Mark Goldberg

The Canadian Telecom Summit

Fox Group Dispatch

Driving competition, investment and innovation

It is a competitive world out there. Regardless of free trade agreements, the digital economy largely transcends international borders, subject of course to legal bounds [an interesting case on that matter – Google vs Equustek Solutions – is being heard today by the Supreme Court of Canada]. Applications generated by coders anywhere in the world are made available and sold worldwide, bypassing border security and customs agents without any delays or protective tariffs.

That raises a number of questions that policy makers and business leaders should be considering:

  • What kinds of communications infrastructure is needed to provide Canadians with a platform to excel in a global digital economy?
  • What are the characteristics of a policy framework that fosters the development of innovative new applications and technologies to deploy in Canada and offer around the world?
  • What conditions are needed to encourage investment of capital and the availability of competitive communications services to Canadian consumers and businesses, regardless of where they are located?
  • How can low income Canadians participate in a more inclusive digital future?
  • How can communications services and applications be refined and developed with a goal for competitors to offer choice and differentiated services to all Canadians?

What will be the impact on Canada from a transition in US communications regulatory policy as the FCC transitions to the new administration? See Hal Singer’s post, “Wondering What A Trump FCC Might Look Like? Here’s A Preview“. Will Canadian consumers have access to the same types of offers as their neighbours to the south? Will Canadian businesses, whether incumbents or entrepreneurs, be able to innovate and launch new capabilities as well? What opportunities will the creative community find?

Registrations are now open for The 2017 Canadian Telecom Summit, taking place June 5-7 in Toronto. We’ll explore all of these issues and more.

Reading, writing and ‘rithmetic

Grade 4 ScienceGrade 4 MathCanadians should be concerned about mathematics and science education in our elementary schools, according to the latest release by Trends in International Mathematics and Science Study (TIMSS), a report on student achievement around the world.

Canada ranked 29th in Grade 4 math, well behind leaders Singapore, Hong Kong, Korea, Taiwan and Japan. The US ranked 14th. By the time our kids reach grade 8, our ranking moves up to 8th, still behind Singapore, Korea, Taiwan, Hong Kong, Japan, Russia and effectively tied with Kazakhstan (the US is marginally behind Canada).

In Grade 4 science, Canada ranks 23rd; the US ranks 10th. Grade 8 science shows Canada in 13th place, still two places behind the US.

Recent “investments” have been announced for universities [such as here, here, and here, among many, many more]. Each announcement includes the statement “Canada’s Innovation Agenda aims to make this country a global centre for innovation—one that creates jobs, drives growth across all industries and improves the lives of all Canadians. This investment exemplifies that vision in action.”

Under the heading of Global Science Excellence, the Innovation Agenda consultation asks “How do we make best use of our science and research strengths?”

Should we be concerned about the premise of the consultation? Do we first need to ensure that Canada has a sustainable science and research strength, before we ask how to make best use of it? Ranking 29th in Grade 4 math should trouble all Canadians concerned about our ability to lead in a global digital economy.

It is why I have been pushing so hard for programs like Internet for Good and Connected for Success to be available in all areas of the country. In today’s environment, kids need connected computers at home to succeed in school.

Canada’s Innovation Minister says “the digital economy is the economy“. He is right. In today’s economy, let’s make sure our elementary school kids can do their math without using their fingers.

Gaming the system

It’s been a while since we have seen traffic pumping, a kind of regulatory arbitrage.

When phone companies exchange traffic, the company that receives the call (the “terminating carrier”) gets paid by the “originating carrier” to route the call to the final destination. In most cases, the traffic is somewhat balanced; there are around as many calls in each direction. To handle any imbalance, a termination rate is established and on a regular basis, such as monthly, an accounting is done to compensate the carrier that received more traffic than its customers originated. The originating carrier got paid by the customer, so termination rates are a way for the terminating carrier to be compensated for handling their portion of the call.

In general, termination rates have fallen dramatically which has removed incentives for major “traffic pumping” scams that were popular 20 years ago. Today, it generally costs less than a tenth of a cent for carriers to terminate traffic inside Bell Canada territory.

On the other hand, there are still some areas that have unusually high termination rates. In Canada, area code 867 for the Northwest Territories has a termination rate of 3.8 cents, about 40 times the rate for Ontario and Quebec. Iowa has been home to a number of complaints because of exceptionally high termination rates.

There is an arbitrage opportunity created if the termination rate exceeds the cost of actually handling the calls. A carrier can try to stimulate the number of inbound calls in order to receive more traffic. Traffic can be stimulated by attracting a disproportionate number of inbound call centres (think pizza places) or interactive voice systems, such as tele-banking or listening to audio programming. In the old days, dial-up internet modem pools were a major source of inbound termination imbalances.

Here is how the scam worked: an “entrepreneur” found an area that has an unusually high termination rate. Twenty years ago, international destinations were a popular choice – my personal favourite was Moldova – but there were also some domestic opportunities created by higher than average local terminating rates. The entrepreneur works out a deal with the carrier that receives the traffic and shares the proceeds of the stimulated inbound calls. In the olden days, some companies would offer free meet-me conference calling services using Iowa phone numbers, covering their costs completely from their share of the exceptionally high Iowa inbound settlement. Consumers who had nationwide calling plans were indifferent to where they called since those calls were all part of their plan. The originating carrier was stuck paying millions of dollars to the arbitrager.

In at least one case, calls for one of those late night lonely people chat lines were being promoted with a Moldova international phone number, but the calls never left North America; the seductive sounding operators were located here. So international terminating rates were being charged for calls that never went overseas. In that case, it wasn’t just traffic pumping, but fraudulently charging overseas rates for calls that were handled locally. Another Moldova scam in days of dial-up internet had a trojan-horse application connect people’s computers to a destination charging overseas rates. It is not clear that those calls actually left North America either.

cjmrBut, there is now a new case in front of the CRTC. Rogers has filed a complaint against Iristel [zip] claiming that Iristel has entered into an deal to stimulate traffic to certain exchanges in the Northwest Territories. Rogers claims that in 2016, the scheme has increased traffic destined for area code 867 nearly 500 times the levels a year earlier (2015), and the increase was isolated to 3 of the 6 exchanges belonging to Iristel. Rogers believes the traffic is being stimulated by a “call-to-listen” service from Audio Now, said to be “a “traffic pumping” or “traffic stimulation” scheme designed to take advantage of Rogers and other IXC’s offers to their customers of Canada-wide calling plans for a flat fee, in concert with the high traffic termination charges in Iristel’s Northwest Territories exchange.”

A Toronto area multicultural radio station is promoting access to an AudioNow phone number to listen to its radio programming live, as can be seen on CJMR’s home page. Listeners are instructed to dial a Northwest Territories area code 867 number or an Iowa area code 712 number.

What is the harm? Ultimately, these arbitrage schemes put nationwide flat rate calling plans at risk. For example, carriers may have to exclude calls to the Northwest Territories from their flat rate plans, similar to the way some US carriers exclude Hawaii from their otherwise nationwide calling plans.

Rogers has asked the CRTC to intervene, saying:

The current proceeding is not just an issue between Iristel and Rogers, it will affect all of Rogers’ customers that call the Northwest Territories for legitimate reasons such as to call a business, friends or family. These customers of Rogers and legitimate customers of Iristel may end up losing the benefit of Canada-wide fixed priced calls – whether they place or receive such calls.

This would not be a just outcome of this proceeding. The wrong parties would be hurt.

Rogers has asked the CRTC for expedited relief to immediately set the termination rates as “interim,” enabling the rates to be retrospectively adjusted at the end of the proceeding.

It has been a while since we’ve seen one of these arbitrage arrangements. The history of traffic stimulation programs is not a good one.

Rogers has proposed interrogatories to the CRTC to determine if the stimulated traffic is in fact being routed to the Northwest Territories. Among the issues the CRTC may choose to consider is whether it makes a difference where the traffic is actually routed. For example, if a pizza ordering call centre is physically located in the North, stimulating new traffic and new employment, would that make a difference to its determination? With portability enabled by mobile services and voice over IP services, is it possible to know where calls are being routed? How do we ensure that termination rates are being used to fairly cover the costs of providing service in higher cost areas, and not being abused through regulatory arbitrage?

Not all Canadians have unlimited nationwide calling plans. If calls are being routed to a location other than the Northwest Territories, are consumers’ calls being rated correctly?

How quickly will the CRTC move to review the impact of this 500 fold traffic increase to area code 867?

Predictable regulation

In an interview last week with, CRTC Chair JP Blais said “As long as people say they want predictability, I’m fastidiously predictable.”

Consider a regulatory decision that came out just two days after the interview. MTS made significant investments to upgrade its province wide emergency network and applied to the CRTC for these costs to be treated as an exception, just as the CRTC had ruled in 2010. However, in this case, the Commission said “Regarding MTS’s submission that the Commission had previously approved the company’s proposed 9-1-1 service rate change related to the upgrade of its ALI database, past approval of exceptions to the frozen rate treatment is not a reason in and of itself to approve the company’s application.”

In a speech on Thursday, Minister Navdeep Bains called for carriers to invest more in infrastructure.

Isn’t predictability in the regulatory treatment a reasonable expectation, especially when carriers are making significant investments in upgrading 9-1-1 infrastructure?

The digital economy is the economy

Earlier today, at IIC in Ottawa, ISED Minister Navdeep Bains said “the digital economy is the economy.”

There is not a single industry that digital technologies don’t touch anymore. Digital technologies underpin every sector, from fishing and farming to mining and health. That means the number of jobs requiring people with digital skills will continue to grow. Canada must do more to give people the skills and experience they need to compete in a global and digital world. In particular, we need to give every Canadian the opportunity to get online. No one should be left behind.

To succeed, Minister Bains emphasized the need for government and the private sector to make smart investments in:

  • People: Expand work-integrated learning programs, such as internships, apprenticeships and continuous learning opportunities, for Canadians at every stage of their careers—from new graduates up to the highest-ranking executives.
  • Technology: Set big-horizon goals and create broad-based partnerships to fund ambitious research projects that solve complex, large-scale problems and spark commercial opportunities for the private sector.
  • Companies: Leverage the buying power of government, as the single-largest purchaser of goods and services, to support the growth of innovative companies that have the potential to be globally competitive.

He is right. And as we move forward, there are some important lessons that we can learn from global leaders in transformation, such as David Bray.

Dr. David Bray is CIO of the Federal Communications Commission who transformed more than 200 of the FCC’s legacy information systems to award-winning technology in less than two years. His biography is worth a look.

David began working for the U.S. government at age 15 on computer simulations at a Department of Energy facility. In later roles he designed new telemedicine interfaces and space-based forest fire forecasting prototypes for the Department of Defense. From 1998-2000 he volunteered as an occasional crew lead with Habitat for Humanity International in the Philippines, Honduras, Romania, and Nepal while also working as a project manager with Yahoo! and a Microsoft partner firm. He then joined as IT Chief for the Bioterrorism Preparedness and Response Program at the U.S. Centers for Disease Control and Prevention, leading the program’s technology response during 9/11, anthrax in 2001, Severe Acute Respiratory System in 2003, and other international public health emergencies. He later completed a PhD in Information Systems from Emory University and two post-doctoral associateships at MIT and Harvard in 2008.

David volunteered in 2009 to deploy to Afghanistan to help “think differently” on military and humanitarian issues and in 2010 became a Senior National Intelligence Service Executive advocating for increased information interoperability, cybersecurity, and protection of civil liberties. In 2012, Dr. Bray became the Executive Director for the bipartisan National Commission for Review of Research and Development Programs of the United States Intelligence Community, later receiving the National Intelligence Exceptional Achievement Medal. He received both the Arthur S. Flemming Award and Roger W. Jones Award for Executive Leadership in 2013. He also was chosen to be an Eisenhower Fellow to meet with leaders in Taiwan and Australia on multisector cyber strategies for the “Internet of Everything” in 2015.

Outside of work, David was selected to serve as a member of the Council on Foreign Relations and as a Visiting Associate for the Cybersecurity Working Group on Culture at the University of Oxford starting in 2014. He also has been named the “Most Social CIO” globally in 2015 by both Forbes Magazine and the Huffington-Post, tweeting as @fcc_cio.

Frequently, David writes thoughtful pieces about digital transformation issues, such as the Internet of Everything (IoE) and Artificial Intelligence.

He writes about the need for deeper, focused substance versus the too typical reach for the quick shiny prize.

In particular, a lot of this would include rethinking beyond how we use technology tools — we need to rethink how we do the work to improve the stakeholder experience.Most importantly, we need focus on those meaningful elements of public service that need to be done to improve the United States and the world, and also focus on either automating or ending the less meaningful and often rote elements of public service that may no longer be necessary.

While startups often create a place where experiments and new ways of working can be done, several parts of public service cannot fail — which means we will need to identify a systematic, substantive approach that identifies:

  1. What parts of public service absolutely, positively must run-on-time and not fail; i.e., crucial parts of defense, the economy, etc.
  2. What parts of public service are most likely to produce significant “returns on investment” if new, better ways of doing the business of public service were found at the local, state, or national levels, and thus might be best for in-situ experiments including AI and new ways of working?
  3. What parts of public service are rote or less meaningful in today’s rapidly changing world, and thus might be best decreased, completely automated, or stopped?

He also writes about needing “better solutions to help empower individuals to make contextual choices about their privacy and what data they want to provide in return for “free” apps or other services.” He suggests interesting models for open source privacy services, “empowering consumers to decide when, where, and in what context their data should be shared with data requestors.”

He proposes open “Health of the Internet” reports:

Such a report could be akin to how the U.S. Centers for Disease Control (CDC) provides regular updates regarding the start, spread, and conclusion of the flu season each year. The CDC’s reports are anonymized, aggregated statistics. A cyber public health approach could protect privacy and improve IoE resiliency by publicly sharing the equivalent of anonymous cyber signs, symptoms, and behaviors that different IoE devices are experiencing on a regular basis.

David Bray will be speaking at The 2017 Canadian Telecom Summit, taking place June 5-7 in Toronto. He has important messages for CIOs in the public and private sectors as well as all of us concerned with technology policy. You should plan to be join us. Registrations are now open.