While some people have been focused on Industry Canada’s update of the 700 MHz auction bidders list, changing status to “Provisionally qualified”, there was another change announced, impacting the bidders’ behavioral rules.

The response to Q2.14 has changed to permit discussions between bidders and affiliates of bidders regarding their beneficial ownership:

For example, discussions by an affiliate of Bidder A with another bidder regarding a potential change in ownership or control of that affiliate are not captured under the auction rules, as long as the potential change in ownership or control of the affiliate of Bidder A does not affect the beneficial ownership of Bidder A.

This change should enable more open discussions about potential transactions involving companies such as Mobilicity or Allstream to take place.

Crown Castle International has announced a deal to buy the rights to 9700 wireless services towers owned by AT&T in a deal worth $4.85B – that works out to $500,000 per tower. Crown Castle claims to be the largest wireless infrastructure player in the US, with 40,000 towers, representing nearly half the towers in the top 50 urban markets.

Under the arrangement, AT&T will lease back space on the towers for $1900 per month for 10 years, covering about half of the original price. Under the agreement, Crown Castle will have the exclusive right to lease and operate the AT&T towers for a weighted average term of about 28 years. At the end of the leases, there is an option for Crown Castle to purchase the towers for a further $4.2 billion. Those purchases, if exercised, would be primarily between 2032 and 2048.

In Canada, the construction of a tower costs about $250K, but this does not include the land or the costs associated with permits. There are continuing costs for rent and maintenance of each site. The valuation of the AT&T deal appears to provide a break even point if Crown Castle can increase the current average occupancy of each tower by 20%, rising from 1.7 to 2 tenants per tower.

The carrier gets to unlock value in its infrastructure, allowing Crown Castle to aggressively market the real estate.

A number of reports were released in the past week that are worth collecting for future analysis.

• Last week, the International Telecommunications Union released its latest edition of Measuring the Information Society (2013). The report, less Annex 4 (Statistical tables of prices used to compute the ICT Price Basket), is available as an 8.5MB pdf. Be sure to watch for simplistic analysis that ignores examination of source data!
• Today, Akamai released its Second Quarter 2013 State of the Internet report (4.8MB pdf) and Executive Summary (2.7MB pdf). Among other information, it confirms the error in the CRTC’s Communications Monitoring Report that was highlighted in this blog a few weeks ago.
• Also today, as reported in the mainstream media, we saw PCMag.com release its test of US and Canadian wireless networks.

Urban Canadians can get online fast, often at speeds that would make south-of-the-border Americans green with envy.

The peak speeds delivered by the big three carrier’s new LTE networks are nothing short of breathtaking. We saw a 92Mbps download on Rogers’ 2600MHz LTE network in Vancouver, the highest result we’ve seen anywhere in four years of testing in North America.

When shopping for services, we know network technology and quality can be competitive differentiators.

Canada’s wireless association, the CWTA, has told us that Canada’s wireless industry invested $2.6B in capital in 2011 alone, as wireless has “become a critical component of our economic prosperity.”

Just a couple of months ago, differentiating on wireless network quality was a matter before the courts, after the Competition Bureau challenged an ad campaign where Rogers’ Chatr brand boasted fewer dropped calls than the new entrant wireless carriers and said that its subscribers shouldn’t worry about dropped calls.

Other failures have been on the application side. There have been some celebrated outages for Blackberry users affecting customers around the world.

The CRTC has toyed with quality of service reporting requirements over the past 20 years. In its original Long Distance decision, the CRTC required local phone companies to provide their long distance competitors “with the earliest possible notice of all network outages affecting the operation of [their] network.” In 2000, the CRTC codified this and required “that the telephone companies should report all service outages that affect competitors and that exceed 15 minutes in duration.” Further, the CRTC required filing: a) the duration and reason for the outage; b) the extent to which service to the telephone company’s other customers was affected; c) the time at which service was restored to the competitor; and d) the time at which service was restored to the telephone company’s other customers.

Driven by the Policy Direction, as part of a paperwork reduction initiative, in 2009, the CRTC eliminated this reporting.

Also in 2000, the CRTC had required reporting of major service interruptions affecting large groups of customers. In Decision 2000-24, the CRTC defined three categories:

• Category 1 – Local network outage causing small community isolation lasting 60 minutes or longer.
• Category 2 – Local network outage relating to 10,000 lines lasting 60 minutes or longer.
• Category 3 – Local network outage relating to 30,000 lines lasting 60 minutes or longer.

The world of telecommunications has evolved since quality of service indicators were established. Wireline services are in decline; the latest CRTC monitoring report shows there are now nearly three times as many wireless connections as there are residential phone lines. Over the past five years, Canadians disconnected more than 1 million wired lines and added 5.8M wireless services.

In a competitive environment, consumers have choices. In announcing the Wireless Code, CRTC Chair JP Blais said:

The wireless code is a tool that will empower consumers and help them make informed choices about the service options that best meet their needs. To make the most of this tool, consumers also have a responsibility to educate themselves.

To make informed choices, consumers need to have access to useful information upon which they can make decisions. What network quality information should consumers have available? What services should be reported? Should VoIP, Long Distance, Wireless, internet access all be captured or just local wireline services? What about TV distribution? What about applications like Blackberry Messenger, Skype, Twitter, Facetime, etc.?

The three pillars of the CRTC’s 3-year workplan are Create, Connect and Protect. The Connect pillar is described as:

The CRTC’s activities under this pillar ensure that Canadians can connect to quality and innovative communication services at affordable prices and have access to creative content. This includes services that facilitate access to the communication system by Canadians with disabilities. By fostering competition, the CRTC strives to provide Canadians with choice and improved rates and services.

In the United States, there is a Network Outage Reporting System operated by the FCC. The system, applicable to wireline, wireless and interconnected VoIP services, is considered essential enough that the FCC has kept that system running during the current US Government furlough. Because of the impact on consumer access to emergency services, the reports to the FCC are made available to the Department of Homeland Security.

It is perhaps appropriate that the the CRTC launch an inquiry today looking at “Matters related to emergency 9-1-1 services“. At paragraph 151 of the Inquiry Officer’s Report, there is a reference to the concerns in the United States about network reliability, and at paragraph 181, there is reference to improved data collection requirements. At paragraph 245 of the Inquiry Officer’s report, he suggests that a multi-stakeholder organization be charged with “Devising performance metrics for carriers, databases, and other networked participants, including levels of service to [Public Safety Answering Points].”

Should the CRTC be collecting and disseminating network outage information that helps consumers make informed choices? Should that information be restricted to Public Safety purposes, or be used to help consumers make informed choices about their communications services?

I saw some erroneous articles [such as this one] and tweets [such as this one] today that makes me think that there are a lot of people who don’t know a lot about Allstream, the target of the acquisition denial issued by the government last night.

Allstream doesn’t play in the consumer market; it doesn’t offer cell phones so most of us don’t ever see their ads. But the company has a rich and storied history.

Let me quote from the for Long Distance Application, filed with the CRTC by Unitel in May of 1990 when it sought to introduce competitive services [disclosure: I was part of the Unitel team at the time]:

On December 19, 1846, thirty years before the telephone was patented, the first telegram transmitted in Canada was sent from Toronto to Hamilton by a small telegraph company that would evolve into what became Canada’s first national facilities-based telecommunications carrier…

That pioneering achievement of the Toronto-Hamilton-Niagara and St. Catharines Electro-Magentic Telegraph Company marked the birth of Canada’s telecommunications industry…

At the time of Confederation, much of the telegraph traffic in Canada was routed through the United States. With Confederation, however, the new Canadian government was presented with the challenge of linking the scattered parts of Canada into a nation from sea to sea.

Resolved to establish an all-Canadian communications link from coast to coast, Parliament granted a charter to the Canadian Pacific Railway Company in 1881. The charter empowered the company to construct, maintain, and operate telegraph lines and to provide both telegraph and telephone service to the public.

The railway based telegraph companies merged to form CNCP Telecommunications, which successively became known as Unitel, AT&T Canada and Allstream – with a restructuring or two thrown in for good measure.

The company has evolved a lot over 167 years, sporting an 18,000 km intercity fibre optic backbone, 8 border crossings into the United States, 30 local city networks and nearly 3000 buildings connected by fibre. Allstream offers an array of advanced communications services riding across that fibre, as well as connectivity through its global partnerships. Its revenues peaked in the order of $1B.

As I mentioned in yesterday’s blog post, Allstream has won some significant government business recently. Government has always been an important vertical market for all of Canada’s major carriers. Frankly, it isn’t surprising that national security concerns might arise in connection with Allstream’s communications network.

But a fair question might be raised about why it took so long – nearly 5 months – for the government to say “no”.

It seems to me that financial markets – and industry participants – would like to have clarity, consistency, and predictability in the policy framework.

Should foreign ownership reviews trigger greater disclosure in order to increase transparency for the industry, the investment community and Canadians?