Industry Minister James Moore told Reuters that the government’s wireless policy was focused on the upcoming 700 MHz spectrum auction.

Moore said the government was concentrating on an intensely watched auction of wireless spectrum, where it is encouraging new entrants to challenge the Big Three. “Our policy is the auction and we’ll see what happens through the auction,” he responded.

The Minister declined to provide any information about whether any new foreign companies had submitted bidding papers and preliminary deposits yesterday, saying that the list will be released next Monday.

According to the current auction list of key dates, Monday September 23 is when Industry Canada will publish a list of applicants, their “beneficial ownership and associated entities information”.

We will not get any information about the number of bidding points being sought by each company. That information would provide some insight into the company’s bidding strategy. Pre-auction bid points require $130,000 each; 1221 bid points ($158,730,000) are needed to bid on one paired block across the country. A minimum of 2 bid points are needed to participate in the auction for a prime paired block, or just one point for bidding on an unpaired block – that would let you play in the game for the three territories.

The applications needed to be accompanied by a down payment of only 5% of the bid deposit.

Keep this in mind when the list gets published next week. To appear on the list, companies may have only submitted a check for about $7000.

The balance is due October 29, a week after Industry Canada publishes the list of provisionally qualified bidders. To move from “provisionally qualified” to fully qualified simply requires physically delivering the 95% outstanding balance owed on the bid point deposit. The qualified bidders list will be released November 8, indicating only who has a seat at the table, with no disclosure of the size of their stack of chips.

Applicants can decrease the number of bid points between now and October 29, but they may not increase them.

Not a lot of money was needed to make the preliminary list that will be published next Monday, the provisional list on October 22 and the final list on November 8. Because Industry Canada elected to use anonymous bidding, there will be no information released about activity by each company during the auction.

Once the auction has concluded we will hear who the winners are and how much money was spent. We may not know much about what is happening for the next 6 months.

When the CRTC expanded the scope of services covered by the office of the Commissioner of Complaints for Telecommunications Services (CCTS) in December 2010, we knew it would be a challenge to ensure that all service providers would register.

The major telecom service providers are front of mind, but there are hundreds of smaller players providing voice and internet services to the public. Although all service providers were supposed to have registered, compliance was to be ensured by checking the list when a customer complaint arrived at the CCTS.

A year later, in December 2011, Brama Telecom was the first service provider to face the CRTC over a continued failure to comply with the requirement to register with the CCTS following a complaint. Following an official CRTC inquiry being launched, Brama joined the CCTS and the CRTC proceeding was discontinued.

Today, 3 service providers became the first to continue past that gate and have moved to the “name and shame” stage. The CRTC has modified its webpage describing the CCTS in order to list the continued non-compliance of the companies.

You should also be aware that the CRTC has required the following companies to participate in the CCTS, but that they have not yet complied with this requirement:

• Adeste Global Managed Networks Inc.
• Lions Gate Internet, doing business as Imagen Communications Inc.
• Tollfreeforwarding.com

Further, the CRTC has issued mandatory orders to the companies seeking information about the nature of the services being offered and how those services are being provided, such as over the company’s own facilities or by resale of another telecommunications service provider’s services). The CRTC says that it “intends to register these orders with the Federal Court and pursue their enforcement as orders of that court.”

Ignoring such an order could lead to contempt charges.

Today’s decision was triggered by a “show-cause” proceeding launched 6 months ago, that threatened service disconnection:

The Commission notes that where a TSP is found to be in non-compliance with the CCTS participation requirement and does not own or operate a transmission facility, disconnection would be effected through an order directed at the Canadian carrier that provides that particular TSP with telecommunications services, whether directly or indirectly, to cease providing the TSP with the services.

Will these companies comply with the information request now that there is the threat of contempt proceedings being launched?

Will services being provided by these companies in Canada be disconnected? The CRTC could issue a disconnection order to all Canadian service providers who could be underlying these 3 non-compliant companies: Adeste Global Managed Networks Inc., Lions Gate Internet (doing business as Imagen Communications Inc.), and Tollfreeforwarding.com.

On July 15, James Moore was named Industry Minister, charged with fostering “a growing, competitive and knowledge-based Canadian economy.”

He is 65 days into the new job, two-thirds of the way into his first 100 days. How is it working out so far?

Three and a half years ago, Minister Moore’s predecessor’s predecessor launched a consultation to develop a strategy to guide the development of a digital economy strategy. Together with then Industry Minister Tony Clement, and Minister of Human Resources and Skills Development Diane Finley, the current Industry Minister was part of the original announcement in his role as Minister of Canadian Heritage and Official Languages. He said at that time:

Our government is committed to ensuring that creators, inventors and entrepreneurs have the incentives to innovate, the confidence to take risks and the tools to succeed. We recognize the important role the digital media and content sector plays in the digital economy, and we intend to develop a long-term plan that will stand the test of time.

Three departments launched the digital economy consultation; with our third Industry Minister, we are still waiting for the outcome of that consultation. The consultation was to explore 5 themes:

• Capacity to Innovate Using Digital Technologies;
• Building a World-Class Digital Infrastructure;
• Growing the Information and Communications Technology Industry;
• Digital Media: Creating Canada’s Digital Content Advantage; and
• Building Digital Skills for Tomorrow.

Where is the “long term plan that will stand the test of time”?

In his first two months, it is evident to all that there is a new leadership in place. How will this translate into advancing the department’s mission, “to foster a growing, competitive and knowledge-based Canadian economy”?

There was an interesting address earlier today by Jason Furman, Chair of the White House Council of Economic Advisors [pdf]. His observations on the telecommunications sector were informed by a depth of economic analysis that looked beyond international consumer price comparisons and recognized the flow of capital investment by the US industry. I commend reading the speech in its entirety.

Among the highlights was reading about concerns first documented in a White House report released in June, “Four Years of Broadband Growth” [pdf]: uneven adoption of broadband by education and income; uneven adoption in rural areas; and, affordability challenges.

Reading the depth of research that clearly informed Furman’s speech, reviewing the White House report with its analysis, it became clear that there is a policy gap in Canada caused by our missing digital economy strategy.

In the next 5 weeks, by October 23 – the 100 day milestone in office – will Canada finally see a comprehensive national digital strategy?

At noon on Tuesday September 17, applications are due for Canada’s upcoming auction of 700 MHz spectrum. At that time, deposits of 5% of the initial bid price are to be remitted – roughly $8M for a national block of spectrum.

According to the current schedule, we can expect to see the release of the preliminary list of applicants next Monday, September 23. The controversial Licensing Framework, the subject of much discussion this past summer, can be found on the Industry Canada website.

Noon on September 17 also represents the beginning of a quiet period, intended to prevent collusion between auction participants. News was emerging about plans by various companies to submit deposits. That kind of communication is considered on-side: “Discussions regarding the mere intent to participate in the auction will not be deemed to have contravened the collusion rules.” But some companies have also made announcements about their intent to restrict bidding to specific regions. Publicizing bidding strategies is not permitted.

As described in the Licensing Framework, and clarified in supplementary materials from Industry Canada, bidders are not to share information related to their participation in the auction or signal other bidders.

All applicants, including affiliated and associated entities, are prohibited from cooperating, collaborating, discussing or negotiating agreements with competitors, relating to the licences being auctioned or relating to the post-auction market structure, including frequency selection, bidding strategy and post-auction market strategy, until the deadline for the final payment.

As a cone of silence gets lowered between bidders, this anti-collusion rule likely means discussions regarding potential industry consolidation and financing will be stunted among registered bidders in the auction.

The current deposits are fully refundable. As the list gets published next week, keep in mind that: not all applicants will remit the remaining 95% balance over the coming month; not all applications will necessarily be accepted by Industry Canada; and not all qualified bidders will necessarily participate when the auction gets started in January.

While the coming week will satisfy the curiosity of some, many more questions are certain to emerge.

The University of Calgary School of Public Policy released an important paper today, providing what it calls the first study that assesses the state of competition in wireless services in Canada. Based on the authors’ analysis, “there is no evidence that there is a competition problem in wireless services in Canada.”

The paper takes aim at simplistic analysis that has led various critics to have accused the industry of being “woefully uncompetitive” and “dysfunctional and in desperate need of an overhaul.”

This paper establishes that there is not a competition problem in mobile wireless services in Canada. The government need not, and should not, intervene to promote competition on the basis that increased competition will lower prices; efforts to do so will likely be unsuccessful and inefficient.

The paper warns that in the long run, the effects of government intervention are likely to lead to “reduced investment, misallocated spectrum, lower quality, and perhaps even higher prices.”

Today’s report was authored by Jeffrey Church, a professor in the Department of Economics and the Director of the Digital Economy Program in The School of Public Policy at University of Calgary, together with Andrew Wilkins, a Research Associate in the School. Dr. Church has testified on behalf of the Competition Bureau in the 2006 CRTC hearing looking into Essential Services. Today’s report documents the results of a long standing research program in telecommunications markets and regulation in Canada. An OpEd that appeared in the Globe and Mail in early July provided a preview of some of the points that are expanded upon in today’s report.

Although it is 50 pages, the report is quite readable and it is an important scholarly contribution to the wireless policy debate. It directly targets naive claims that high ARPU and low penetration rates are evidence of an uncompetitive sector, saying “the facts are not consistent with this simplistic analysis.”

Those who single out high ARPU as an indicator that something is wrong with prices — and therefore competition — are fundamentally misinformed about the meaning of ARPU and why it is high in Canada.

The authors say that it is ill-advised for the government to try to enhance competition by committing to four competitors in every region, saying the policy is based on “unsophisticated and misinformed textbook economics — that more competitors are better — which is simply inappropriate for services where there are important economies of network size, including economies of scale and scope.”

Similar to ideas in a blog post I wrote a few weeks ago, the paper warns that low prices can lead to networks that are not funded sufficiently to support future generations of devices and services.

Efforts to create competition in the short run, that increase the number of carriers, will simply squeeze margins in the short run and likely will not be sustained in the long run, as carriers exit and consolidate to reduce competition and restore margins consistent with profitability and the natural limit. And, while consumers might gain in the short run from lower prices, everyone is likely made worse off in the long run from the misallocation of spectrum, reduction in scale of carriers, and reduction in incentives to invest from such intervention.

The authors recommend that the government should reverse course on policies that reduce or restrict incentives for investment by the incumbent carriers and their access to spectrum. Instead, the focus should be on measures that foster competition in investment and network characteristics, such as speed, reliability, and capacity.

The conclusion is that Canada does not have a problem with competition in Wireless, and steps being taken to artificially incent new competitors may provide short term pricing benefits but likely brings deleterious long term impacts.

Perhaps the Industry Minister could refer the question to the Competition Bureau for an assessment. That is Canada’s independent agency charged with ensuring “that Canadian businesses and consumers prosper in a competitive and innovative marketplace.”

With auction stakes measured in billions of dollars – as well as the possible negative impact on investment in digital infrastructure – should we be asking whether the Competition Bureau agrees with the presumption that policy measures to incent competition are appropriate?

The University of Calgary School of Public Policy report concluded there is no evidence of a competition problem in Canada’s mobile wireless industry. On such an important issue of sector competitiveness, will the Competition Bureau be engaged to confirm or reject this finding?