PwC has released its 23rd annual CEO Survey, entitled “Succeeding in uncertainty” [pdf, 2.5MB].

The report observes that uncertainty is weighing on growth prospects across all industries in Canada:

Entering 2020, Canadian CEOs are more uncertain than ever. In 2018, 72% of Canadian CEOs expected global economic growth to improve, but this optimism dropped to 38% in 2019 and 14% this year. In fact, CEOs are the most negative they have been at any time in the past five years. This finding is compelling because the change in CEOs’ revenue confidence has proven to be a reliable indicator of both the direction and level of global GDP growth in the year ahead.

Among the top five concerns identified by Canadian CEOs were a number that should resonate with those following telecommunications. CEOs were asked “How concerned are you with each of these threats to your organization’s growth prospects?” These five areas, each attrated “extremely concerned” or “somewhat concerned” from about 80% of respondents:

• Uncertain economic growth
• Policy uncertainty
• Cyber threats
• Over-regulation
• Trade conflicts

Across all industries, a full 42% of CEOs were ‘extremely concerned” about over-regulation; 38% were somewhat concerned. “Only a quarter of Canadian CEOs say that governments are designing privacy regulations that actually increases consumer trust and that governments and businesses are effectively collaborating to harmonize cybersecurity strategies.”

Three quarters of CEOs have identified concerns about the availability of key skills to match growth prospects.

The survey was conducted in September and October of last year and includes insights exploring the sources of uncertainty and suggesting how CEOs can forge “a path in today’s new world.”

Those who watched the TELUS panel yesterday at the CRTC’s Wireless Review hearing witnessed a master class in regulatory affairs.

From the opening statement through to a passionate peroration, the elocution by each member of the panel articulated the TELUS position with clarity, greeting each question from the CRTC with alacrity.

CPAC has the session available on-demand. You should watch it.

There has been a lot of chatter on Twitter about statements made by the TELUS panel. Watch it yourself. Whether or not you agree with the positions set forth, you might learn something about how to prepare for a regulatory proceeding.

Be sure to tune in especially at the 1:52:07 mark, where the question by Commissioner Chris MacDonald is greeted with reserved laughter. He asked TELUS if it is “part of ISED’s Connected [sic] Families initiative”. It speaks volumes about failures in CRTC market awareness that the Commission didn’t know the history of the program, the leadership of TELUS and Rogers in launching the service and the companies freely sharing their early experience to help take the program nationwide.

If you are a regular reader of this blog, you know where Connecting Families came from.

It wasn’t just the history of Connecting Families that was troubling. The CRTC seemed completely unaware of the extremely wide range of products and service plans that are available. What other aspects of the industry are missing from the CRTC’s knowledge base?

The CRTC prepares an annual Communications Monitoring Report filled with facts and figures. Has it become so entangled tabulating its detailed measurements that it is missing out on broader observations? You know, that old forest – tree thing?

Earlier this week, I wrote “What Canada can learn from T-Mobile / Sprint”, providing highlights relevant to Canadians from the US District Court decision that has paved the way for approval of the merger of the number 3 and 4 US mobile carriers.

It is worth highlighting an opinion piece from Tuesday’s Ottawa Citizen written by Richard Feasey, a panel member at the UK’s Competition and Markets Authority. In “Canada should learn global lessons on wireless regulation”, we are told the CRTC “risks not only being out of step with the rest of the world but moving off in the opposite direction.”

His OpEd is based on a Summary Report [pdf, 200KB] prepared for Rogers as part of the CRTC’s Mobile Review proceeding. The main findings of that report are:

1. Regulation of wholesale services for MVNOs of the kind that the CRTC is proposing (to address a ‘market failure’) has been very rare in the past and is done in only one country today, Norway, in which one carrier has almost 60% market share.
2. The vast majority of reduction in consumer prices in European wireless markets over the previous decade should be attributed to reductions in costs that have been enabled by investments in new network technologies, not to changes in the degree of retail competition, such as might arise from MVNOs. This has led European regulators to conclude that the risks to investment from regulating for MVNOs outweigh any benefits that might arise.
3. Where regulation has been attempted in the past, there is no good evidence that having more MVNOs in a wireless market has led to lower prices, either for consumers in general or for those on low incomes. European competition authorities have stopped relying on MVNOs to preserve competition following wireless mergers as a result.
4. Evidence from the rest of the world suggests that regulation of wholesale services for MVNOs would do little to benefit Canadian consumers, including those on low incomes, but would risk the network investment which is responsible for most of the improvements in wireless services that consumers experience. Most regulators in the rest of the world would endorse the CRTC’s efforts to promote competition between facilities-based carriers, since this drives investment and allows MVNOs to obtain wholesale services for themselves on proper commercial terms.
5. By proposing to change direction and focus its efforts on regulating to promote entry by MVNOs, the CRTC appears to be both out of step with the rest of the world and willing to disregard the lessons other regulators have learned over the past 20 years.

The oral phase of the CRTC hearing continues through the end of February.

Yesterday, Michael Geist released a podcast that plays more as an infomercial to promote Ting Mobile, a Canadian based company that operates as a Mobile Virtual Network Operator (MVNO) in the United States.

According to the podcast, Ting’s services ride on the Sprint network in the US, but claims that Bell, TELUS and Rogers have not been willing to ‘play ball’ with Ting in Canada. It is not clear whether Ting attempted to strike a deal with the smaller players in Canada, just as it did in the US. Indeed, later in the podcast, Noss says that only ‘2 of the 3 turned us down’. There was no follow-up asking about the third.

Ting’s principal, Elliott Noss, says that the prices Canadians pay are ‘heinous’, yet an examination of Ting’s own prices shows that Canadians already pay less than what Ting charges its customers.

I took a look at the CRTC’s service baskets, defined in its Communications Monitoring Report, and checked Ting’s rates versus offers publicly available on Canadian service provider websites.

At the CRTC’s price basket level 1, Ting would save Canadians 13 cents per month. For every other basket, Ting isn’t close.

Noss made a number of other assertions that were unchallenged by Professor Geist, such as a statement that many countries have regulated mandatory access to MVNOs. This is simply not true. While the podcast is certainly entertaining to listen to, too frequently, the guest’s assertions are left unchecked and simply don’t stand up to scrutiny.

Noss claims [around the 28:30 mark in the podcast]: “Michael, I will tell you right here on this podcast, look we’re an MVNO in the US; it’s 10 times the market. If I could have right now an offer from the CRTC for liberalized MVNO on exactly the terms that we want and we couldn’t enter the market, I would take it in a second.” In reality, Ting operates in the US where MVNO’s are not mandated by the regulator and it offers services at prices higher than what Canadians are already paying.

The CRTC should be cautious and Commissioners should deeply probe assertions that are made later today when Ting’s parent company, Tucows, appears. And frankly, we should demand more critical inquiry from our academics who are asked to inform Canadians on these issues.

In a 173 page decision [pdf] issued last week, Judge Victor Marrero of New York’s Southern District of the US District Court rejected an appeal of the merger of T-Mobile with Sprint, clearing the way for the deal to go through, subject to just two final gates: approval by California’s utility board; and, a federal judicial sign-off on the Justice Department’s settlement.

Judge Marrero described the challenge of ruling in a case such as this as recognizing that “In the final analysis, at the point of sharpest focus and highest clarity and reliability, the adversaries’ toil and trouble reduces to imprecise and somewhat suspect aids: competing crystal balls.”

Like the CRTC’s Wireless Review proceeding (with its oral hearing opening this week) Judge Marrero said “This is a case about competition in the retail market for mobile wireless telecommunications services.” So, I thought it might be especially relevant to take a look at what the Court said about a number of issues that are currently before the CRTC.

I suspect that a number of witnesses at the CRTC’s hearing will raise at least some of these issues during their testimony [agenda for the CRTC hearing can be found here].

• MVNOs should not be considered competitors of the carriers: “the Court is persuaded that MVNOs should not be considered independent competitors in the RMWTS [retail mobile wireless telecommunications services] Market, and it adopts Plaintiff States’ position that MVNO shares should thus be attributed to the MNOs from which the MVNOs lease network access. The weight of the evidence at trial suggested that MVNOs could not restrain the pricing behavior of MNOs to any truly significant degree. MVNOs have a miniscule share of the RMWTS Market overall; for example, even though defendants cite Comcast as one of the fastest growing MVNOs in the market, it nevertheless has only two million customers (measured by connected lines) in a market of over 300 million lines… Comcast’s Chief Business Development Officer… testified that he had seen no evidence of MNOs altering their pricing or service plans in response to Comcast’s actions in the market, and he did not believe Comcast’s Xfinity Mobile brand served as a competitive constraint… That MVNOs necessarily rely on MNOs for use of the MNOs’ mobile wireless networks further demonstrates their further limited ability to constrain the MNOs’ market power.”
• Market Concentration: “depending on the affirmative practices and actions taken by market participants, highly concentrated markets can nevertheless be quite competitive. And, as observed, the HHI [Herfindahl-Hirschman Index] thresholds prescribed by the Merger Guidelines are generic as to the markets being evaluated. This fact is particularly relevant because antitrust analysis must always be attuned to the particular structure and circumstances of the industry at issue. HHI measures may not be as informative as they might first appear in light of complexities particular to the RMWTS Markets”
• Coordinated Behaviour: “the RMWTS industry is not particularly vulnerable to coordination. As both sides acknowledge, price is not the only dimension on which competition occurs. The non-price factors listed above demonstrate the various strategies that competitors in the market might pursue, drawing also into question whether the firms’ pricing is truly so transparent. For example, while T-Mobile might try to compete primarily on the basis of its capacity advantages, AT&T might try to leverage the entertainment content provided by its merger with Time Warner, and a cable MVNO like Comcast might advertise the convenience of bundling mobile wireless services with fixed in-home broadband and cable services.”
  …
  “in complex and dynamic markets, pricing strategies tend to be less transparent and more dependent on a multitude of pushes and pulls, internal and external. In particular, prices are more likely grounded on combinations of different product and service features varying by capacity, speed, quality, and content. For this reason, in complex and dynamic markets, anticompetitive behaviors pricing strategies creating coordinated or unilateral effects are likely more risky, impractical, or unrealistic for reasonable corporate executives to implement.”

The Court also found “there are local RMWTS markets which should be considered in determining the relevant geographic market”, which is relevant because Canada has seen regional pricing in certain cases, reflective of local market conditions. “As a practical matter, it seems highly unlikely that a consumer in a locality like New York City could simply turn to anywhere else in the nation, such as California, to obtain wireless services. On the contrary, consumers likely rely primarily on local services in the area in which they live and/or work.”

Without any intent to be patronizing, I found this statement by Judge Marrero provides important counsel for consideration by the CRTC, the Competition Bureau and policy makers on the other side of the river at the Department and in the Prime Minister’s Office:

Most significant about the preceding contrast between relatively simple versus complex product markets, and the static as opposed to the dynamic, is how the distinction bears upon individual and corporate behavior in a business context. The differences raise a basic question: whether or not commercial practices and decision-making norms generally prevailing in one type of market may be transferable, and thereby likely to inform and guide the kinds of practices and decisions that govern another type, thus aiding predictions about the business choices company executives are likely to make under particular market conditions.

From this Court’s review, the record of this litigation informs a response to the preceding question. Projections of likely conduct in one type of market and analysis and predictions of competitive effects should take account of the unique features of the particular market and not be gauged by economic standards and practices that characterize another. Effects on competition in the market for cinder blocks, for instance, should not be assessed by the rules and practices prevalent in the market for computers. On this view, the extreme complexity and dynamism characterizing the wireless telecommunications markets would justify treating the industry as unusual for the purposes of antitrust analysis, and hence not be examined solely according to traditional economic models or based narrowly on the simpler business calculus that may be more fitting in evaluating competitive effects in relatively simpler and more stable product markets.