UPDATE 3-Canada telecoms regulator rules broadband basic service, sets up fund

(Adds reaction from groups)

GATINEAU, Quebec, Dec 21 (Reuters) - Broadband internet access will be considered a basic service in Canada, the country’s telecom regulator ruled on Wednesday, paving the way for universal access to high-speed services in rural and isolated areas of the country.

The Canadian Radio-television and Telecommunications Commission (CRTC) said it was establishing a fund providers will pay into to invest C$750 million ($560 million) over five years to build or upgrade broadband infrastructure to improve access in underserved areas.

The CRTC set a target download speed of 50 megabits per second, 10 times its previous, and recommended providers offer unlimited data for fixed broadband. About 82 percent of Canadians had access to those speeds last year.

Declaring broadband an essential service means it should be available to all Canadians, though establishing high-speed access in remote areas remains an expensive proposition for providers.

“These goals are ambitious. They will not be easy to achieve and they will cost money,” Chairman Jean-Pierre Blais said. “But we have no choice.”

The regulator did not set a price cap, which could have eroded the profits of telecom operators whose revenue from internet access has outstripped television services.

“The CRTC is putting out a call for the government to lead the way on broadband access,” said Laura Tribe, executive director of advocacy group OpenMedia.

Internet revenues will now be included in the calculation of what companies have to pay for the new fund, potentially chipping away at an increasingly profitable area as consumers embrace streaming.

Companies that make C$10 million or more already contribute a percentage of their profits to subsidize basic phone services. Companies currently pay about 0.5 percent of their telecom revenue, with the fund at about C$100 million.

Companies made C$9.81 billion from the supply of internet connections in 2015, topping the C$8.92 billion they made from television subscriptions, the CRTC said recently.

Companies that cannot meet the targets can apply for financing, but only those that receive money will be obliged to.

Blais called the fund “an important carrot” to getting companies to meet the targets.

David Watt, a senior vice president at Rogers Communications Inc, said the company “was encouraged by this reasonable plan to help increase access to Canadians in hard to reach areas of our country.”

BCE Inc, Canada’s largest telecommunications company, said it was reviewing the decision.

The funding will be on top of the C$500 million over five years the government allocated in its budget for improving broadband in remote communities. ($1 = $1.34 Canadian) (Additional reporting by Morgan Sharp in Toronto; editing by Alan Crosby, Bernard Orr)