Mark Goldberg


www.mhgoldberg.com




Fox Group Dispatch
Digitcom

Getting a second wind

Despite a report last week that Blackstone has decided that it is not willing to take the risk of investing in WIND Mobile, conditions appear to be improving for the company to find “an investor with deep pockets”.

Cash would enable WIND Mobile to expand its network and marketing and put the company in a position to pick up much of the new AWS-3 spectrum being offered early next year to operating new entrant carriers at significantly favourable prices.

A couple of CRTC decisions are helping all new entrants lower their costs of providing national services. As the only player with spectrum and distribution across most of English Canada, WIND Mobile should benefit most from the domestic roaming rulings this summer. The CRTC has banned exclusive roaming contracts, which should have the effect of enabling new entrants to roam on each others’ networks. The company has also benefited from a CRTC letter identifying a sharp reduction in domestic roaming prices. These two actions should enable WIND Mobile to work on aggressive consumer plans (such as a soon-to-be-announced WIND 35 plan) in time for the back-to-school sales season.

Last Wednesday, Mobile Syrup wrote about a leaked price chart showing that WIND Mobile will be offering national 3G roaming with data rates of just 5 cents per megabyte, down from $1. The company had previously been limiting roaming to 2G speeds because of concerns that roaming charges would be be too high for customers to stomach. With lower costs being passed on, consumers will also benefit from faster connections.

WIND Mobile has recently enjoyed impressive financial results despite having limited access to capital as its principal backer, Vimpelcom, seeks to sell its stake.

It could be that Blackstone walked away from WIND Mobile just as the company was starting to get its second wind.

Tiger ice cream and the digital economy

One of the best features of summer is the (almost) guiltless attitude to indulging in an occasional ice cream treat. In the area of my summer office, we have access to a few shops that feature more than 3 dozen varieties of Kawartha Dairy’s ice cream. Despite the availability of more modern flavours, such as Salty Caramel Truffle or Crème Brûlée, I like the nostalgia of Tiger (orange ice cream with a black licorice swirl) combined with Creamy Orange.

I have used the ice cream metaphor a number of times on this blog. The first time may have been 8 years ago in reference to net neutrality, where I also invoked the imagery of the movie Pleasantville.

For all the talk of ensuring that networks will enable the creation of the next Facebook or Google, it is possible, perhaps likely, that calls to impose increased regulations, restricting services innovations, are going to have the opposite effect.

Canada led the world in actually creating regulations that give effect to net neutrality when the CRTC created its rules governing the internet traffic management practices of Canada’s internet services providers.

Mobile TV has been under examination by the CRTC to see if rules are being broken because people can’t get open internet video streaming for the same effective cost per megabyte as packaged mobile video. Frankly, my initial reaction would be to respond that mobile carriers marketing departments should be free to choose whatever products they want to offer. Some service providers only offer voice and text. Isn’t it up to the service provider to decide whether they offer data and at what speeds?

If you want open internet, here is the price per megabit per second and here are the terms and conditions. If you don’t accept those conditions, please feel free to find another service provider.

We don’t mandate that ice cream stores offer tiger ice cream – although maybe we should – nor do we limit them from offering more than vanilla flavour. We don’t even require them to offer vanilla.

As hard as it may be for some people to imagine, there really is a segment of the market that doesn’t want high speed open internet from their service provider. They may only want email. Others may want email and specific popular messaging. Some may want access to Facebook. Rather than having to take a $25-30 open data package, shouldn’t the service provider be able to target market segments based on specific applications? Might this get more people to get introduced to mobile digital services?

The government has continuously focused on supply side incentives for its digital strategy, funding infrastructure and avoiding the issue of demand side incentives. Although I have written about the need for Canada to help with targeted programs for low income Canadians, it has been the private sector that has done the best job segmenting the market and finding ways to launch services to get more customers.

It makes sense. It is self serving for the service providers to seek incremental growth. That is a good thing. Rather than discourage growth and investment, perhaps the focus of policy should be in encouraging that growth in targeted markets – such as services for disadvantaged Canadians or segments that have not yet gone on-line.

Arbitragers may want to have access to targeted service innovations; demanding equal access to the prices being offered for a different service. We have seen claims that some wireless carriers are taking advantage of their vertical integration, being affiliated with broadcasters or cable companies.

I might respond: “then switch suppliers”. Go across the street. The CRTC already made it easier to switch companies. If you don’t like the way your current company packages its bits and bytes, leave them.

I just don’t want to see central control of what flavours of services we can create through innovation, or examining the cost base for those services. If I wanted to add salty caramel truffles to my vanilla ice cream, it would cost a whole lot more than just getting the pre-mixed version. Should the dairy board be investigating why my ice cream shop charges the same price per scoop for truffle packed ice cream as it does for plain vanilla?

I doubt I would ever find tiger ice cream if my local shops needed to get bureaucratic approval.

The digital economy framework shouldn’t block service innovation and differentiation.

Ensuring a strong, internationally competitive telecom industry

More than 8 years ago, on March 22, 2006, the Telecom Policy Review Panel delivered its report (pdf) to the Minister of Industry.

The panel had been created a year earlier, charge with responsibility:

to review Canada’s telecommunications policy framework and recommend on how to modernize it to ensure that Canada has a strong, internationally competitive telecommunications industry that delivers world-class services for the economic and social benefit of all Canadians.

In the report, Recommendation 9-4 called for legislation requiring the creation of periodic refreshers:

The Minister of Industry should be mandated by legislation to undertake a comprehensive review of telecommunications policy and regulation every five years.

Although this recommendation did not result in legislation, many would agree that we are long overdue.

Perhaps it is time now for a fresh look “to ensure that Canada has a strong, internationally competitive telecommunications industry that delivers world-class services for the economic and social benefit of all Canadians”.

Importing foreign solutions?

The Washington correspondent for the Globe and Mail, Kevin Carmichael wrote last week that Canada should follow the lead of American regulators and impose further rules on wireless carriers here in Canada to “germinate” a fourth wireless provider (“U.S. telecom regime provides strong model for Ottawa,” August 1, 2014).

There is a strong gravitational pull in the telecommunications business to consolidate to achieve economies of scale. A government can counter those forces, but only if it is resolute about it.

It might be be worthwhile to review the state of Canada’s wireless industry.

Canada already has at least four wireless competitors in all major markets. According to a recent government study, Canadian wireless prices match and usually beat those in the U.S. And while the U.S. has just two national carriers offering the latest wireless network technology, 4G LTE, Canada already has three, despite the challenges imposed by our larger geography and more dispersed population. The quality of Canadian wireless services are similarly acknowledged as superior to those in Europe – where countries like Germany recently reduced their number of national carriers from four to three, in hopes of bringing wireless network investment to North American levels, with more countries expected to follow soon.

The federal Government‎ has recently introduced some legislative changes, and the CRTC had a major ruling on Thursday, both contributing to lower costs for smaller new entrant players. Combined with generous terms in the next spectrum auction, we see Canada has already taken aggressive steps to benefit smaller competitors, the impact of which has not yet been seen, let alone measured.

Wireless is a part of everyone’s lives and discussing how Canada can continue to build our lead in the sector is always worthwhile. But we need an informed understanding of the real state of the Canadian marketplace before adopting foreign “solutions” for it.

You can’t manage what you aren’t measuring. Another reason that we need a better Digital Economy Scorecard.

Canada’s digital future

Facebook CEO Mark Zuckerberg recently wrote in the Wall Street Journal that connecting everyone on the planet to the web can create opportunity and reduce poverty. It sets out a noble vision and it is an article worth reading.

Sometimes, I am left with a feeling of concern for Canada’s ability to lead in the digital economy.

It has nothing to do with our abilities to be creative, innovative, entrepreneurial, faster-to-market or any other characteristic.

It isn’t even a matter of government incentives. Indeed, if anything, my concern is that our government may sometimes be too eager to intrude.

Digital Canada 150 – Canada’s national digital strategy – is the product of three years of examination of thousands of pages of feedback following an extensive consultation process. The consultation sought input on 26 issues caught under 6 broad headings. Of the 26 pages in the pdf version of Digital Canada 150, 5 pages are the cover, printer notes, table of contents and letters from the Prime Minister and Industry Minister.

Europe released a digital scorecard looking at where it stands on targets in its digital agenda. What does Canada’s scorecard look like?

In the past week or so, the government announced it was moving forward on its Connecting Canadians program to spend nearly a third of a billion dollars to try to stimulate investment by ISPs to enable uninspiring broadband speeds to be available to rural and remote communities:

Over 99 percent of Canadian households currently have access to basic Internet with speeds of 1.5 Mbps, but newer online technologies typically require faster speeds and higher data transfer rates. Through Connecting Canadians, the government will boost speeds to 5 Mbps for up to 98 percent of Canadians.

Earlier today, Xplornet announced that it will beat those targets, offering 5 times the speed to all Canadian households:

CRTC and Industry Canada have forged a vision and an action plan to ensure all Canadians have equal access to high speed broadband. Xplornet has embraced this vision and is executing a plan to provide customers outside big cities with the most attractive Internet experience that technology can provide. Xplornet has started rolling out a new Long Term Evolution (LTE) fixed-wireless network this year and will activate two state of the art next generation satellites in 2016 with the aim of making 25 Mbps broadband service available at affordable prices to 100% of Canadian homes and businesses outside of the big urban cities.

Over the past year, I have written a number of pieces (such as “Measuring success” and “Inconsistent messages; predictable turmoil” and “Building a digital economy dashboard“) that call for the government to provide clear, measurable objectives for our digital policy agenda.

Two of the questions in the Digital Economy Strategy consultation asked by the government itself were directly related to this:

Improving Canada’s Digital Advantage

  • Should we set targets for our made-in-Canada digital strategy? And if so, what should those targets be?
  • What should the timelines be to reach these targets?

I have said it a number of times. “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.”

It is encouraging to see the Connecting Canadians program begin with a data gathering process. To get where you want to go, it helps to know where you are starting from.

Last week, the CRTC recognized the wide disparity in internet adoption rates based on income among Canadians:

The use of the Internet by individuals in households in the lowest income quartile continues to lag, at 62%, compared with 95% of individuals living in households in the highest income quartile.

It has been too easy for the government to focus on programs to stimulate the supply of internet. We need to examine programs that look at demand – increasing computer ownership and broadband adoption among low income households, especially in homes with school aged children.

Canada’s digital future depends on such inclusiveness and opportunity for all.