Mark Goldberg

The Canadian Telecom Summit

Fox Group Dispatch

In search of greener pastures

It is almost a defining characteristic for Canadians to distinguish ourselves from our neighbours to the south. The untrained ear may think we speak English somewhat similarly, but Canadians emphatically define ourselves as “not American” while we roll-up-the-rim-to-win.

That doesn’t keep us from wishing we had American-style prices for gasoline, milk, eggs, airfares, clothing and alcohol. It is springtime, and it is natural for us to look wistfully at greener grass growing on the other side of the border. And we can add to the list, unlimited mobile data plans.

So the City Council for Toronto recently passed a motion calling for the CRTC to mandate “reasonably priced unlimited data packages” as an option:

City Council direct the City Manager to convey to the Commissioner of the Canadian Radio-television Telecommunications Commission the request that major telecommunications providers across Canada be required, as part of their licensing arrangements, to provide consumers with options for reasonably priced unlimited data packages that would be part of the cellular packages they offer.

This motion was passed just a few weeks after that same city council was unable to balance its own budget without increasing taxes and adding additional user fees. Leaving aside the issue of CRTC “licensing arrangements” (and retail pricing forbearance), we might consider whether increased regulation is the best way to increase price competition.

I have frequently written about looking at greener grass elsewhere. We seem to lose sight of how many of these outcomes emerge. US unlimited data plans were not introduced due to regulation, but rather in response to signals of loosening regulation from the new FCC chair, Ajit Pai.

I have written before about the cost of regulation in Canada [such as here and here]. Is it really reasonable for Toronto’s City Council to think we can regulate our way to “reasonably priced unlimited data packages”?

A recent paper by Roslyn Layton and Joseph Kane describes how Denmark “has pursued a largely laissez-faire approach to telecom regulation.”

Denmark has been praised as a broadband utopia, but observers often fail to understand the concrete decisions that helped create Danish telecommunications policy.

There is an official telecom policy direction requiring the CRTC to “rely on market forces to the maximum extent feasible” and “when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary.”

Still, a growing number of CRTC regulations (including regulating the internet) have served to reduce differentiation between service providers, such as with mobile video services (such as NFL Mobile).

Has increased regulation limited choice and reduced incentives for pricing as a competitive response? Is there another approach that could lead to improved outcomes – greener grass?

There are a couple panels at The 2017 Canadian Telecom Summit [June 5-7, Toronto] that could examine this issue, among many, many more. The latest version of the brochure was updated today. Have you registered yet?

The grass is always greener…

NY TimesI thought that so many people were pointing at the US as a model for Canadian wireless. So many have looked south of the border, longing for Cingular-type plans and services or Apple’s iPhone to be launched here.

But the apparently, the US wireless market is primitive, and doomed to stay that way, according to an editorial in the NY Times. [Thanks, Michael for the tip.]

An open auction means that anyone can purchase spectrum and use it in a way that allows them to determine how to best get a return on their investment. Adding rules amounts to constraining the flexibility for companies risking billions of dollars on a business plan, thereby increasing risk. Increased risk translates into an increased cost of capital.

As I wrote before, there are questions that could arise with terminology as imprecise as “open access“. It seems to me that FCC Commissioner Robert McDowell‘s July 24 “Broadband Baloney” Opinion piece in the Wall Street Journal has some appropriate messages for wireless markets as well.

In the next few years, we will witness a tremendous explosion of entrepreneurial brilliance in the broadband market, if the government doesn’t micromanage. Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.

With wireless services, the grass always seems greener elsewhere.

The truth about European broadband

A recent news item appears to contradict testimony given during the CRTC’s recent #TalkBroadband hearing that stated, “all Europeans will have basic access by 2013. That’s been accomplished.”

According to the BBC, “The government will not automatically roll out broadband to those areas of the UK that don’t yet have services, it has been confirmed.”

The article quotes a spokesperson from the UK Department for Culture, Media and Sport stating “Our current plans will reach at least 95% of the UK, but we want everyone to have fast broadband so we are introducing a Universal Service Obligation to help make sure no-one is left behind.” The article says the government hopes to have its Universal Service Obligation in place by 2020.

I checked the text of the actual presentation [pdf] to ensure there wasn’t an error in the transcripts. The original CRTC hearing speaking notes stated:

Second, the Digital Agenda’s central aims are much more ambitious than those of the FCC or the CRTC:

  1. all Europeans will have basic broadband by 2013;
  2. all Europeans will have internet access above 30 Mbps by 2020;
  3. at least half of European households will subscribe to internet connections above 100 Mbps by 2020.

How can all Europeans have basic broadband already if the UK government is saying that it could be 2020 before its universal service obligation can be fulfilled? Is the grass really so much greener elsewhere?

Despite what the CRTC was told, Canada’s broadband availability (99% – 96% at speeds of 5Mbps or higher) appears to be pretty good compared to the UK, despite the vastly different population densities and geographic challenges. Just last December, the UK government launched a satellite voucher program, to provide a higher speed option for up to 300,000 households that do not have access to internet speeds faster than 2 Mbps. Satellite is part of the solution even in the UK, a country that has almost double Canada’s population residing in a land mass less than 1/40 its size.

Policy making needs to be rooted in facts and it isn’t helpful to have incomplete evidence set before the Commission.

It is fair to say that all of us would like everyone to have access to broadband. But, there is a cost to deliver such services. The most important questions remain: how much of a subsidy is required, who should be eligible for that subsidy, and how do we pay for that subsidy.

Above all, as I have written many times before, affordable broadband isn’t just a rural issue.

Digging ditches and digital policy

My neighbour is putting in a pool. As I sit at my desk looking at the construction crew, I think back twenty-five years to a day that I went out for lunch with my office-mate from Bell Labs. We were envious of the road workers on the Garden State Parkway. They were outside on a beautiful spring day. At the end of a shift, construction workers get to see what they accomplished: a hole was dug; a half mile of road was paved; a pile of dirt got moved from one place to the next.

Compared to our office jobs, it looked kind of satisfying. We were planning network development – with features and capabilities that would need 5 years to implement. Some of the capabilities would never see the light of day. We wondered if we would ever get to celebrate the completion of our work. Still, we have objectives; we knew what we were trying to achieve.

The construction workers probably looked at Sam and I driving by, thinking that they envied our jobs: after all, we got to take off in our car for lunch; we had an air-conditioned office; we didn’t have to worry about rain interfering with our work schedule.

The grass is always greener?

Parliament has recessed and we are expecting another cabinet shuffle this summer, likely bringing another new face to head up Industry Canada. When Christian Paradis was appointed two years ago, we had been expecting the imminent release of a national digital strategy. That was understandably delayed until the new minister was able to get a grasp of the file. Two years later, Canada continues to drift aimlessly without any clarity on the objectives. As I wrote a few weeks ago, the absence of a clear strategy has led to us having inconsistent messages and somewhat predictable turmoil.

The objectives keep changing. If Canada had truly wanted a viable “fourth” player in wireless, then the AWS auction was structured in a way that worked against that objective. If a stong national new entrant was the objective, then the 40 MHz new entrant set aside should have been auctioned as a single tier one license. Foreign ownership should have been liberalized in advance. If the new entrant spectrum wasn’t supposed to fall into the hands of the incumbents, then the five year restriction should have been 10-years or longer. If the auction winners were supposed to forfeit their spectrum if they didn’t deploy, then this should have been a condition of license.

No clear strategy. No clear objectives. No scorecard for measuring progress.

The absence of a strategy isn’t just an issue for telecom services and the digital economy. Yesterday, in a new paper looking at “The Resurgence of Industrial Policy and What It Means for Canada“, the Institute for Research in Public Policy observed:

Like other countries, Canada is once again engaging actively and more openly in industrial policy. In fact, it has a profusion of industrial policies, what it lacks is a strategy.

What are we trying to accomplish? How do we measure success? As I said last week [here and here]:

Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.

The guys working in my neighbour’s yard know they are building a pool. They have an objective, with a timeline. The site supervisor can see how they are progressing toward their objective and make management decisions to keep the project on schedule.

How do we celebrate success in digital policy, if we aren’t clear about what we are trying to do?

Returning home

Getting ready to fly back to Canada, I can reflect on some international communications experiences. I have been overseas for the past week visiting my daughter. It has been interesting to travel in a country that enjoys mobile penetration of more than 140%, despite prices that appear to be in the same order of magnitude as ours in Canada. My daughter’s voice and data plan is around $70 per month, which takes about 3 and a half hours to earn. Her plan includes 1 GB of data, with extra charges for more. She is shopping for a better plan, no different from her friends back in Toronto.

Mobile phones are everywhere and competition appears to be vibrant, with number portability and switching incentives. But using any measure of affordability, prices are much, much higher as a share of local wages. So, the local government is taking steps to add more competitors to the marketplace.

While most areas have solid connectivity, 3.5G is not prevalent and no one is talking about LTE.

I kept connected with a local SIM card, in part to avoid roaming charges, but mainly so that friends and family over here would have a local number that they would call. Generally, I have used WiFi to connect my Blackberry and PC, thanks to open coffee shop networks.

While the grass always seems greener elsewhere, it has been worthwhile looking beyond raw penetration numbers and arbitrary price baskets to see how people are using their means of communications.