The federal budget indicates we are going to throw more money at the problem of universal broadband. Under the heading of “Consumers First”, the government promises to spend “$305 million over five years to extend and enhance broadband internet service for Canadians in rural and Northern communities.”

It is a politically attractive move to spend money in rural and remote markets. There will be a series of media events with grateful local dignitaries and telegenic kids receiving an oversized ceremonial cheque to urge a single service provider to extend the reach of its network.

It is the wrong approach.

Subsidies to a single service provider means the government is put in the position of picking a winner, virtually guaranteeing the end of competitive choice in the communities. One service provider ends up operating with its business plan subsidized, distorting the marketplace for the entire region, not just the “unserved” territory. The same page of the budget website includes a section that speaks of “Improving Competition in the Telecommunications Market”. The rural broadband approach represents a disconnect from the national telecommunications strategy. Why should rural markets have to settle for a monopoly service provider?

In the meantime, there is no mention of dealing with the lack of connectivity among low income households in urban markets. The Survey of Household Spending from Statistics Canada tells us that 1 in 6 households in Canada still has no personal computer, let alone internet access.

Building a Digital Canada means we have to look at both sides of the broadband adoption equation, finding solutions to increase demand as well as the supply of access. A few years ago, publicly available data showed that there were 300,000 households in Montreal that didn’t have a computer, despite having lots of broadband choices available. More than 200,000 households in Toronto; 100,000 households in Vancouver. As you might expect, computer ownership and broadband access is highly correlated with household income.

Increasing digital connectivity means finding solutions for affordability, targeting those who can’t afford the cost of getting online, regardless of where they live.

The CRTC undertook a study of broadband and released a Broadband Report in November 2011. At the time, it said “The purpose of this report is to establish a baseline from which to assess the progress that is being made in achieving this target.”

It has now been two and a half years since the “baseline” was established. Before the government spends nearly a third of a billion dollars, it might be helpful to see an update to “assess the progress.”

As I wrote at the time the CRTC Broadband Report was released, we need a digital strategy “that promotes digital literacy and leads to computers getting into Canada’s low income households. We have the plumbing in place: we need to lead more Canadians to the well and teach them how to drink.”

I noticed an interesting tweet yesterday from SAP:

My immediate response was to ask “The future?” We shouldn’t be waiting for “the future.” The time to be more customer-centric is “now.”

In the services business, especially in a competitive services business, it seems to me that the industry focus already is all about the customer. At least it should be.

Those companies that can excell at tailoring a suite of products for their customers and delivering a superior customer experience will be the winners.

As SAP asked, what are you doing to be more customer-centric?

We have a session scheduled for Tuesday afternoon, June 17 at The 2014 Canadian Telecom Summit looking at Customer Experience Management.

Early bird rates are still available for The Canadian Telecom Summit, through Friday. Register today!

I noticed that the US Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights is convening today to conduct “An Examination of Competition in the Wireless Market“.

Witnesses today include representatives of Cellular South, Aalborg University (Denmark), Verizon Communications, Mobile Future, T-Mobile USA, and Free Press. Some of the testimony is already available – I will try to update links here.

The US Senate hearing may be instructive for Canadian policy makers – there is a webcast starting at 10am Eastern. The CRTC will be exploring the state of competition in Canada’s wholesale wireless marketplace in a proceeding that was launched last week, with a process that includes an oral hearing starting on September 29, 2014. Perhaps just by coincidence, CRTC’s hearing is scheduled to take place during the period between Rosh Hashana and Yom Kippur, the days of penitence, and a time of special introspection for the religiously observant.

The CRTC’s paper process gets started with filings on May 1.

On Monday June 16, in one of the sessions at The 2014 Canadian Telecom Summit, we plan to bring together some leading economists to look at competition in telecommunications, in a session to be moderated by Dvai Ghose of Canaccord Genuity. So far, we have confirmed participation by Len Waverman (Dean, DeGroote School of Business at McMaster University), John Mayo (McDonough School of Business, Georgetown University) and Bob Crandall (Sr Fellow at Brookings Institute). It should prove to be an interesting session.

Early bird rates are still available for The Canadian Telecom Summit, through Friday. Register today!

Earlier this week, CRTC Chair JP Blais took to Twitter to have a chat about the second phase of the Commission’s Talk TV consultation.

The chat took place during the Olympic quarter-final men’s hockey game between Canada and Latvia, and the timing itself was the subject of one of the questions.

The tone seemed chippy at times; when the Chairman was asked if the CRTC had the jurisdiction to regulate Netflix, the response wasn’t a simple “yes” or “no”. Instead, the answer was “I don’t want to debate jurisdiction online. See section 4(2) of the Broadcasting Act.”

Let’s look at Section 4(2) of the Broadcast Act.

(2) This Act applies in respect of broadcasting undertakings carried on in whole or in part within Canada or on board

(a) any ship, vessel or aircraft that is

1. (i) registered or licensed under an Act of Parliament, or
2. (ii) owned by, or under the direction or control of, Her Majesty in right of Canada or a province;

(b) any spacecraft that is under the direction or control of

1. (i) Her Majesty in right of Canada or a province,
2. (ii) a citizen or resident of Canada, or
3. (iii) a corporation incorporated or resident in Canada; or

(c) any platform, rig, structure or formation that is affixed or attached to land situated in the continental shelf of Canada.

Clear on that?

I’m not sure how many Canadians would be able to readily find the Broadcast Act, let alone understand what spacecraft, ships, vessels or aircraft have to do with a computer app. And that was just the second question asked by a member of the general public.

The question didn’t seem to be baiting the Chair for a debate. It would seem reasonable for a “conversation with Canadians” to be able to get a straight answer to a pretty basic question: In the view of the Chairman of the CRTC, does the Commission have the jurisdiction to regulate Netflix?

I thought it might be helpful to capture the Twitter conversation to make it easily accessible for review.

The following is the English language Twitter chat that took place on February 19, 2014 at 1:00pm [eastern].

The 700 MHz auction is over at last. In the next 6 weeks, 8 Canadian carriers will be scraping together five and a quarter billion dollars to pay for their spectrum. Some were quick to compare this to the $4.25 B raised in the 2008 AWS auction, without realizing that the license being issued this time around are 20 years, not 10 years.

The final bids varied widely between carriers and comparative analysis is challenging without considering which blocks were acquired, whether the spectrum was adjacent to a block that can be aggregated to provide better performance, the demographics of the geography and the compatibility with existing networks for handsets and partnerships.

Not all spectrum is alike.

For example, SaskTel issued a press release expressing its concerns with the outcome. SaskTel paid just $7.5M for the C1 block in its home province, covering about 10.4 million megahertz pops (population times the bandwidth). But SaskTel said “device options are not available for the C1 band”, so its “rural customers will not see a benefit for some time”. As it has consistently claimed for a couple years (since the auction framework was announced), SaskTel said “This incredibly complex auction format is clearly biased against regional carriers, in addition to having a number of other systemic flaws.” It called for the Federal Government to continue to focus efforts on ensuring no spectrum remains unused in rural Canada.

Rogers acquired dual blocks in most of the most populous regions of the country, gaining the A and B blocks everywhere but Manitoba and Saskatchewan, Northern Ontario, Northern Quebec and the Northern Territories. As Minister James Moore said in the press briefing, Rogers paid the most ($3.3B), but they got the highest quality spectrum that was being offered. With aggregation possible across the two blocks, the purchase should allow Rogers to get higher performance from its network, and many of its existing customers already have compatible handsets.

I won’t begin to speculate on Videotron’s spectrum strategy. I will just observe that in 2008, the company spent $555M to acquire AWS spectrum, mainly in Quebec, and on a 10 year license. Today, the company spent 60% less, just $233M for a 20 year license on Quebec, Southern and Eastern Ontario, Alberta and British Columbia. It picked up spectrum in the most populous and most valuable markets in the country, with spectrum that has far better performance characteristics than its current inventory. Videotron spent less for its 20 year 700 MHz spectrum than Mobilicity spent for less coverage with its 10 year AWS purchase ($243M). Allocated on a population basis, Videotron’s “out-of-territory” 700 MHz spectrum cost about $150M of the $233M that they spent.

Does this set an upper bound for the value of Mobilicity’s spectrum?