To maximize media coverage, the CRTC is trickling pieces of its 2015 Communications Monitoring Report. I think it may be a sneaky way of getting the public to help do proof-reading and submit corrections.

Little slips have made the communications strategy obvious. On October 22, the CRTC Twitter account let slip a little factoid that wasn’t actually published in the excerpt published last week:

That figure didn’t actually show up until today in Figure 5.5.8.

In the excerpt of the report released earlier today, the CRTC refers to a mysterious Appendix 9. There is no Appendix 9 in the report. There are no appendices at all. Perhaps they will show up in the next release.

When the Commission finishes teasing us with partial releases, we’ll hopefully see a complete final edition, in the customary full html and pdf formats.

In the meantime, we’re detecting some gaps in the analysis, with a couple glaring errors. Maybe the strategy is to get us to help do the proof-reading.

Map 5.5.1 purports to show “Wireless service availability by number of facilities-based WSPs, 2014”. Now, “WSPs” is a defined term in the report: Wireless service providers. Table 5.5.15 purports to show “Number of different wireless networks, expressed as a percentage of population covered, by province and territory, 2014” and it includes a note that says “In many provinces, facilities-based wireless service providers who own spectrum share the same radio access facilities to offer telecommunications services to the public.”

It appears that Map 5.5.1 is trying to show, in map form, the information that is contained in Table 5.5.15, that is, the number of wireless networks.

It certainly does not reflect the number of facilities based wireless service providers.

A more glaring set of errors can be found in Section 5.3, looking at broadband internet services. In the overview comments in that section, the CRTC confuses coverage with capacity: “While rural Canadians have access to services provided by satellite, capacity limitations restrict practical availability to approximately 1.5% of Canadian households.” No other service is treated that way.

This has a significant impact on Figure 5.3.15, “Broadband, 5 Mbps availability (percentage of households), 2014”. The Commission fails to include satellite in the chart, saying “Satellite service is excluded; however, it would add approximately 1.5% to the availability of 5 Mbps broadband services.” That is a flawed statement, based on the capacity consideration. No other technology is listed showing capacity – they show coverage.

The CRTC appears very confused about how to treat satellite broadband. For example, Figure 5.3.14 purports to show “Broadband availability vs. broadband subscriptions by province/territory, 2014” showing a percentage. The figure includes a note: “These data exclude satellite broadband service for availability, but they are included for subscriptions.”

Huh? So we have a table that could end up showing a higher level of subscriptions than availability? How does that make sense?

Table 5.3.11 has two bold headers for the technologies that are used to provide broadband: “Mobile broadband”; and, “Wireline broadband”. Under which of these two would the subheadings “Fixed wireless” and “Digital satellite” fit? Would you have picked “Wireline broadband”? I might have used “Fixed broadband” as a major heading, instead of “Wireline broadband.”

Maybe the CRTC is trying to crowd-source the editing of this year’s Communications Monitoring Report. The new Minister isn’t being named until next week, November 4.

If you want to help the CRTC get the final report right, add your corrections to this blog post by submitting a comment.

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[Update: October 29, 2015] The CRTC has issued the full report [html version or download 10 MB pdf]. The report still refers to the Atlantic provinces as the Maritimes (refer to Canada’s Constitution to understand the difference).

The CRTC invites suggestions from the public to improve the report: “Interested parties are welcome to provide comments for improvements or additions to future editions of the report. You can send your comments to the attention of the Secretary General, CRTC, Ottawa, K1A 0N2.”

Perhaps the CRTC can also consider including an email address in the next edition.

Across all income levels, in 2014, Canadians spent roughly the same amount of money per person on communications – in the order of $80 per person per month for phone, internet and TV.

That was the result of doing a little arithmetic on the data released by the CRTC last week.

Sources: Statistics Canada’s Survey of Household Spending

I did a little more analysis on that table, using simple arithmetic to derive the following:

One of the factors impacting the higher cost on a per person basis in the lowest income quintile may be the smaller average household size – just 1.49. While mobile services are sold to individuals, other services (TV, home internet, wired phones) are sold to the household. The slightly higher cost of communications on a per person basis in the lower income levels might be attributable to a “single supplement” effect – a higher cost per person due to living alone.

Telecom service provider marketing departments and social service agencies alike need to consider household sizes as they examine ways to help make services more accessible for these lower income quintiles.

Smaller household sizes would also be an explanation for why lower income households have a greater tendency to be wireless only. The CRTC suggested that it may be an issue of affordability:

Yet as Canadians embrace mobile wireless, a more precise picture emerges when examining this trend across income quintiles. For instance, wireless-only households are most prominent among the two lowest income quintiles … This suggests that the rise of mobile-only households does not solely reflect changing preferences but may also be driven by affordability.

It is important to look at the significant differences in size of household across the income quintiles. With small households, affordability may not be the most important factor driving wireless-only choices.

In the case of single member households, at any income level, going “wireless only” is just plain common sense.

Is the CRTC sending inconsistent messages?

In my blog post last night, I indicated that the CRTC’s determinations to mandate wholesale access to next generation fibre networks took Bell, and likely the other major wireline carriers, by surprise.

Let’s look at a chronology.

The CRTC had open proceedings examining the wholesale regimes for each of wireless and wireline service in 2015, processes that began in 2013 [see: Wireless notices 2013-685 and 2014-76; and, Wireline notice 2013-551].

On May 5, 2015, the CRTC issued its decision on the wireless file in its Telecom Regulatory Policy CRTC 2015-177. Among the issues being examined was whether the CRTC should mandate access to facilities-based wireless networks by MVNOs – Mobile Virtual Network Operators. Many similar arguments regarding the impact on investment were raised by the wireless carriers as we heard in respect of wireline facilities. It was a key concern of the CRTC on the wireless side, and the following statement is found in the Commission’s summary at the top of the decision:

The Commission’s determinations in this decision will facilitate sustainable competition that provides benefits to Canadians, such as reasonable prices and innovative services, as well as continued innovation and investment in high-quality mobile wireless networks.

But the CRTC reached a very different conclusion on mandated resale on the wireless side from how it ruled for fibre. Despite finding “the barriers to entry into the retail market are very high” and the difficulty of “wireless service providers to obtain wholesale mobile wireless services from other wireless carriers, in particular the national wireless carriers, at reasonable rates, terms, and conditions”, the CRTC rejected mandating resale for wireless.

121. Investment in wireless network infrastructure by wireless carriers is important to ensure that Canadians have access to mobile wireless networks and services of high quality in all regions of Canada. The new entrants have made and are planning to make significant investments in spectrum and their wireless networks. The Commission considers that mandating wholesale MVNO access at this time would significantly undermine these investments, particularly outside urban core areas.
122. Accordingly, if the Commission were to mandate GSM-based wholesale MVNO access provided by the national wireless carriers, this permanent network access would likely discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.

That was in early May. The wireline decision was still outstanding, but in mid-June, Bell and TELUS made multi-billion dollar announcements for major fibre-to-the-home (FTTH) investments in their largest cities. At the time, many observers wondered if the telephone companies were anticipating a similar approach by the CRTC for wireline.

In July, the CRTC finally released its Telecom Regulatory Policy CRTC 2015-326 with the wireline wholesale policy. It acknowledged that the impact on investment was a consideration in the development of its policy [see paragraph 51]:

Innovation and investment – mandating or not mandating the facility or wholesale service could affect the level of innovation/investment in advanced or emerging networks or services for incumbents, competitors, or both, or impact the associated level of adoption of advanced or emerging services by users of telecommunications services.

The telephone companies warned that mandating access to FTTH access facilities would impact investment decisions, as acknowledged by the CRTC in the decision:

109. All of the ILECs raised concerns regarding the impact that mandating the provision of FTTP access facilities could have on their investment decisions. For example, the Bell companies argued that the business case for investment in FTTP access facilities was challenging, and would only worsen if the Commission proceeded to mandate the provision of wholesale HSA services over these facilities. Bell Aliant cited its FTTP deployment program in Ontario, which it scaled back in light of unforeseen costs, to demonstrate the fragility of the business case. Moreover, Bell Aliant argued that mandating the provision of FTTP access facilities may reduce or delay future technology upgrades in areas currently served by FTTP, thereby broadly harming consumers.
110. Similarly, TCC argued that the mandated provision of FTTP access facilities would result in less fibre deployment, and that this would occur not just in lower-density areas, where the already-challenging business case will be eliminated, but more broadly throughout Canada. TCC indicated that if the Commission is not prepared to reject the mandated provision of FTTP access facilities, the negative effects of this regime on investment in next-generation broadband facilities should be attenuated through a moratorium on mandated access to Internet access services at higher speeds.

Similar concerns, but different conclusions. In the case of wireline wholesale, the CRTC shrugged off the impact on investment with a simple statement at the end of a somewhat unrelated paragraph dealing with implementation: “any investment risks associated with mandating the provision of wholesale HSA services over FTTP access facilities can be attenuated by providing the incumbent carriers with a reasonable rate of return.”

Under the Policy Direction, the CRTC is required to take into account the principles of technological and competitive neutrality.

At the bottom of each of the CRTC decisions, there is a section dealing with whether the orders are consistent with the Policy Direction. In particular, the wireline policy says:

262. Consistent with subparagraph 1(b)(iv) of the Policy Direction, the Commission’s determinations, as they relate to network interconnection arrangements or regimes for access to networks, are technologically and competitively neutral and do not artificially favour either Canadian carriers or resellers. In this regard, the Commission notes that its determinations regarding disaggregated wholesale HSA services apply to all incumbent carriers, and require such services to be provided over any underlying technology, including FTTP access facilities.

The wireless policy has a similar paragraph:

201. Consistent with subparagraph 1(b)(iv) of the Policy Direction, the Commission considers that its determinations, as they relate to network interconnection arrangements or regimes for access to networks, are technologically and competitively neutral and do not artificially favour either Canadian carriers or resellers.

Perhaps considered independently, the determinations technologically neutral, but are the two policies consistent when considered together? Both proceedings were open at the same time. Did the CRTC ensure that the conclusions of both wireless and wireline wholesale proceedings would be technologically neutral?

Did the CRTC’s “Review of wholesale wireline services and associated policies” decision in July contain provisions that reduce the incentives for major carriers to invest in advanced broadband infrastructure?

That may be the first major digital economy policy question to be faced by the Trudeau Government’s as yet un-named Minister of Industry. A day after the election, Bell Canada has filed a cabinet appeal of the CRTC’s decision, claiming that Canada position as a broadband leader is being threatened by the CRTC’s wireline wholesale decision, that changes the rules by mandating reseller access to these next generation fibre-to-the-home networks. Bell argues that its investment to date of more than $2.5B enables more than 2M households to access its Gigabit Fibe Internet service already.

Bell’s position in the proceeding leading to the July decision had warned that mandating resale of fibre-to-the-home could lead to:

1. reduced private capital being deployed in fibre-to-the-home infrastructure;
2. fibre-to-the-home going to fewer communities, particularly smaller and rural communities;
3. jobs being lost; and
4. undermining the competitiveness of Canada’s economy .

Why did Bell file immediately after the election?

Under Section 12 of the Telecom Act, a petition for Cabinet review of a CRTC decision must be presented within 90 days. Since the CRTC issued its decision on July 22, the deadline happens to fall on October 20 – today – the day after Justin Trudeau’s Liberals were swept into power. The timing is purely coincidental and should not viewed as a test of the new government.

The CRTC’s decision clearly caught Bell by surprise. Just a month before the release of the CRTC’s decision, both TELUS and Bell announced significant, multi-billion dollar investment plans for fibre to the home projects across the country. These aren’t just sharply enhancing service quality in big cities; Bell Aliant has connected more than 60% of homes in Atlantic Canada to date. And only 2 weeks ago, Rogers announced its plan to roll out gigabit speeds to its entire cable footprint [see “A national gigabit dream“].

In the proceeding leading to the CRTC’s wireline wholesale decision, many smaller ISPs were looking for liberal resale privileges for fibre-based services; the CRTC stated “Increased choice is expected to drive competition, resulting in further investment in high-quality telecommunications networks, innovative service offerings, and reasonable prices for consumers.”

The fundamental question for the government is whether that CRTC determination is sound.

Does price competition from smaller non-facilities-based ISPs increase or decrease the incentives for continued infrastructure investment by facilities based providers?

Bell warns that the CRTC’s decision to favour resale over investment will result in reduced investment in infrastructure in Canada. Its evidence to the CRTC showed that is what happened to Europe, “where policy-makers are now searching for ways to recover.”

Does increased price competition for consumers promote further development of innovative services and investment, as the CRTC states? Are mandated wholesale rules required, or indeed, appropriate, in a marketplace that has multiple wireline and wireless choices for most consumers.

Since the CRTC’s landmark long distance decision more than 20 years ago (a proceeding with which I had more than just a passing interest) the Government, CRTC, and the Competition Bureau have all promoted facilities-based competition as the model to promote, sustainably delivering price, quality, and innovation benefits of competition to consumers.

While the timing of the appeal was driven by the CRTC, not the election of a new government, there are some fundamental policy questions raised in the application that will force the new cabinet to give consideration to how to approach private sector investment in the digital economy.

The Liberal platform said “It is time for smart, strategic investments that will turn our economy around and get it growing again. Our plan will deliver the services we need, create jobs, and restore economic security to the middle class.”

The major carriers in Canada have been making multi-billion dollar investments in strategic infrastructure, without government funding, creating jobs both directly and indirectly. While major centres could still attract fibre-to-the-home investment, Bell has warned there is a risk that the business case for fibre may not be supportable in smaller towns and rural areas under a mandated resale regime.

Under the Telecom Act, the yet to be formed cabinet has until July 22, a year after the original CRTC decision, to “vary or rescind the decision or refer it back to the Commission for reconsideration”. Bell’s application will get the new government to conceive its own digital policy in the next 9 months.

The term “infrastructure” appears 50 times in the Liberal platform. Will the new government want to take the risk that the private sector will curtail billions of dollars of its own investment?

It may be notable that the 2006 Report of Telecom Policy Review Panel was delivered to Stephen Harper’s first Minister of Industry, Maxime Bernier, but the panel was actually created by the Liberal government under Prime Minister Paul Martin and Industry Minister David Emerson in April 2005. That 2006 report called for a fresh review every 5 years, a call that was ignored by the Conservative government. Perhaps the new Trudeau government, in its quest to return to fact-based policy making, will strike a new expert panel to engage in consultations, just 5 years overdue.

Canadians have decided to hand the reins of power over to Justin Trudeau, the first time Canada has had a prime minister who is so intimately familiar with the official residence at 24 Sussex Drive, having lived there as a child.

We already knew that there would be a new Minister of Industry as a result of yesterday’s election – James Moore decided not to seek re-election. It was less certain that the new cabinet would be formed by a Liberal Prime Minister – Prime Minister Trudeau 2.0 – and it wasn’t until the initial results emerged from Atlantic Canada that we were sure that Canada voted so emphatically for a change.

We will learn in the coming weeks who will fill the seat to lead Industry Canada – the department responsible for the development of policy for telecommunications and information technology and services – and as a result, most digital economy issues.

As Scotiabank indicated in a note to investors late last week: “While the Liberal Party does want to see greater competition and lower prices, we believe its approach would be very different from that of a Conservative majority.” The research note said that anything but a Conservative majority was expected to lead to “fewer regulatory disruptions than in the last few years”, since

The Conservative government under Prime Minister Stephen Harper and Industry Minister James Moore had a pro-consumer, populist approach to the telecom sector and appeared to put less emphasis on the impact of their policy decisions on jobs and network investment.
…
A Liberal majority could be a fresh and positive change for the incumbents.

The last Parliament was characterized by a lack of balance, a failure to appropriately give consideration for long term structural impact of populist policy, in part because the partisanship of Parliamentary Committees gave little (if any) consideration to Opposition amendments to bills. That is assuming the legislation even reached Committee, thanks to tactics such as burying legislative changes within Budget Implementation bills and other omnibus bills.

Canadians voted for change and the message was loud and clear. Hopefully, the Liberal strategists who will shape the operation of the PMO – the Prime Minister’s Office – have been listening, learning to develop a more cooperative and humble approach to the institutions of Parliament.

Over the past few months, I have indicated what I would like to see on Canada’s digital agenda.

There is now an opportunity to build on the post-election optimism, as Prime Minister Trudeau forms his government.

Thank you to all the candidates from every political stripe across this land who put forward their names and worked so hard over the past few months.

Congratulations to the new Parliament. And congratulations to Prime Minister Trudeau. Welcome back to 24 Sussex.