Mark Goldberg

20/20 vision

We have been told “hindsight is 20/20.” As a graying consultant, I like to think is helpful to have not just a rich knowledge of the past, but also a deeper understanding of that which has happened, to guide better decisions, like periodically glancing in the rear-view mirror as you drive forward.

Over the holidays, my friend Timo referred me to an interesting piece in the Financial Times, “Why the global telecoms dream turned sour”. There were a few parts of the article that resonated with me, including:

  • The discussion of the devastating impact of European 3G spectrum auctions reminded me of a piece I wrote 11 years ago (“Telecom investment in 2009”), saying “We need to consider the extent that capital investment in spectrum auctions impacts the ability of operators to build out their networks.” Also, recall what I wrote this past September (“The cost of spectrum policy”)”: “As Canada moves forward with development of auction policy for the next wave of spectrum, it is critical to consider the potential for unintended consequences to have significant impact on consumers.”
  • The article observes “Telecoms has been one of the worst performing sectors for investors over the past five years as global bets have failed to pay off. That has left companies with huge debts even as they are under intense pressure to invest in new 5G and full-fibre networks both in their home markets and across their still-sprawling networks.”

There are some pundits who have questioned the strategies of Canadian carriers to concentrate on domestic markets rather than globally. The FT article demonstrates that the seduction of global markets hasn’t produced the returns that many carriers sought. The article also recognizes the capital intensive nature of the business, historically and moving forward.

As an aside, I often find that many people look at carrier EBITDA margins and forget the need for that metric to service the “I” (interest) and “DA” (depreciation and amortization) portions of the financial statements.

There are also some industry commentators who don’t appear to understand that foreign investment restrictions have largely been removed, permitting foreign-owned companies the opportunity to purchase spectrum and build a competitive network in Canada. The only restriction that remains is one that prevents a foreign company from buying one of the existing major carriers (as defined in the Telecom Act §16(2) as a carrier with more than 10% of the annual Canadian telecommunications services revenues). One would think that if Canadian telecom profits were supra normal, there would be a better business case for market entry. But I digress.

We need to understand the extent to which Canada’s regulatory and policy framework contributes to the state of our current telecommunications marketplace. Is there a way to mitigate unintended consequences that have arisen from well-meaning regulatory and policy decisions of the past? How can Canada move forward to encourage investment in high quality networks, with a wide range of affordable service options? How do we expand our understanding of those factors that inhibit a more universal adoption of information and communications technologies and services?

Which policies and regulations are actually raising prices paid by consumers? Will the CRTC begin to treat consumers as adults, able to choose for themselves between longer or shorter amortization periods to pay for ever increasing device costs, as I have written numerous times before? How will the government make more spectrum available for mobile network expansion, (both capacity and reach)?

How broadly will the Minister interpret his mandate?

These are just some of the issues I look forward to following in the coming year. Hindsight may be 20/20, but as so many investment prospectuses warn, past performance is no guarantee of future results.

Looking in the rear view mirror, the path may appear to be clear, but it doesn’t provide enough information to enable the drive forward, starting with the vision for where we want to go.

What should be the vision for Canadian telecommunications policy for the year 2020?

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