked to attend, and were promised anonymity in exchange for their views on the topic. Consequently, quotations from users are not attributed in the body of the document, nor are the names of user participants provided. The questions addressed in this part of the study included: 1. What network access needs do Canadians identify? Should the current definition of universal service be broadened? How accessible are Canadian networks and services, in small towns and rural areas as well as in the cities? 2. Is network access - to both basic and high-speed networks - perceived as affordable? How affordable is access to the Internet, or to Electronic Data Interchange (EDI) services? What steps are needed to broaden access to the CANARIE/CA*net network, and the regional networks connecting to it? 3. Is the cost of access a barrier to network use by special constituencies, such as education and health care, which serve broad social and economic goals? What alternatives should be considered to make network use by such groups more affordable? (For example, special rates or subsidies.) 4. What impact do rates have on the adoption and use of new services? Is it important to encourage lower rates, so as to attract a critical mass of users and thus allow more rapid deployment of new services? Will competition among network industries have an impact on the price and affordability of new services? 5. Are there perceived risks with regard to security and confidentiality of proprietary and personal information on the electronic highway? 6. What policy issues and options should government consider to enhance network access and affordability? Are there initiatives in other countries from which we could learn? Two briefing papers were prepared: one to guide the supplier discussions, and the other for the user focus groups and interviews. In both cases, the papers were sent to participants prior to the meeting, to enable them to prepare their thoughts. These documents are reproduced in Appendix C. Evolving the 'Network of Networks' Canada's Information Highway Angus TeleManagement Group · Decima Research Three EVOLVING THE `NETWORK OF NETWORKS' The information highway is not a completely new infrastructure which needs to be constructed. Major components of it are already in place, and are undergoing rapid transformation. The task of achieving full interconnectivity between segments of the network, and ready access by all Canadians to the services it can offer, is an evolutionary one. In contrast to the highway system or the railroads, the information highway will never be entirely completed: there will not be a "last spike." The task before us is to create the right environment to facilitate the growth of today's networks and services, to meet the rapidly expanding needs of Canadians. Future generations will build on the foundation we lay today. A multi-level view of networks In discussions of the information highway, people often seem to be talking at cross-purposes, or even to be talking about completely different things. In many cases, they are talking about different things. Networks operate at multiple levels. Depending on one's point of view, any given level may seem to be the "real" network. But a comprehensive policy on the information highway must take all levels into account. A schematic view of the levels within a network appears in the margin on the right. This is a highly schematic diagram. In reality, there is overlap between levels, and there are subsidiary layers within each of the four levels indicated here. For example, the Internet is a "service" - but it may be provided through a private network of leased channels (as is the case with Internet connectivity provided by CA*net or fONOROLA), and the Internet itself serves as the vehicle for other services such as electronic messaging. Two points should be kept in mind: . The higher levels are relatively independent of the lower ones. Content (programming, messages) can be transmitted through a variety of services; services can be extended through a variety of channels; channels can be created through a variety of media. Access to content or services can be ubiquitous, without being tied to availability of a particular transmission medium or channel type. . Interconnectivity and interoperability is generally a within-level issue. For example, communicating between CompuServe and AT&T Mail (or the Internet) is a question of interconnecting between services. The technical and operational issues involved in this type of interconnectivity are different from those posed in connecting radio frequencies to DS-0 circuits (channel interconnection) or in connecting fiber to coaxial cable (physical media interconnection.) (A word on terminology: the words "network" and "channel" are used somewhat differently in the broadcasting and telecommunications industries. For consistency's sake, this report generally uses the telecommunications meanings for these terms. In the terminology used here, The Learning Channel and the CBC are "services", not channels or networks.) Physical media Networks require a physical medium to transmit information. Current networks may use optical fiber, coaxial cable, copper wire - or radio spectrum, in the case of wireless communications. When people say "we need [or don't need] fiber to every home" they are referring to the physical medium used. In many cases, services and signals can travel over a variety of media, sometimes several different media in the same transmission. For example, a cellular phone call travels through the radio spectrum, then over fiber or copper in the telephone network, and may pass back through the radio spectrum again (over a satellite circuit, or a microwave link, or out to another cellular phone). Cable TV signals typically travel through a combination of fiber and coaxial cable. Suggested Policy Guideline: Access to services can be ubiquitous, without being dependent on a provider's choice of physical medium. Therefore, government policy should focus on ensuring open access to new network services,whether or not a given physical medium is available in every location. A network provider's choice of physical medium is based partly on the relative carrying capacity of the media, and partly on the relative costs: . Fiber optic cable - composed of multiple fine glass wires - can carry the greatest amount of information. (No practical upper limit on fiber's information-carrying capacity has yet been determined. There are limits on the ability of current equipment to generate optical signals - but that ability is rapidly increasing.) Both telephone and cable network providers use fiber in their backbone networks, where they have the greatest concentration of traffic. Fiber is also used to provide some high-capacity local connections, at this time primarily into office towers in major cities. . Coaxial cable can carry less total information than fiber but much more than a single copper wire, at least over extended distances. Cable TV networks use "coax" almost exclusively in the branches of their networks, to connect to homes and other premises. Many businesses use coax internally for local area networks to connect personal computers and other devices. . Copper "twisted pair" cable has less total carrying capacity than either fiber or coax, though over short distances copper can transmit relatively high-speed signals. This type of cable is used to connect most homes and businesses to their telephone company's local switch in the "local loop." It is also used for the telephone wiring inside most buildings. Over the past decade, technological improvements have allowed higher bandwidths to be sent through copper wire, so it is now used for many local area networks as well. . Wireless networks transmit information in the radio/TV spectrum through the air, or - in outer space - through vacuum. Examples of wireless transmissions include microwave, radio, TV (direct broadcast), cellular, and satellite transmissions. The carrying capacity depends primarily on the type of equipment generating and receiving the signal. For all types of media, the cost of the medium itself (the wire) is a relatively small percentage of the cost of installing and operating the physical network. More significant are the costs of trenching (to lay wire underground), installing poles (for above-ground installation) or building towers (for microwave networks). Other significant components include the cost of the equipment necessary to send information through the cable, and the cost of maintenance. . Fiber optic cable is generally the most expensive to install and operate. The cost of the glass fiber is rapidly falling. But trenching remains expensive, as is the equipment required to "light" the cable (create optical channels in it). . Installation of coaxial cable is not necessarily less expensive than fiber - trenching, being labor-intensive, is costly in the laying of any type of wire, whether fiber, coax or copper. (For that reason, cable and telephone companies often share the trenching cost in wiring new housing developments.) However, the equipment required to send information through coaxial cable is generally much less expensive than for optical fiber, at least with today's technology. Most cable TV companies expect that the final drop to the home will continue to be coax rather than fiber in most instances, even though fiber rings may be installed to reach closer to homes than they do now. Approximately 71% of Canadian homes currently have a coax connection to a local cable company's network. About 71% of all Canadian homes currently have a coax connection to a local cable company's network. . Copper wire is the least expensive type of physical media connection, and the equipment required to send and receive signals through it is relatively inexpensive. It is also the most widely installed type of communication line, especially for the local telephone loop. Over 98% of households in Canada have a copper wire connection to the telephone network. The cost of replacing all of this existing copper wire would be very high. Over 98% of all Canadian households have a copper wire connection to the telephone network. For that reason, the development of standards and technology to send high-speed digital signals through copper wire can significantly enhance the range of services to which universal access can be readily provided - without waiting for future rewiring with different media. This is the underlying goal of ISDN (Integrated Services Digital Network) and ADSL (Asynchronous Digital Subscriber Loop) technologies, which allow high-bandwidth signals - up to and including video - to travel over existing copper telephone wires. . Wireless networks are often the easiest to install, because they do not require trenching or laying cable. Relative costs vary with the type of signal-creating equipment used, as well as issues such as the cost of rights-of-way for transmission towers or satellite dishes. Microwave networks are generally less expensive than fiber networks, and can carry high-bandwidth signals. Parts of Unitel's and Stentor's national digital networks are microwave - notably sections across northern Ontario, where the existence of the rocky Canadian shield makes fiber networks especially difficult and costly to install. Several of the new interexchange carriers are constructing microwave networks rather than fiber. Channels When people say "we need high bandwidth connections to the home" they mean that the type of channel connecting to the local network should be capable of carrying a high-speed signal. Networks require channels within the medium, through which electronic or optical signals can travel. "Bandwidth" is a measure of the carrying capacity of the channel. Some common types of channels include: . analog voice circuits . T-1, DS-3 channels . Optical Carrier channels . frequency allocations (for wireless communications: broadcast radio and TV, satellite, microwave, cellular, and the new public cordless systems) . channels within a cable TV system. Channels are not inherent in the media - they are created by equipment and software attached to, or integral to, the network. Today's telecommunications and cable networks are increasingly "intelligent" networks. Computers, microchips, and software in the network switches and head ends - as well as in peripheral equipment, including terminal equipment - control the way that information is handled in the network, what routes it travels, the protocols used to transmit it, and many other details relating to how the network functions. When people say "we need high-bandwidth connections to the home" [or to schools, or business premises] they mean that the type of channel connecting to the local network should be capable of carrying a high-speed signal. The channel could exist in fiber, coax, or - over short distances - copper wire. For some applications the channel could be a wireless (radio) connection. It is the type of channel, not the physical medium, which is the determining factor. The bandwidth of a given medium is not fixed. Technology is continually increasing the bandwidth-carrying capacity of each of the physical media. Upgrading to higher bandwidth or to digital carrying capacity in many cases will not require replacing the physical medium used, but will require replacing hardware and software components in the network. Digitization and bandwidth enhancement of networks is effected through changing equipment and software which create channels in the physical media. Transformation of a network from analog to digital is almost entirely a matter of changing the equipment and software which controls channelization of the network. Similarly, the network's bandwidth (also referred to as its "speed" or information-carrying capacity) can in many cases be increased by changing equipment and software on the network, rather than the physical medium used. The "500-channel universe" over cable TV, for example, will be made possible by a combination of digitization and compression of signals. It will not require replacement of physical coaxial cable runs to the home - though the receiving devices will have to be replaced so that they can read the new signals. In some cases, intermediate providers can lease channels (usually referred to as circuits) through which they offer their own services. For example, organizations like CA*net, IBM Network Services, Gemini, and long distance resellers such as ACC or fONOROLA, lease circuits from the telephone companies or Unitel, and provide their own services to customers or members through these leased circuits. Many large organizations, including businesses and governments, also lease circuits - either local or intercity circuits - from the carriers and use these circuits for "private" networks to provide computer and voice communications between their various locations. These operate as "overlay networks" on the carriers' networks; the organizations typically use their own routers, switches, computers or other devices and software to manage the network and provide services to their members and customers. Services and Applications A network also needs information-carrying services, such as voice telephone service, facsimile service, TV signals, digital data transmission services. Some of these, in turn, act as secondary transport for other types of information, so there may be multiple layers of services and applications travelling across the network. With digital encoding and sampling and compression technology, multiple applications may travel through the same medium and channel simultaneously. For a user, it is often the service or application level that is perceived as "the network." For example: . local or long distance voice telephone services. . electronic mail services. . Electronic Data Interchange (EDI) - a set of agreed-upon software procedures that allow organizations to send and receive commercial documents (such as purchase orders) electronically. . videoconferencing and other video transmissions. . the Internet, along with various types of services that use the Internet as transport. (The Internet can support voice and image transmission, as well as electronic mail or EDI - as long as both sender and receiver have appropriate interface equipment and software, and they are accessing it through a channel with sufficient bandwidth.) When people say, "I want to get onto the Internet," they usually don't care what physical medium or channel the signals travel through. They want access to the information and other services they can reach using the Internet. Content When people refer to "information highway services," they often mean movies on demand, interactive games, shopping channels, or distance learning. They are talking about the content level of the network. Finally, there is content, the actual information being transmitted or accessed. Examples of content include: . databases - users can call up to access information on the stock exchange, research subjects, etc. Though such databases are currently most often text-based, they can also include image, sound, and/or video transmission. . programming - TV and radio shows, for example. The separation between "programming" in the broadcast sense and "databases" is blurring, as digitization makes it possible to store any information in a computer, including the audio-visual components traditionally associated with broadcast programming. Telecommunications carriers are increasingly interested in providing access to "video on demand" services, resulting in a current debate about whether or not these constitute broadcasting services (requiring broadcast licenses). . electronic publishing and production of other information services. "The network" consists of all levels "Interconnection"and "interoperability" of networks can happen at several levels. · Interconnection at each level poses different technical challenges. · Interoperability at the service level requires physical and functional interconnection at the lower levels. When people refer to "getting on the network," they may mean physically connecting (getting a line installed). More often, however, they mean the ability to connect to a given service or application: the Internet, CompuServe, shopping and games channels, etc. Higher levels rely on the lower levels. Clearly, in order to have an interactive video game, or a multimedia transmission between computers, or video on demand - or even just a voice call or bulletin board log-on - it is necessary to be connected to the physical infrastructure through a channel of appropriate bandwidth, as well as to have the appropriate equipment to send and receive signals. To use the highway metaphor, which though overworked is sometimes useful to explain relationships between different parts of the system, as well as between different providers: REFER TO ORIGINAL FOR COPY OF TABLE Information - the content of voice calls, data transmission, video broadcasts, etc. - sometimes simply travels in the "trucks" (services) and sometimes moves through "containers" - intermediate services or applications, which may have their own security and protocols. To extend the metaphor, some network providers build and maintain the roads; some operate trucking services; some send containers in the trucks. Some produce the content that fills the trucks or containers. Some providers focus on only one level in the network system - others are providers at various levels. Many providers are currently exploring whether they could or should expand their operations to other levels. All metaphors have limitations. In some ways, the railway system is a better analogy. For example, in the early days, different railways often had rails placed at different widths, or gauges. Exchanging traffic between two different railways was not easy; the problem was finally resolved only when common standards for railway gauges were established. Similarly, common standards for the interchange of traffic between different networks - at each of the network levels - are essential to achieving a "network of networks." To have full interconnection and interoperability of networks, there must be agreed-upon standards for connecting channels and transmitting information through the network. Some such standards are in place, others are in development or still to be developed. Standards - for interconnection and interoperability - are critical for the "network of networks"vision of the information highway. Canada's current networks High-bandwidth channels Proponents of the information highway who say that "we need high-bandwidth networks in Canada" sometimes forget to mention - or are unaware - that we already have very high-bandwidth capacity in several key parts of our networks. . The intercity telephone network in Canada is virtually entirely digital, with high-capacity networks - fiber, satellite and microwave - carrying traffic at speeds up to 2.5 Gigabits per second (the equivalent of 32,000 simultaneous voice conversations). This capacity will continue to be upgraded by the carriers - the Stentor telephone companies and Unitel, as well as new interexchange carriers like Sprint, WesTel, and TelRoute - to improve the ability of their networks to carry increasing amounts of information. REFER TO ORIGINAL FOR COPY OF TABLE . Our cable TV networks, to which about 71% of Canadian homes are connected - a higher percentage than in the US - can currently carry 30 or more simultaneous one-way video transmission channels. These networks are typically a hybrid of fiber optic and coaxial cable, with the link into households being coax. Canadian cable companies' conversion to fiber rings in the backbone of their networks has progressed more rapidly than in the US. Over the next few years, conversion to digital compression, and to two-way service, will considerably expand the capacity and the types of services which are possible through the cable networks. Cable companies have primarily served local markets, but there is a trend toward linking regional cable networks. For example, Rogers Communications' network connects with most of the cable networks in southern Ontario. (When the Anik satellite went out of service, Rogers was able to supply specialty programming to many cable operators which normally receive those signals via satellite.) Some cable companies, for example Rogers and Videotron, also provide leased digital circuits within or between cities to business customers, who use them for private high-capacity networking applications. . The cellular networks have evolved to provide virtually national service, and are rapidly completing a conversion to digital transmission. Though typically used for voice services, they can also be used for data and image transmission. Local access channels Accessibility of network services, however, does not rely only on backbone services. It also requires local access and distribution networks. Having a multi-lane highway (or high bandwidth network) nearby only benefits the user if there is a way to get to it. The local access network provides the "driveways" and "on-ramps" to the information highway. Most limitations on network use - by consumers or business organizations - reflect limitations of the local access and distribution networks. Using the highway metaphor, these networks are the "driveways," the "local roads," and the "on-ramps." Having a multi-lane highway (or high-bandwidth network) nearby only benefits the user if there is a way to get to it. The majority of Canadian homes are connected into at least two local communication networks: the telephone network and the cable network. In addition, cellular access is available in most metropolitan networks and in many rural areas. Other wireless access methods - satellite and the about-to-be-launched PCTS (public cordless telephone service) - offer additional ways to connect to the wider network. Both the telephone network and the cellular network provide two-way (interactive) network access; the cable network at this time provides primarily one-way access, as does satellite broadcast service. The quality and capacity of the local telephone access loop varies considerably from location to location. . In some major downtown urban areas, businesses are able - for a price - to obtain high-speed digital access directly into fiber rings. This enables them not only to connect directly to high-bandwidth services, but to obtain the additional security of redundant networks. (Some businesses - for example, major banks - provide themselves with additional security by leasing digital circuits from Unitel or a cable company in addition to the telephone company circuits. That way, if one network goes down, they can still transmit information through the other network.) Because high bandwidth fiber access loops primarily connect to business premises, many industry participants expect that business users will be the "early adopters" of interactive multimedia services. . Most businesses and consumers, however, rely on analog copper circuits connecting their location with the telco switches. In many locations, digital access is also available, though at higher rates. . There are still parts of Canada where the only telecommunications access is over party lines. Though telephone companies have, over the years, reduced the number of party lines, in January 1994 there were still 293,000 two-party or multi-party lines in service in Canada. As a recent caller on the radio show "Cross-Country Checkup" said, having a party line means that he can only place a call to a computer bulletin board or the Internet at 2 a.m., when his neighbors are unlikely to pick up the line and terminate his call. Suggested Policy Guideline: Replacement of 2-party and multi-party telephone lines with single-party lines should be a priority in all parts of Canada. Canada has some limited types of competition for provision of local access channels for connection to the telephone network: . Cable companies (like Rogers, Videotron) are providing leased access lines to businesses, typically to provide dedicated access to high capacity networks. . Cellular service provides wireless access and alternate local and long distance service. Typically, however, this is a supplementary access rather than a replacement for a wired access connection. . The new Public Cordless Telephone System providers will provide another type of wireless access, though with more limited geographic coverage than cellular. Coverage will initially be confined to in-building or high-traffic public areas. Though all of these types of services will continue to grow, they will not significantly supplant the role of the telephone company's local access networks in providing basic telecommunications connectivity to all subscribers, for much of the decade ahead. The local Bottleneck Access to network services such as the Internet, public E-mail services, competitive long distance services, or other interactive networking services is primarily available through the local telephone network today. For this reason, the telephone companies' local access network is known as a bottleneck: virtually all traffic between users and non-telco service providers must travel through these local circuits. (Though alternative forms of local access exist, the proportion of total local traffic travelling over other access connections will likely remain small for some years.) From a policy and regulatory point of view, as long as the local telephone networks retain this bottleneck nature, special care must be taken to ensure that the owners of the local access networks - the telephone companies - do not accord themselves special privileges based on their control of the local networks and their special relationship with the subscribers. This is important not only to protect other service providers, but to protect the rights of users who want access to other providers' services. Similar concerns would apply to the cable networks and other providers of local access connections, assuming that as we move closer to implementing a ubiquitous "network of networks," other access providers will play an increasing role in providing local connections to the network. To the degree that full competition in provision of local access becomes a reality, the issues involved in providing "bottleneck" service will diminish in importance. Suggested Policy Guideline: Existing legislation and regulation ensures that carriers controlling bottleneck local access facilities may not accord themselves special privileges based on this control, or on their special relationships with subscribers.This principle should be extended to all access providers in an open interconnected network environment, to the extent that bottlenecks still exist. Services and Content Canadians have access to a wide range of electronic services - too many to catalog in this report. Many of the services provide access to various types of content. Some examples include: . Over the telephone network, users can make voice, fax, and data calls. They can dial into electronic bulletin boards, search information databases, and use electronic mail services to exchange messages. . In some cities, users can dial into "Free-Net" servers to access the Internet and other types of networks and messaging. . Most universities are connected to regional leased computer networks (such as ONet in Ontario) which provide access to the CA*net country-wide leased backbone network now funded by CANARIE. CA*net connects its members' networks to the Internet, and to each other. Users may also have access to a variety of processors attached to the network. These leased networks are an example of an intermediate network level, fitting between "channels" and "services" in the highly schematic diagram on page 24. Long distance resellers are another example, as are the private networks leased by governments and large corporations. In these cases, the providers lease channels from the carriers who own them, and use these channels to provide services to their own customers or members. . The banking industry runs its Interac service to exchange highly secure financial information between banks, allowing users to process transactions from any Automatic Teller Machine on the banking network. (This is another example of a leased network.) . Businesses can subscribe to commercial "value-added networks" such as those provided by IBM and others, which give them access to Electronic Data Interchange (EDI), the Internet, and a variety of other services. . The cable networks provide television service packages which provide access to entertainment, shopping, information, and community programming. . Television services are also available through direct broadcast or satellite broadcast. . Business organizations can use videoconferencing for interactive communications with colleagues and customers in other locations. They can also use point-to-multipoint broadcast TV to deliver training programs, sales information and other material. Despite the wide array of services available, the degree of interconnectivity between them is limited. Suppliers' readiness for network interconnection In the full "network of networks" vision of the information highway, a user on any network will be able to reach a subscriber or service located on any other network. This requires a high degree of network interconnectivity, especially if the connection is to be transparent (that is, made without apparent effort by the user, similar to the way in which the connections made to accomplish direct-dial telephone service is transparent to the parties on both ends). Referring to the various network levels described earlier, the "network of networks" requires the following kinds of interconnection: . There must be a continuous physical path, or media link, between the user and the network on which the other subscriber, database or service is located. If all subscribers and services are to be available to each other, this means there must be physical links - wired or wireless - between all networks. . The channels over which communication is to take place must be able to exchange signals. This means that physical connection is not enough: there must be functional connection as well. . If users of different services want to communicate with each other, the two services must be able to exchange signals. This requires agreements between multiple service providers regarding the protocols and standards to be used in transmitting messages. . Content providers must ensure - if they want to provide full public access to their programs and or databases - that access is "user friendly" and complies with industry standards. At the same time, some databases and programs will no doubt remain private. Protection of individual privacy, and of copyrights, will require ways to prevent unauthorized access to programs and databases. Certain types of interconnectivity between various networks and services exist today. Others remain to be accomplished. Transparent interconnectivity of services requires: 1. a continuous physical path; 2. physical and functional connection between channels and facilities; 3. non-proprietary protocols and standards; 4. user-friendly network service interfaces. Interconnection between competitive telephone networks Calls can be easily transferred between the public telephone network and the cellular network. However, a fuller level of transparency will be achieved with new arrangements to exchange additional signalling information about each call (Signalling System 7: see Glossary). Negotiations for such interconnection between the Stentor company networks and those of the cellular companies have been under way for some time, and are nearly complete. With the cellular networks' conversion to digital service, this level of interconnection will enhance call processing. Signalling System 7 interconnection between the telcos' and Unitel's network has been under negotiation for several years. Little progress was made until the CRTC ordered the telcos to provide this level of interconnection, both to Unitel and to resellers' leased networks. With the introduction of "equal access" later in 1994, it appears that network transparency between various long distance service providers will be nearly complete. This type of interconnection is primarily at the physical and channel level. Some service interconnection is provided as well, primarily for exchange of voice and fax calls, where standards are widely established. For other services, however (for example, public voice messaging services) each company provides its own services which at present do not interwork with those offered by competing providers. The CRTC can require, and enforce, interconnection and interoperability between carrier networks. Interconnection between cable and telephone networks Following is a schematic diagram of the way today's cable and telephone company local networks connect to homes or other locations, with no direct links between the two networks. (This diagram does not show the entire architecture of either network. For example, both cable and telco networks include fiber rings and fiber runs in the backbone parts of their networks.) REFER TO ORIGINAL FOR COPY OF DIAGRAM cAngus TeleManagement Group, 1994 To date, there has been little demand for interconnection between cable and telephone networks, so not much has been done by the respective providers to explore the issues which would need to be resolved. Most industry participants interviewed for this study said, however, that they believe that any technical problems of network interconnection (at the physical media and channel level) could be readily resolved. At the backbone level, most telephone and cable networks in Canada today use high capacity fiber networks with SONET (Synchronous Optical NETwork) standards, so the technical interface problems should be relatively straightforward. Cable networks could most easily connect to telephone company networks by connecting their head ends to telco central office switches, to provide physical and channel interconnection between networks, as shown in the diagram below. Some forms of physical interconnection of cable and telco networks have already been done in Canada. Rogers Network Services, for example, which provides leased private circuits to businesses through Rogers' fiber network, links those customer circuits (or channels) into circuits on Unitel's network, which in turn is connected to the telephone companies' public network. This is not the same thing, however, as transparently transmitting a voice or video call between the telephone network and a cable subscriber. To accomplish that, the cable network would have to be capable of two-way transmission, and some form of switching or addressing connected to the telephone numbering system. Ideally, it would also be digital. Devices to connect telephones or telephone jacks directly to coax cable would have to become readily available. The two network providers would also have to agree on network interface protocols and other matters. Some commentators predict a future in which some subscribers are connected to the 'network of networks' only by a cableco link, others only by a telephone link (copper or coax), and others by both or by wireless access. This would require both physical and channel interconnection between cable and telco networks to allow carriage of services across both infrastructures. REFER TO ORIGINAL FOR COPY OF TABLE cAngus TeleManagement Group, 1994 Access variants: Each house in this diagram connects to the Information Highway over a different type of connection. (These are examples only; others are possible) 1. Voice by wireless, high bandwidth by cableco 2. Voice and data by telco; video by cableco 3. All services by cableco 4. All services by telco The diagram on the previous page indicates some possibilities for the evolution of local access networks. In this scenario, some subscribers are served only by a cable access, others only by a telco access, while others continue to be served by both or by wireless accesses. The cable and telephone networks are connected through a host server, allowing services to be available to all subscribers, regardless of how each subscriber connects to the "network of networks." Network interoperability issues are not insurmountable. However, resolving these issues will require clear direction from government and regulators. Full interconnection between cable and telephone networks is unlikely to be implemented unless: . Both types of providers believe there is a business case to be made for services requiring such interoperability. . They can reach agreement on questions such as cost allocation, revenue settlement, billing, and interconnection standards. Other commentators suggest that the telephone and cable networks need not interconnect; instead, users would have access to both networks (through either dual or single wire connection to the home) and would connect to various networks and services by using an intelligent network access device, something like the control box now used to switch between cable channels, but providing access to the telephone network as well. For example, in submissions to the CRTC's regulatory framework review (Telecom Notice 92-78) the telephone companies suggested a scenario in which customers would have a single box through which they could select either the cable network or the telephone company network. A "single wire" scenario would not necessarily benefit subscribers. Having at least two network connections into the home allows for competitive provision of access services, whereas reducing them both to a single access link could limit the opportunities for consumers to choose between competitive access providers. In any case, since most homes now have two-wire access, it seems very unlikely that either provider will remove its existing connection. The "single wire" solution would only be practical in new housing developments, or at a time when one or both of the existing access channels were judged - either by the subscriber or the provider - to be inadequate. A "single wire to the home"scenario is unrealistic in the near term, and perhaps for the longer term as well. · Over two-thirds of Canadian homes already have both phone and cable connections. · New technologies could make any "single wire" commitment obsolete. · Deployment schedules for new technology will vary from one provider to another. · Users can benefit from a choice of competitive access providers. · Service and information providers may require a variety of delivery methods. Interconnection between overlay networks and services Services which operate as "overlay networks" on the carriers' networks also face demands from users to interconnect with each other. For example, the various banking networks which provide services to their Automatic Teller Machines originally operated independently. However, the Interac network now links them; a user can withdraw money from any automatic teller machine on the Interac network, regardless of which bank he or she has an account in. To make this work, the banks had to resolve questions of network security, effective data transmission between banks, mutual payments for transactions going through each others' networks, etc. Various public e-mail services - AT&T Mail, Envoy, CompuServe - include gateways by which users on other services can be reached. Anyone who has ever used such gateways, however, knows that such transmissions are often far from transparent. Users often find the syntax of addressing messages to each other, and uploading or downloading files in readable format, somewhat daunting even within a single service. At the level of interconnection between services, there is considerable work still to be done to develop standards for effective interchange of files and messages, as well as user-friendly "front ends." This work will likely involve software providers as well as carriers and network providers. Access to Content The large variety of possible content services makes it impossible to review them in detail this report. However, there are several important points which emerged in the course of interviews conducted for this study: . We are accustomed to thinking of "databases" as text- or numeric-based files, accessible by computers through data communications lines. But databases can be anything that can be stored in a computer or server. This could include video, image, and sound as well as text files. In addition to entertainment services (movies, games), there can be databases of museum exhibit information, university lectures, announcements of community events, etc. Database access may be through a telephone, a computer, a television, or future devices that combine features from all three. Databases may include video, image, and sound elements as well as text. . If it is in the public interest to make various databases widely available, then we may need standards to ensure that people can navigate usefully within these databases. Most current databases have been developed for specific uses; no attempt has been made to standardize the way users find information or retrieve it. One solution would be the development of software programs ("intelligent front ends") to provide users with a common interface to a variety of databases. User-friendly ways to retrieve information from databases will need to be developed. . In a user-choice model, what happens to Canadian content rules? This point is dealt with at more length in Chapter 10. Assuring availability of Canadian material, and protecting Canada's cultural industries, will pose new challenges in a user-choice environment. Where are we heading? Technology: what is possible? Researchers at Bell Northern Research, whose business requires them to anticipate network developments a decade or more in advance, say that by the turn of the century the intercity public backbone networks will be capable of transmitting 50 Gigabits per second through optical channels - 20 times faster than the fastest intercity networks today. They anticipate that this capacity will be needed primarily because of increased user demand for multimedia transmissions: not only from business premises, but from homes, schools, hospitals and other locations. At the same time, the cost of transmission has been rapidly dropping, and this trend is expected to continue. It may actually cost the carriers less in the future to transmit a multi-megabit video or multimedia file than to transmit a voice call today. In the local access network, high-bandwidth access can be provided without providing "fiber to the home" access connections. . The highest bandwidth currently provided to most homes is provided by the cable networks. The addition of digital compression and two-way transmission will significantly increase the capacity of the cable networks. However, the cable companies do not anticipate that their outbound links from the home, in the near term at least, will carry more than a narrowband signal. Furthermore, the cable networks are not set up to transmit from one subscriber to another, so interactive services will be limited to interactions between subscribers and a central server (delivering programming or - possibly - non-real-time messages from other subscribers, such as E-mail, stored on the server.) It is worth noting, however, that this would be adequate for carrying most current Internet traffic. Cablecos provide high bandwidth connections to the home through coax cable. They are not set up to switch real-time traffic from subscriber to subscriber. . Telephone company networks can provide digital, high-bandwidth access into the home through the existing copper wire using ADSL (Asynchronous Digital Subscriber Link) technology. This could carry full-motion video, though only over relatively short distances: fiber links to the neighborhood would likely be required, to reduce the distance the signal would have to travel through copper. However, the number of simultaneous transmissions possible over ADSL is quite limited, and high-bandwidth transmission is only possible in one direction (with a narrow return path for signalling purposes). For these reasons, the telephone companies consider ADSL to be a transitional technology. Telephone networks are excellent for switching and routing traffic. Copper local loops are limited in the bandwidth they can carry. BNR engineers say that a hybrid network, with fiber in the backbone and coax connections to the home, is the optimal combination of media for delivering high-bandwidth services. Stentor, in its Beacon initiative announced on April 5 1994, says that its members plan to deliver high-bandwidth services over a hybrid fiber-coax network. A hybrid fiber-coax network provides the optimum infrastructure for delivering universal, interactive high-bandwidth services. Each type of network has an advantage and a weakness. The telephone networks have the advantage of switching capability - they are equipped to transfer calls easily between subscribers, anywhere in the world. Their weakness is bandwidth in the local access loop. The cable networks, on the other hand, offer considerable bandwidth (at least one way) and are planning to expand that bandwidth with digital compression technology. They are much less suited to providing two-way high-bandwidth transmission or subscriber-to-subscriber switching. Cable and telephone networks each have different strengths and weaknesses. REFER TO ORIGINAL FOR COPY OF TABLE The cost of transmission over distances has fallen dramatically, but the cost of switching has not fallen as fast. This affects the evolution of the cable networks as well as telephone networks; the major barrier to switched video service is the cost and availability of video switches. Network Suppliers: what can they deliver? As mentioned, BNR engineers believe the optimum architecture for networks delivering ubiquitous high-bandwidth services will be a hybrid of fiber and coaxial cable (which provides higher bandwidth in the local loop than ADSL through copper, at a lower cost than end-to-end fiber). The cable companies already have such an architecture, though as yet they have not converted to digital transmission. They are better equipped for program transmission from a central point than for subscriber-to-subscriber communications. The telephone networks have high-bandwidth digital intercity backbone circuits, and they are rapidly expanding the capacity of this backbone. (Stentor has announced its members will offer commercial Asynchronous Transfer Mode transmission later in 1994; a BC Tel subsidiary is already offering a service using ATM technology.) They are well equipped for switching services between subscribers, or between subscribers and servers or computers located in various locations on the network. Stentor announces a hybrid fiber-coax network initiative. Stentor, the consortium of Canada's nine major telephone companies, in April 1994 announced plans to significantly upgrade Canada's telephone networks. Besides the addition of ATM and related broadband components in regional and national networks, Stentor members plan to spend an estimated $8Billion by 2005 to convert their local access networks to a hybrid fiber-coax infrastructure. This investment will allow for broadband circuits to pass by 80-90% of Canadian homes and businesses by the end of that period, with coax connections into an unstated percentage of homes which are expected to order high-bandwidth services during the ten years. Senior Stentor representatives suggested that telephone and cable companies could share the coax access to homes, reducing the total cost of providing broadband access connections. This may be one way to move toward a hybrid fiber-coax network, but the mechanisms for such sharing would need to be worked out. For example, leasing access channels over cable's coax might be a tariffed service. In the past, industry representatives have suggested that no supplier might want to depend on a competitor to hold enough unassigned channels available for their future needs. The "network of networks" vision requires more than sharing of physical media and installation costs, however. It requires functional interconnection and interoperability between the two networks - and between all other networks, including wireless networks and various private networks - at least at the channel level, and at higher levels for some services. Telcos and cablecos could share coax access to homes, subject to reaching agreement on terms. However, this does not in itself advance the "network of networks" vision. Suggested Policy Guideline: The "network of networks" should function as a single integrated infrastructure. No single industry or entity should control the entire network, either in the access connections or in the backbone circuits. This is the "network of networks" vision. The purpose of interoperability between networks is to create, functionally, a single network which allows all service providers and subscribers to use the most appropriate infrastructure available. No single industry or entity would own or control the entire network. Those providing various parts of it would be required to meet commonly agreed standards for interconnection and interoperability. Standards All network suppliers interviewed said that the "network of networks" concept is technically feasible: networks of various types can be made to interwork seamlessly. To do so effectively requires agreed-on interface standards to ensure interoperability of networks. Some of these standards exist now or are being worked on, others will need resolution in the future. All suppliers stated strongly that Canadian standards for network interconnection cannot, and should not, be developed in isolation. Canadian networks need to interwork with at least North American and ultimately global networks. This is important for Canadian suppliers (they need access to larger markets), as well as Canadian consumers (otherwise their services lag behind and cost more). However, harmonizing with North American standards requires more than simply a "me too" attitude to US standards - Canadian industry and government must participate in North American and global standards bodies to make sure that Canadian issues are addressed. Most industry representatives interviewed for this study said that this is preferable to developing independent Canadian standards - we need to interwork with a large, seamless market and have common standards. Suggested Policy Guideline: The Canadian public agenda should include the development of common North American and global standards for · functional interconnection between physical networks, including cable and telephone networks; · feature and service interoperability across different physical networks and overlay networks, using non-proprietary connecting devices. Industry evolution Convergence "Convergence" can imply many things. Previously disparate industries are now competing - and co-operating - in the same markets. The term "convergence" is used broadly to describe the fact that previously disparate industries are increasingly contending in a larger common market. For example, publishing, film, and broadcast entities find that their businesses are converging, with each other and with industries which distribute information. One instance is Southam Publishing's interest in joint ventures with cable companies and telephone companies to provide electronic information; another is Rogers Communications' acquisition of McLean Hunter's publishing and cable operations. In telecommunications circles, "convergence" is more commonly used to refer to the increasing similarity between cable and telephone network technologies. This trend is real: both networks are rapidly converting to digital transmission, are using fiber backbone networks, and are benefiting from computer and software advances. However, they are not yet identical and will likely not be for a long time. . Cable companies elsewhere - for example in the UK - are offering local telephone service, but over separate wires, not the same coax as their TV service. Though telephone service could be provided over cable's tree-and-branch architecture as well as over telcos' star architecture, Canadian cable companies do not have switching technology to connect subscribers to each other. Installing such switches would require major capital investment. . Cable companies in Canada say they have little interest in providing local telephone service - they do not believe they could do so profitably, and so far they see no other reason to do so. They believe that entertainment services will continue to be the mainstay of the cable industry, and they want the telephone companies to stay out of this business. (However, if the telephone companies do enter the video distribution market, cable companies could be expected to revisit the question of offering local telephone service.) The cable companies say they are open to competition in what they call the "unclaimed territory" between current cable TV and telephone service. This territory would include services such as telemetry, home banking and home shopping (see table below). Videotron in Quebec has trialled a set of quasi-interactive services, and in March 1994 announced a more fully interactive set of services including games and access to electronic information. REFER TO ORIGINAL FOR COPY OF DIAGRAM Source: A Clear Vision, Cable Vision 2001 Task Force, 1992 The implication of this diagram, published in 1992, is that the cable companies' core business - video information and entertainment - is "claimed" and thus not open to competitors. This view has been disputed. Many of the "unclaimed" services are offered now on a competitive basis, and the cable companies are already facing competition in their "claimed" territory. For example: . Direct broadcast satellite service is clearly targeting the television broadcast distribution market. . Telephone companies (in particular, the Stentor members) are eager to compete in providing video on demand services. Several telco trials of limited video-on-demand service are under way, notably by SaskTel (in conjunction with Acme Video) and by Bell Canada (together with Carleton University and the University of Ottawa). It is less clear whether the telcos are interested in providing alternatives to the cablecos' core services: to do so would presumably require assuming cablecos' responsibilities for community programming and other non-revenue-generating services. In the Cable Vision 2001 table reproduced on the previous page, video on demand appears to fall within the cable view of the "unclaimed territory". How this type of service should be handled from a regulatory point of view is still in dispute. The CRTC, in a letter to SaskTel in the fall of 1993, said that video on demand is a broadcast service subject to the Broadcasting Act, regardless of which network it is delivered through. Stentor members disagree, and plan to continue market trials of video on demand services. In March 1994, the CRTC proposed to exempt providers wishing to conduct field trials of video on demand services from requirements to obtain a broadcast license or have the service regulated. The 1992 report "Convergence: Competition and Co-operation", written by the co-chairs of the Local Networks Convergence Committee - a broadly-based committee representing such industry sectors as broadcasting, telephone companies, cable companies, and others - stated that "the potential exists for considerably greater convergence of the telephone and cable technologies and markets." The 1992 Convergence Report made important recommendations. That report, commonly referred to as the "Convergence Report", said: "To date, Canadian public policy and regulation has generally treated the cable and telephone industries as entirely different species." (p. 4); and further on the same page: "The potential convergence of telephone and cable technologies and markets calls into question the continuation of the two solitudes of policy and regulation that have applied to the two industries." The Convergence Report presented a vision of the evolution of local access networks: "Thus, instead of a movement toward a single integrated infrastructure operated by a single local network monopoly, the trend should be towards a more competitive environment, with a mosaic of innovative service providers, interconnecting and sharing elements of their infrastructures wherever it permits the delivery of more efficient and advanced services." (p. 11) Many important recommendations were made in this 1992 report, including: n "Government policy and regulation should not prevent the sharing and integration of the local cable and telephone infrastructure, as and when such integration is more efficient than the use of separate facilities." (Ch 3, point 2, p. 127) The Convergence Report opposed "a single network, operated by a single industry"(emphasis added), or any solution which would "restrict the diversity of suppliers and technologies employed." The report argued against any solution which would restrict the diversity of suppliers and technologies employed, such as providing all services over a single network operated by a single industry. It recommended "leaving it to individual cable operators, telephone companies and other service providers to determine the degree of network integration that occurs." (p. 52) n "Canadian industry and government should cooperate to develop or adopt standards for the integration and interconnection of telephone, cable and other communications networks. This standards development activity should be industry-led. However, government should participate to ensure that public policy objectives are met, including the maintenance of an effectively competitive local network environment, and to mediate disputes." (Ch. 5, point 21, p. 131) The Convergence Report recommended that industry lead the process of interconnection between telco and cable local networks. Very little progress has been made on these recommendations in the intervening two years. Though the report suggested that the process should be industry-led, it seems clear that government and regulators will need to play a more active leadership role to achieve interoperability between these two components of our local access infrastructure. Industry has made little progress on convergence to date. Senior CRTC staff members interviewed for the current study indicated that, in their view, the "two solitudes" view of the broadcasting and telecommunications environments is coming to an end. Commission staff - who have historically been dedicated to either telecom or broadcasting - are fully aware that they must become familiar with issues on both sides. As discussed earlier, both cable companies and telephone companies own parts of the infrastructure for a hybrid fiber-coax network; but for either, acquiring the full range will require substantial additional investment: the cablecos will require switches, the telcos will require enhanced access loops. The "two solitudes" of broadcasting and telecommunications are merging and overlapping. Both will be integral to the information highway. It is not apparent what model the industry may follow in evolving to this hybrid architecture. We may see any, or all, of the following scenarios: . Cable and telephone companies will each offer services which capitalize on their strengths and are not subject to their respective weaknesses. This would limit their area of competition to the so-called "unclaimed territory," the services which neither now offers and presumably neither has an advantage in. . Providers on each network will steadily encroach on each others' territory: the phone companies may offer video services, and the cable companies may provide telephone access service. . Alternatively, services may appear which use the cable networks and the telephone networks linked together in a hybrid network - either through partnerships between cablecos and telcos, or through one leasing capacity to the other. . Third parties, who lease capacity on both cable and telco networks, may link the two networks together to offer high-bandwidth services. The first scenario simply projects current trends, without major change. The second, third, and fourth scenarios would provide an opportunity to test the efficiencies of both types of network, by providing a more competitive environment. However, they would require at least some forms of interconnection between the cable and telephone networks, and would further require regulatory change. (For example, to allow leasing and resale of cable networks and/or partnerships between telcos and cablecos.) Suggested Policy Guideline: The Information Highway should operate functionally as a single network infrastructure, but no single industry or entity should own or control the entire network. The government and CRTC have the necessary powers to require the interconnection of the various networks. However, the manner of the co-operation between suppliers, and the ways in which services are offered, should be left open so that Canadians may benefit from the ingenuity of competitive providers. Pacific Telesis Group in California, owner of Pacific Bell, has announced that it expects to spend $16 Billion (US) to convert its network to a hybrid fiber and coax infrastructure. The company hopes to provide broadband service to 1.5 million homes by 1995, and to 5 million homes by the year 2,000. Both Bell Atlantic and Pacific Bell want US courts to strike down cable/telco cross-ownership restrictions, so that they have access to wider markets. In Canada, there would be considerable concern - both in the supplier and user communities - if partnerships or joint ventures between telcos and cablecos served to strengthen monopolies over local access, rather than to increase competition. (For this reason, many of the industry representatives interviewed say that telephone companies should not be allowed to buy cablecos in their own territory, or vice-versa. They add that in Canada, where the Stentor members benefit from inter-company agreements which limit their competition with each other, Stentor companies should not be permitted to own cable companies in each others' territories either.) Suggested Policy Guideline: To prevent increased monopolization of local access networks, Canadian telephone companies should not be permitted to control cable companies in their own serving areas, or vice-versa. For the Stentor member telephone companies, this restriction would apply to the serving area of any other Stentor telco as well. Most of the industry participants interviewed for this study do not support a "single wire" model of local access; given that most Canadian homes now have at least two accesses - and new technologies may add new access options - the opportunity to obtain competitive services in a variety of ways promises greater choice than if consumers were reduced to a single access channel to reach all networks. Suggested Policy Guideline: Canadians should have a choice of access networks, and pay only for the services which they choose to use. Government should work with industry to identify and resolve the various issues which must be resolved to achieve the "network of networks". Similar services should be subject to similar rules Many industry participants interviewed for this study support the view that "Those who provide similar services should be subject to similar rules." In order to achieve a truly interoperable network of networks, such an approach will be virtually essential. The task will be much more difficult if each network provider is operating under different rules. The CRTC established a precedent when it determined in 1992 that Rogers Network Services (which provides leased high-capacity lines to business customers) should be subject to telecommunications regulation, even though Rogers' other services are regulated under the Broadcasting Act. Similarly, the CRTC has said that video on demand services should be subject to the same rules, whether provided over the telecom or cable networks. Suggested Policy Guideline: Cable and telephone companies competing in each others' core businesses must comply with the same regulatory standards and legislation as the core providers of that service. · Telcos (or other service providers) engaged in broadcasting must comply with the Broadcasting Act. · Cable companies providing telecommunications services must comply with the Telecommunications Act. In other words, Canadian legislation governing telecommunications and broadcasting is technology-neutral. If a company is providing both broadcasting and telecommunications services, it is subject to the respective Acts. The Acts govern services, more than companies. Currently there remain differences in the rules governing cable and telephone networks, reflecting historical differences in their development. Harmonizing these rules could be done within the context of existing legislation. Some of the changes which would be necessary to harmonize the rules include: . Carrier functions should be separated from content functions - at least conceptually, if not in terms of company organizations - for both cable and telecommunications providers. (Cable companies can, and do, currently offer both. Telephone companies do not yet provide content, though only Bell Canada is explicitly prevented by legislation (the Bell Canada Act) from providing broadcasting services.) . Within the carrier function, a further subdivision may be required, between provision of the basic access infrastructure (lines and channels) and services offered over that infrastructure. . The cable companies' carrier functions should be subject to rules similar to those affecting the telco networks, including ownership rules. Leasing - and sharing and resale - of cable channels by subscribers and affiliated or unaffiliated service and content providers should also be permitted, on a non-discriminatory basis. This could not happen overnight. Among other things, the cablecos would need to complete their implementation of digital compression technology to allow for sufficiently increased number of channels on their networks. Other technical changes would likely be required as well. . The question of whether the telcos should be permitted to provide content over the network has not been resolved. Most of the industry participants interviewed for this study believe that this should be permitted, though several said it should be through a separate subsidiary to avoid cross-subsidization from monopoly revenues. The cable companies have not, to date, been required to establish separate subsidiaries to provide content. If such a rule were established for the telcos, it should apply to the cablecos as well. Harmonization of rules affecting telephone and cable networks would require a number of changes. There is no industry consensus on whether there is a distinction between "broadcasting" and "video on demand." The question will indubitably end up in the courts if the government does not set clear guidelines. Even a court decision might not settle the matter: a policy clarification will likely be required. Competition It is fashionable today to speak of competitive markets as a good thing in themselves. However, it is important to remember that while there are strong reasons to support a competitive model, there are also limits to what market forces alone can achieve. The new Telecommunications Act, passed in 1993, recognizes both the positive contribution which market forces can make, and their limitations: Objectives - Section 7 (f) "to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective." Benefits of Competitive model There are two major benefits which a competitive market can achieve. . Cost-effective deployment. In a monopoly situation, it is virtually impossible to determine the true costs of providing services. Only when competitors are attempting to win market advantage by reducing costs relative to each other is the industry driven to eliminate unnecessary costs. A competitive market also makes it more likely that cost reductions will be reflected in lower consumer prices. . Consumer choice. Monopolies provide new services on their own timetable. In competitive markets, suppliers have an incentive to determine what their customers want, and to attempt to deliver new services ahead of their competitors. The great advantage of a competitive market is that it fosters experimentation and innovation by suppliers. The outcomes of these experiments are unpredictable: no one - government, regulators, or industry leaders - can know in advance which services and methods will prove most successful. Though policy making in such an environment of uncertainty is challenging to government and regulators, the end result is far more likely to meet consumer needs, cost-effectively, than any attempt to pre-determine the best course for industry development. Limitations of Competitive Model There are also things which market forces do not do well. Government direction and regulation will be needed to meet policy objectives which are not well met by pure market forces. . A pure competitive market provides little or no incentive for suppliers to provide services which consumers may want - and which may be good for the society and the economy as a whole - but for which subscribers cannot pay enough to support deployment, or for which the payback would be longer than the supplier is willing to accept. The pure competitive model does not include a mechanism for providing services or rates based on societal objectives, rather than ones generated by the market. This was the historical reason for establishing the telephone monopolies: in exchange, the telcos accepted the obligation to provide universal service to remote areas which, in a pure mark