This morning, Bronwyn Howell, adjunct scholar at the American Enterprise Institute, published “Upping the political ante in mobile markets: A cautionary tale from Canada” on the AEIdeas blog.

It is worth a careful read, urging caution for those advocating political interference in the telecommunications marketplace.

The politicization of matters such as the price of a mobile connection flies in the face of the conventional wisdom (if not even an article of faith) holding from at least the early 1990s that the long-term interests of telecommunications consumers are best served by political interests staying as far away as possible from day-to-day industry activities. Policy entities such as the Organisation for Economic Co-operation and Development (OECD) and the International Telecommunications Union (ITU) have urged nation states to delegate competition and regulatory oversight to independent authorities, and to allow the private sector to be the primary investors in network capacity and services wherever possible.

That isn’t to say that there is no role for politicians in setting policy.

Of course, the delegation of network ownership, competition, and regulatory oversight does not mean politics doesn’t have a role in telecommunications policy. Government subsidies play an important role in ensuring access to disadvantaged populations and providing funding for infrastructure in regions where private investment would not otherwise occur. Political debate is important for making decisions about which communities and activities should receive scarce taxpayer funds. There is also room to debate the finer features of the powers delegated to the arms-length overseeing agencies — for example, clarifying their powers to act in certain ways when undertaking their constitutionally-assigned duties.

A number of times, I have criticized surveys that find that anything less than 100% of Canadians want lower prices for anything. Of course we do. Whether it is milk, chicken, housing, gasoline, sushi, cauliflower or communications services, of course we all want lower prices for things we buy. That is what makes the politicization of telecom prices so attractive as a campaign promise. “No rational mobile consumer would disagree with a proposal that they should pay less for the same service, so it’s all too easy for voters to support politicians promising to deliver this result without giving much thought to whether there is a problem with current prices or the longer-term consequences of the methods by which price reductions will be achieved.”

There is a good reason why the ITU has stated [pdf, 254 pages] “the regulator should have sufficient independence to implement regulations and policies without undue interference from interested parties such as politicians or other government agencies (functional independence).”

We all want lower prices for everything. Let the CRTC weigh the evidence, consider the consequences of intervention, and make a determination away from the super-charged election campaign rhetoric. In the meantime, take a few minutes to read the cautionary tale being told of Canada’s telecommunications market.

The debate about phone rates doesn’t belong on the campaign trail; it should be adjudicated by an independent regulator.

Yesterday, the US Court of Appeals for the District of Columbia released its decision [186 pages, pdf] in Mozilla v. FCC, better known as the challenge to the FCC’s Restoring Internet Freedom order.

A few excerpts are notable from my initial read. Among the first paragraphs is this summary:

Petitioners––an array of Internet companies, non-profits, state and local governments, and other entities––bring a host of challenges to the 2018 Order. We find their objections unconvincing for the most part, though we vacate one portion of the 2018 Order and remand for further proceedings on three discrete points.

On the question of broadband investment being inhibited by heavy-handed regulation and being promoted under the FCC’s lighter-touch approach:

We are, in short, unpersuaded by Petitioners’ and Intervenors’ objections to the Commission’s finding and their implicit claim that uncertainties associated with that finding render arbitrary the Commission’s overall judgment—that there are net public policy benefits from reclassification, based not only on a likelihood of increased investment and innovation but also on the absence of any “discernable incremental benefit relative to Title I classification.”

The court discusses the economic analyses at length, including a criticism of “Mozilla does not address shortcomings of the Free Press figures, pinpointed by the agency, including for example its failure to exclude investment abroad.”

As to the benefits of a “light-touch” regulatory approach,

the 2018 Order’s transparency rules—combined with the deterrent effects of “market forces, public opprobrium, and enforcement of the consumer protection laws”—can “mitigate potential harms.”
…
In sum, a “light-touch” approach can in the Commission’s judgment secure Internet openness and encourage innovation at lower cost than the Title II Order, while yielding unique benefits.

The court’s decision is quite readable, as are the 2 concurring opinions and the third appended opinion that concurs in part and dissents in part (with respect to the part of the ruling that vacates the FCC’s preemption of state law. While a number of media accounts seem to suggest that the ruling will allow state-by-state regulation of net neutrality, this is an incorrect reading.

There are discussions throughout the court ruling that appear to be quite relevant to Canada’s regulatory environment.

In “Keeping out of the way”, I wrote: “I continue to look optimistically to the future. As I have written before [such as here and here], the future will be brighter for Canadian innovation if the government would try harder to get out of the way.”

The Jewish calendar is based on a lunar cycle, with adjustments every few years where an entire month is added in order to recalibrate the religious harvest festivals with the proper seasons.

Within the Jewish community, people often speak about the holidays coming late, or coming early, relative to the common calendar. This year, the new moon on Sunday evening (September 29) marks the start of Rosh Hashana [literally, “head of the year”], welcoming the Jewish year 5780. It is just about right on schedule. As an easy relative measure, this year Christmas will take place right in the middle of Hanukkah. The sun and the moon are aligned.

Rosh Hashana starts a 10 day season of personal reflection, culminating in the fast day of Yom Kippur, the Day of Judgment, taking place this year on the evening of Tuesday, October 8, and continuing until night falls October 9th. In religious services, we hear the stentorian blast of a shofar [ram’s horn], triggering a period of introspection, examining the past year while looking forward to improvement in the year ahead. There are, of course, family dinners that customarily feature a number of traditional foods, like honey [for a sweet year]. As I have noted in previous years, it is very different from the kind of festivities and partying that mark the secular transition from December 31 to January 1.

The Canadian election on October 21 takes place at the end of the harvest festival of Sukkot, a week long festival that marks the end of summer and the beginning of the winter rainy season.

It is my hope that 5780 will be marked by peace, good health, by personal and professional growth and may it also be a year of inspiration for all of us.

Our offices will be closed on Monday and Tuesday (September 30 and October 1) and closed again the following Wednesday (October 9) to observe the holy days.

שנה טובה ומתוקה

“High spectrum prices can cause negative consumer outcomes, including lower coverage levels and slower data speeds.”

That’s just one of the findings of a new report released last week, by the GSMA. The report, “The impact of spectrum prices on consumers” [pdf], shows that countries with poor spectrum policies – policies which either inflate spectrum or delay spectrum assignments – are leading to millions of people being left unable to access mobile broadband services or experiencing reduced network quality.

The study is said to be the most detailed econometric study into spectrum pricing, considering more countries (64, including both developed and developing), more consumer outcomes (cost, quality and coverage) and the study controls for a wider range of other potential explanations for these outcomes, such as market competition, population density, timing of spectrum awards among others. “These findings have important ramifications for regulators, particularly when so many are trying to prioritise improved coverage and increased investment in 4G and 5G.”

The study provides the following recommendations:

1. Maximising revenues from spectrum awards should no longer be a measure of success
2. Auctions can deliver inefficient outcomes when poorly designed
3. Artificially limiting the supply of spectrum, including through set-asides, risks slowing services and inflating prices
4. Spectrum should be released to the market as soon as there is a business case for operators to use it
5. Policymakers should work with stakeholders to enable timely, fair and effective spectrum licensing to the benefit of society

The use of set-asides have been contentious in recent Canadian spectrum auctions. The study observes that “Governments often design awards with the intention of promoting competition and innovation in the sector – for example set-asides or reserved spectrum for a new entrant (or existing operator).”

However, the report says “While such policies may be designed with the right objectives in mind, they may also have unintended consequences if they are poorly designed or implemented and result in higher spectrum prices, thus harming consumers.”

There is a cost associated with spectrum policy, not all of which is financial. 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.

As we move closer to the official start of election season, many political parties are trying to curry favour among the electorate by bashing telecom service providers.

Such positioning may be good politics, but not necessarily good policy.

We should look for greater balance. In the 2019 Policy Direction to the CRTC, there was an important balance of interests, between “competition, affordability, consumer interests and innovation.”

1. the Commission should consider how its decisions can promote competition, affordability, consumer interests and innovation, in particular the extent to which they
   1. encourage all forms of competition and investment,
   2. foster affordability and lower prices, particularly when telecommunications service providers exercise market power,
   3. ensure that affordable access to high quality telecommunications services is available in all regions of Canada including rural areas,
   4. enhance and protect the rights of consumers in their relationships with telecommunications service providers, including rights related to accessibility,
   5. reduce barriers to entry and barriers to competition for new, regional or smaller telecommunications service providers,
   6. enable innovation in telecommunications services, including new technologies and differentiated service offerings, and
   7. stimulate investment in research and development and in other intangible assets that support the offer and provision of telecommunications services; and
2. the Commission, in its decisions, should demonstrate its compliance with this Order and should specify how those decisions can, as applicable, promote competition, affordability, consumer interests and innovation.

It is particularly telling to examine how the text of the Policy Direction changed from its preliminary version to the final Order. These changes, which added the word “investment” in section (a)(i) and strengthened the concept of investment in high quality services “in all regions of Canada including rural areas”, are found in my June blog post.

As I wrote a few months ago, “most government programs continue to focus on increasing ‘supply’, extending access to broadband. We need to ensure there are strategies to drive ‘demand’: increasing adoption rates among groups that could subscribe, but have not. That is a problem across all geographies, and is perhaps more pronounced in urban markets.”

The demand side of the equation is often overlooked when governments deal with universal broadband adoption. That isn’t just a matter of price, but understanding all the barriers.

It is easy to call for measures that lower prices. It is more responsible to set out a policy platform that understands the balance between competition, affordability, consumer interests, investment and innovation.

Ask candidates how their platforms meaningfully ensure that all Canadians, those in urban and rural areas, will have access to high quality, innovative services.