Mark Goldberg


www.mhgoldberg.com




Fox Group Dispatch
Digitcom

Opposing resale competition?

One of the most interesting sessions at The 2014 Canadian Telecom Summit was a panel featuring 5 of North America’s top telecommunications economists discussing the state of competition in the industry.

A video replay of the session is available from CPAC on demand.

A month before the panel appeared at The Canadian Telecom Summit, Canada’s Competition Bureau filed comments in the CRTC’s proceeding looking at wholesale mobile services (Telecom Notice of Consultation 2014-76). These comments were press released, highlighting the conclusion:

The Bureau has submitted to the CRTC that Canada’s largest wireless companies have retail market power, which provides them with the ability to profitably maintain prices above competitive levels for a significant period of time. These companies compete in both wholesale and retail markets for mobile wireless services; furthermore, they may benefit from charging high prices to rivals for the wholesale mobile services their rivals need to serve their customers. High wholesale costs may force rivals to increase their retail prices, resulting in some of their customers either leaving the market or switching to the large mobile wireless companies.

As a result, the higher rates charged by mobile wireless companies for wholesale mobile wireless services may hurt competition in retail markets. The Bureau estimates that increased retail competition from an additional nationwide mobile wireless carrier could result in gains of approximately $1 billion per year to the Canadian economy in the form of better product choices, price reductions and other benefits for consumers.

The Bureau is therefore recommending that the CRTC adopt measures to address the incentives Canada’s largest mobile wireless companies may have to raise their competitors’ wholesale prices as these increases may be passed on to consumers.

A couple weeks after The Canadian Telecom Summit, the Competition Bureau filed less publicized comments in the second round of the CRTC’s Review of wholesale services proceeding (Telecom Notice of Consultation 2013-551). On June 27, the Bureau’s filing in the CRTC’s Let’s Talk TV proceeding merited a press release, but no publicity was associated with the Bureau’s comments in the wholesale services proceeding.

The wholesale services comments may be newsworthy.

In reaching its conclusion that mandated access to unbundled local loops should be withdrawn, the Bureau said:

The vast majority of Canadian residences, as well as many businesses, are now served by two facilities-based competitors, and competition between ILECs and cable companies is generally vigorous.

Two competitors are sufficient for internet services, but 3 are considered insufficient for wireless services.

Why?

CASL and new technolologies

Will Canada’s anti-spam law (CASL) inhibit adoption of new technologies? Will it limit the participation of Canadian firms in exploring innovative new services and business models?

These were real questions that emerged from an exchange on Twitter earlier today.

As described by Wikipedia, iBeacon is the trademark for an indoor proximity system that Apple calls “a new class of low-powered, low-cost transmitters that can notify nearby iOS 7 devices of their presence.

That led to a real question:

Will Canadian development or adoption of beacon (or other technologies) be limited by the broad nature of the restrictions inherent in CASL?

CASL is indefensible

Barry Sookman has an excellent blog post that strongly refutes the weak defense of Canada’s Anti-Spam Law that has been put forward as a desperate response to an outpouring of criticism of the “ludicrous regulatory overkill.”

For 8 years, I have been writing about the problem of legislation dealing with our right to be rude:

In a democratic society, I think you have the right to be stupid, you have the right to be rude and we should try to teach telephone etiquette, not legislate it.

A week later, still in May 2006, I wrote more directly about the hidden cost of spam, saying “I think that a democracy gives you the right to be merely offensive and annoying – otherwise, my brother would say that I should have been put behind bars years ago.”

In 2008, I warned “Worst case will see us get it wrong and introduce costs on legitimate businesses while doing nothing to stem the flow of the real garbage filling our inboxes.”

In 2010, I wrote, “the bill would be better titled the Electronic Commerce Restrictions Act: it discourages many efficiencies that should be available to businesses of all sizes in reaching out to new customers.”

As CASL was proceeding a year and a half ago, I cautioned, “we strayed too far from trying to target fraud. In doing so, Canada is going to cause harm to the adoption of digital technologies and electronic commerce.” At the end of the day, this translates into higher costs for consumers.

As Barry Sookman concluded in his post:

The Government should promptly suspend CASL’s operation until a Parliamentary Committee or special committee can review it and make recommendations on whether to kill it permanently or how to fix it. The Government could instead refer it to the Supreme Court of Canada for an opinion on CASL’s constitutionality. Either way, Canadians of all stripes would be put out of the collective misery of dealing with CASL.

Regulating the internet

Some of the things I have been thinking about this week. Perhaps they will percolate into a bigger post over the summer. Otherwise, I thought I would share these thoughts with you. Please feel free to comment.

Over the past few years, Canada has enacted a number of regulatory and legislative constraints on the delivery of content over the internet. Some have been proclaimed (with pride) as being first in the world, such as internet traffic management, or among the most protective, in the case of anti-spam laws.

It may be worthwhile for some academic researchers to take a look at the impact of regulating internet content  in Canada, from an economic perspective, social policy, cultural issues, etc.

Are we restricting the evolution of creative business models and innovation through regulation?

  • Internet Traffic Management Regulatory Policy (Net Neutrality)
  • Canada’s Anti-Spam Law (CASL)
  • New Media Exemption Order
  • NFL Mobile Content Decision
  • Others? (such as digital copyright, lawful access, etc.?)

CASL costs consumers

The government couldn’t be happier. The CRTC has reported since the  that it has already received more than a thousand complaints since the anti-spam law took effect on Tuesday. CBC reported in the most dramatic fashion: CRTC flooded with more than 1,000 anti-spam complaints. “Flooded”!

The Industry Minister’s press secretary went onto Twitter boasting that this is evidence of how serious a problem we have:

CASL evidence of need

How does the sudden tracking of complaints show spam is a serious problem? 10 years after there was an anti-spam task force – that’s right, 10 years – the press secretary to the Industry Minister says that 1000 complaints “shows this is a serious problem.”

The reality is that 1000 isn’t really such a large number. Remember that there are more than 30 million internet users in Canada and there are billions of spam messages being trapped by Canadians’ email systems every day – most never reaching the end user. The 1000 complaints from 35 million users should be compared to about 500 complaints being received by the CRTC every day for violations of the national Do Not Call List – a system that has been operating for more than 5 years already. There are only about 40% as many phone numbers in the DNCL as there are email users. So the CRTC was not “flooded” with complaints.

Indeed, just last week, CRTC chair Jean-Pierre Blais boasted that the commission was over-staffed in anticipation of CASL coming into effect: “we have more than enough human and technical resources to do whatever is needed to ensure the law is upheld.”

Unfortunately, the number of complaints doesn’t indicate anything about the effectiveness of the solution. Or the lack of effectiveness of this government’s solution. Or the cost to the economy of what has been imposed.

One might have hoped that 10 years would have produced better evidence.

Of course, proper evidence might have avoided the regulatory over-reach of Canada’s Anti-Spam Law (CASL). Jeffrey Graham, of Borden Ladner Gervais asks “Why would it not be enough for the law to simply provide that if there is an existing relationship, broadly defined, and an effective opt out right clearly identified in the promotional emails, the public interest is adequately protected?” In his OpEd in the Financial Post, he says that the compliance costs could be in the hundreds of millions of dollars.

In a commentary called “Spamaflop! Why Ottawa’s spam ban law is absurd and should be overturned“, Terence Corcoran cites Barry Sookman of McCarthy Tetrault in considering the impact on Canada’s economy:

The anti-spam law, he says, is an infringement on “commercial speech,” which is guaranteed under the Charter of Rights and Freedoms. The law “ignores that consumers benefit from receiving useful information about products and services” ‘ from businesses. It increases competition and expands consumers’ market knowledge.

Commercial Electronic Messages – and I mean otherwise legal, non-fraudulent, non-malicious messages – increase competition and expand market knowledge. Why would we want to block increased competition?

Recall from my blog post earlier this week that former Industry Minister Tony Clement claimed that 35 million Canadians disagree with my views on CASL.CASL 35M Consumers

If there are consumers who believe that CASL is worth the costs of compliance for Canada’s business community, I wonder if they understand the costs that are ultimately being borne by them? The direct costs will ultimately be passed on to Canadian consumers, as will the costs associated with reduced competition and reduced market knowledge.

Our government has imposed yet another impediment to the adoption of e-commerce and information technology in Canada. It is another contributor to lower levels of competition across the board in Canada’s economy.