Mark Goldberg


www.mhgoldberg.com





#CTS20

Permissionless innovation: is regulation penalizing infrastructure investments?

The MEI think tank has released a new paper calling “for the CRTC to stop overregulating the telecommunications sector and penalizing infrastructure investments.” The MEI paper argues in favour of a presumption of competition for policy making and against the presumption of regulation.

In the context of the continuing discussion on telecommunications service pricing, we often forget that Canada has top quality telecommunications infrastructure, that the MEI claims is despite a regulatory framework that is very restrictive for the sector.

Canada’s mobile speeds are among the fastest the world, thanks to investments per connection that are nearly twice as high as in Europe. According to the MEI press release, “Canada’s relatively high prices are explained in part by the country’s low population density, by the quality of the infrastructure, and by the substantial investments that are made.”

“Canada does well despite its regulatory framework, not because of it. The country could do even better!” according to Gaël Campan, Senior Associate Researcher at the MEI and author of the publication, “Permissionless Innovation: For an End to the Presumption of Regulation in Telecommunications”, written in collaboration with Daniel Dufort, Director of External Affairs at the MEI.

The easy to read report is divided into 3 main chapters, as listed below with some highlights:

  • Chapter 1 – Innovation, Growth, and Regulation
    • The main source of growth in an economy is figuring out new approaches for being more productive with the same resources: in a word, innovation
    • By making it more expensive to run a business, or invest in a new technology, regulation delays projects, or diminishes the chances that projects will be undertaken
  • Chapter 2 – Regulation by Default: A Misconstrued Approach to Markets and Competition
    • Consumers commonly substitute across markets, as when cellular phones — originally considered separate and distinct — came to offer a compelling alternative to fixed line telephone monopolies, eliminating the market power of legacy network providers.
    • Customers of fixed line providers in an industrialized country aren’t captive at all, since alternative services (such as satellite, mobile, and cable operators) are already available and improving fast, but also because of the emergence of “third places” such as coffee shops offering good Wi-Fi speed.
    • The number of mobile and fixed operators has not changed much over the past few years, but the number of their suppliers has decreased drastically, with a few equipment manufacturers becoming giant players, and their bargaining power increasing significantly.
    • Equipment manufacturers, terminal manufacturers, internet service providers (whether wireless, wireline, or cable companies) and content providers all belong to the same ecosystem, and must adapt their strategies to each other’s progress, always driven by what the general public is willing to pay for.
  • Chapter 3 – Reintegration of the Telecommunications Industry under the General Competition Regime
    • Rescinding the specific regulation of the telecommunications industry will create immediate economic value, as some financial and human resources currently devoted to compliance matters will be freed up and made available for productive use.
    • Commercial offers which were banned by the regulator even after having already found their customers, such as the zero-rating practices banned by the CRTC in 2017, will likely be reinstated if possible.

The MEI argues that as a sector specific regulator, the CRTC can have a tendency “to see the state of the market and of competition as a fixed reality, rather than an evolving one.” In calling for regulatory humility, the MEI expresses its concern that regulations can slow investment and create a drag on technological and service innovation as well as new business models. “The CRTC must rescind its special regulatory policies as soon as possible and let the sector fall under the general competition regime in order to enjoy the proceeds of unhampered competition.”

Your comments are welcomed.

We need more data

Statistics Canada has released its latest edition of the “Canadian Internet Use Survey”, providing data from 2018. I wrote about its last report, released in 2013 with data from 2012.

Some interesting data emerged by examining Tables 22-10-0081-01 and 22-10-0113-01 together.

2018 Canadian Internet Use Survey
Household Income Quartile Has Home Internet Access Internet Users
Accesses Internet (Any location) Accesses Internet (At home)
Lowest 80.9 % 97.1 % 90.7 %
Second 95.1 % 97.9 % 94.0 %
Third 98.9 % 99.0 % 95.4 %
Highest 99.6 % 99.1 % 95.5 %
Total Canada 93.6 % 98.3 % 94.1 %

I have asked Statistics Canada to clarify some of the anomalies that appear.

It is worthwhile noting that 80.9% of households in the lowest income quartile now have a home internet connection. At the time of the last Internet Use Survey six years ago, there was an internet connection in only 58% of those homes. This 40% increase is a testament, in part, to the focus of an industry led initiative, Connecting Families, to make affordable connected computers available to low income households. It also indicates that more households are coming online, even those in the lowest income quartile.

What are the factors that are standing in the way of universal adoption or internet services?

As recently as last week, I have written about the need to do more research to help us build a better understanding of digital economy issues:

I have often written about the need to understand all of the factors that have inhibited universal adoption of broadband and mobile services, such as in “Understanding the digital divide”. In “Do we know what we don’t know?”, I asked, “Is Canada doing enough research to explore the nature of its digital divide?”

The price of connectivity is just one of the elements. How can we find solutions for a problem that we may not fully understand?

It should be embarrassing to Canada’s policy makers that it has been 6 years since the last Internet Use Survey. How is Canada supposed to be engaged in evidence-based policy making when there is so little information being gathered about who is online, how Canadians are using the internet and perhaps most importantly, who isn’t online yet and why not?

We need more data. We need to do better.

19 years later, still going strong

#CTS20For 3 days, More than 60 leaders who shape Canada’s ICT industry will speak at The 2020 Canadian Telecom Summit, June 15-17 in Toronto. The event will include over a dozen keynote addresses offering insights into the future of Canadian ICT, examining the services, technologies, consumer & business trends and regulatory & policy initiatives that drive the information economy.

With so much public attention focused on telecommunications & broadcast issues, no other event is quite like The 2020 Canadian Telecom Summit in covering the industry from every angle.

Now in its 19th year, The Canadian Telecom Summit is Canada’s most important annual ICT event, attracting attendees from around the world.

The Canadian Telecom Summit delivers thought provoking presentations from the prime movers of the industry. This is your chance to hear from and talk with them in both a structured atmosphere of frank discussion and high-octane idea exchange and network in a more relaxed social setting of genial conversation.

#CTS20After being immersed in a full program of keynotes and panel discussions, plan to attend our not-to-be-missed Cocktail Reception. This is a chance to unwind, enjoy some delicious food & drink, catch up with colleagues and make new professional acquaintances.

Come meet with leaders from services and equipment suppliers, applications developers, policy makers, regulators and major customers.

The Canadian Telecom Summit is the only event you need to attend. Mark the dates in your calendar: June 15-17, 2020. Registrations are open – book your place today!

Special Networking Events: All participants are invited to join us for our annual cocktail reception Monday evening, June 15.


Continuing Professional Development: Time spent attending substantive sessions at The Canadian Telecom Summit can be claimed as “Substantive Hours” toward the Law Society of Upper Canada’s Continuing Professional Development (CPD) requirements.

Comparison price shopping

Too many are confusing ‘affordability’ with a desire to pay lower prices. Don’t we all want lower prices for everything we buy?

In reality, millions of Canadians are finding mobile data plans that they can afford, as evidenced by Rogers third quarter 2019 financial results. More than a million subscribers signed up for its unlimited data plans, “adopting these ‘no more overage’ plans at three times the pace anticipated”. More than 100,000 net new customers, despite an increase in churn.

Rogers indicated that “Approximately 60% of our existing customers that have migrated to these plans have upgraded to higher price plans.” It is an interesting data point. Clearly, those customers have found that the new plans are delivering much better value, with far more data for just a little more money.

Rogers’ financial results provide evidence that most Canadians are finding mobile plans to be affordable. While we all want to pay less, at the same time, we need to ensure our policies preserve incentives for investment in network expansion for capacity and coverage, maintaining leadership in the delivery of advanced speeds and services.

We should be exploring more creative approaches that deal with the small minority of Canadians who cannot afford the mobile devices and service plans they need to participate in the economy. I have often written about the need to understand all of the factors that have inhibited universal adoption of broadband and mobile services, such as in “Understanding the digital divide”. In “Do we know what we don’t know?”, I asked, “Is Canada doing enough research to explore the nature of its digital divide?”

The price of connectivity is just one of the elements. How can we find solutions for a problem that we may not fully understand?

I have also written frequently about the challenges associated with producing international price comparisons for telecommunications services. Each year, Innovation, Science and Economic Development produces a mobile price comparison study [2018 study | pdf | 1.35MB], examining trends in prices in Canada and how those prices compare to selected trading partners. The annual study looks at 6 baskets of services for mobile:

  • Level 1: 150 voice minutes;
  • Level 2: 450 voice minutes and 300 SMS (texts);
  • Level 3: 1,200 voice minutes, 300 texts and 1 GB of data usage per month;
  • Level 4: unlimited nationwide talk and text along with 2 GB of data;
  • Level 5: unlimited nationwide talk and text along with 5 GB of data; and
  • Level 6: Shared plan with 3 phones lines and unlimited nationwide talk and text along with 10 to 49 GB of data.

A problem arises when those baskets are no longer representative of the types of services that people are buying. For example, the average price for a level 4 plan from 2018’s study was $75.44 which included just 2GB of data. New ‘unlimited’ plans are available from most carriers for less than that price, with at least 5 times the full speed data. However, these new popular plans with no overage charges simply don’t fit into any of the survey’s arbitrary baskets.

As Statistics Canada writes about its updates to the Consumer Price Index, “If the fixed-quantity basket of goods and services was kept unchanged for an extensive period of time, it would gradually lose accuracy and relevance as a reflection of consumer spending.” The report continues, “New products and services are introduced to the market and existing ones may be modified or become obsolete. As a result, the basket needs to be revised periodically to reflect changes in consumers’ spending patterns.”

Over time, we have seen significant changes to consumers’ spending patterns for mobile equipment and services. Regulatory changes have led to a restructuring of device subsidies for many plans; new unlimited plans have caught on faster than anticipated. How will these get captured meaningfully in the annual study?

Consumers were promised lower telecommunications prices as part of the political campaign. Will the government’s annual price comparison study accurately “reflect changes in consumers’ spending patterns” and show that mobile plan prices are already much lower than last year?

Public utility broadband networks

One of the jobs I had in the early days of my corporate career was in a Budget and Results organization. This was before the days of personal computers on every desk, before the days of smart phones or personal mobile phones. We had armies of clerical staff tabulating numbers on adding machines and new paper tape calculators, typing up monthly reports and responding to executive inquiries.

Many of those inquiries would be generated on Friday afternoons, around 12:30 with a response due by 8:00 am on Monday. Often, the answer would then be tracked for months, creating yet another tab in the monthly results package. I learned early on that the source of many of these Friday inquiries was an innocent lunchtime comment by a Vice President, who would join his AVPs each Friday at the Ridout for a weekly ‘leadership meeting’ fueled by 25 cent glasses of Labatts Blue on tap. As an aside, in those days, one would order drinks at the Ridout by the table, and it didn’t really matter what was in the glass: beer; soft drinks; or, juice. The tavern was directly across the river from the original Labatts brewery. Blue was assumed to be the order when you asked for a ‘table’.

So, Bert would scratch his head, say something like “I wonder… you know, I just sometimes wonder… ” and he would blurt out some stream of consciousness thought, that might have otherwise been kept to himself, had he not just finished his second glass of inspiration. My AVP would chime in saying “that is a really good thought, Bert. I think I saw a report on that recently.” He would then find an excuse to slip away from the table, work his way to the payphone by the men’s room and call us in order to generate a report to have on Bert’s desk first thing Monday morning. Most of the time, Bert really didn’t care – he was just making conversation.

We learned early on that some of these ideas didn’t merit disruption of everyone’s weekend plans. Once we advised the AVP of the cost of responding to his Friday lunch phone calls, he was no longer as eager to leverage each Friday lunch comment as an opportunity to impress the boss.

Why did I think of this story?

An article by The Logic in the National Post brought this anecdote to mind: “Canada Infrastructure Bank explored launching public utility to compete with Rogers, Bell & Telus”. The Post says “The report argues that a public utility would be more efficient for building rural infrastructure than paying private companies to do so.”

That summary should have been the indication that this was an idea that should be buried. Otherwise, the line on the chart that said “The most basic policy question is should telecommunications infrastructure be a regulated public utility based on open access infrastructure.”

That isn’t a question anymore. The question of treating telecommunications infrastructure as a regulated public utility has been answered numerous times, examined by independent regulators around the world (including Canada’s) and various expert bodies, such as the 2006 report of the Telecom Policy Review Panel [pdf, 1.6 MB]. I have written about this numerous times, such as in “Should Canada create a telco crown?” from August, 2013, and “Governments can’t run networks” from July, 2010.

As I wrote last week, the land down under has shown what can go wrong when governments take on the job of building a public utility broadband network: “Learning from Australia”.

Canada Infrastructure Bank may have explored launching a public utility network, but hopefully, it gave the idea the attention it deserved, before laughing it off and moving on to consider whose turn it was to order the next table full of draft.