The last few weeks have seen telecom policy as the lead story on national newscasts, and headlines on page one (above the fold) in newspapers. Bell, TELUS and Rogers have waged a very public battle over federal telecom policy, supported by 150 leading Canadian corporate CEOs and a major union. The national telecom giants have won the editorial support of the Globe and Mail and Toronto Star.

The battle is over the government’s ever shifting telecom policy: from transfer rules for spectrum to the auction timing and structure for the 700 MHz block.

The voices of smaller regional players may be getting lost in noise of the big guns being fired.

The government has stated that it wants four wireless players in every market. As I have indicated before, many parts of Canada already satisfy that objective. Strong regional service providers have been among the most successful competitors – in some cases (Saskatchewan and Manitoba), the regional carriers have more than double the combined market share of the big national brands.

But the auction rules for 700 MHz favour national market players.

Eastlink warned of this [pdf] last year in its comments on the 700 policy, challenging Industry Canada to reconcile its draft policy against its stated objectives:

Specifically, the Department said in Paragraph 6 of SMSE-002-12 Policy and Technical Framework for the 700 MHz spectrum band that its “main objectives for the decisions” outlined in the technical framework were:

• Sustained competition in the wireless telecommunications services market so that consumers and businesses benefit from competitive pricing and choice in service offerings;
• Robust investment and innovation by wireless telecommunications carriers so that Canadians benefit from world-class networks and the latest technologies; and
• Availability of these benefits to Canadians across the country, including those in rural areas, in a timely fashion.

Eastlink submits that this auction framework, as described in the Consultation and as subsequently described by the Department does not appear to support these policy objectives. Instead, new entrant and regional service providers will be participating in this auction at a considerable disadvantage to national incumbent providers, putting both sustainable competition and meaningful rural deployment at risk.

Videotron also indicated its concerns [pdf]:

Canada’s spectrum policy framework has always recognized the substantial benefits that flow from a vibrant regional carrier presence and has always worked to encourage this presence. Indeed, since 2008, it has been the new entrant carriers, all of whom have a regional presence, that have transformed the traditionally oligopolistic Canadian wireless sector, improving responsiveness to consumers and generating substantial consumer savings in the process.

Now is not the time to undermine these achievements. Whatever spectrum auction format the Department adopts must not impede the ability of these regional new entrant carriers to secure the additional spectrum resources they need to extend and deepen their networks.

SaskTel also clearly stated its concerns [pdf] in its 700 MHz consultation comments:

Overall however, SaskTel finds that the suggested rules for the acquisition and deployment of this important spectrum make it much less likely that regional players will be able to access 700 MHz spectrum with its unique ability to help rural areas to bridge the digital divide.

The AWS auction of 2008 collected billions of dollars from regional carriers that have provided the most successful sources of competition for Canadians in urban and rural markets.

Amid all of the noise, will the concerns of regional carriers continue to go unheard?

According to the most recent Industry Canada timeline, deposits for participating in the 700 MHz auction in Canada are due at noon on September 17.

That date also marks the most likely deadline for definitive agreements to be reached for mergers and acquisitions in Canada’s wireless sector.

Let me explain why.

According to the “collusion rules” [see Section 5.4 of the Licensing Framework (pdf), and Section 2 of the Q&A] associated with the auction,

From the date of application until the deadline for the final payment on winning bids, each applicant is prohibited from cooperating, collaborating, discussing, negotiating or entering into agreements, arrangements or understandings with any competitors regarding the licences being auctioned, bids or bidding strategies in the auction, or the post-auction market structure. Each applicant is also prohibited from signalling its bidding intentions, either publicly or privately, from the application deadline until the end of the bidding process.

If a deal has not been concluded – or at least a proposed deal with a massive break-up fee – then the parties would have to stop working together, or agree that only one of the parties will be participating in the auction. Agreeing to forego participation in the auction could be suicidal in terms of its future Canadian business opportunities for a company to voluntarily withdraw from contention for the 700 MHz band, in the hopes of concluding a deal post-auction.

For this reason, one might expect considerable pressure for deals to be concluded over the coming 8 weeks. Given the time required for spectrum transfer approvals, one might expect deals to include substantial break fees to try to compensate for having to sit out the auction on the bench in case deals do not close for any reason.

Jamie Sturgeon of Global News wrote a story yesterday about new 2-year wireless plans being rolled out in response to the CRTC’s Wireless Code‘s effective ban on wireless agreements longer than 24 months.

As the story says, “customers may shake their fist at the Canadian Radio-television and Telecommunications Commission (CRTC) when the first bill arrives.”

Witnesses at the CRTC hearing had warned that this would be an outcome. Simple math suggests that if a $600 smartphone subsidy is paid off over 2 years instead of 3, the monthly price will increase.

Even the lawyer for OpenMedia acknowledged that its proposal would raise prices. In an exchange with CRTC Commissioner Candice Molnar, OpenMedia was asked to clarify its position:

3255   COMMISSIONER MOLNAR: If I could just kind of put back what I think I heard you say and you can tell me if I understood you?
3256   It is better ultimately for the industry for the potential cost of devices over time and due to the pressures of competition that will be increased by eliminating the switching cost. So it is better over time even though customers may have to pay more upfront. The long term benefits outweigh deferring that payment.
3257   MR. ISRAEL: Right, because the service fees will go down.
3258   COMMISSIONER MOLNAR: Do you promise?
3259   MR. ISRAEL: I’m sorry.
— Laughter
3260   MR. ISRAEL: I promise.
3261   Do I get a commission?
— Laughter
3262   COMMISSIONER MOLNAR: We are going to tell everybody that you said the fees would go up.

So it was a little disingenuous for TechVibes to write yesterday “OpenMedia Communications Manager Lindsey Pinto saw this travesty coming.” OpenMedia didn’t just see “this travesty”; it asked for it. OpenMedia Communications Manager Lindsey Pinto was sitting with her lawyer when he asked the CRTC for provisions in the Code that he acknowledged would make prices go up.

There are a number of other provisions in the Wireless Code that are increasing costs for all of the industry participants. Indeed, beyond the Wireless Code, a number of CRTC and Industry Canada projects are driving costs that can be expected to be passed on to consumers:

• Enhancements to 9-1-1 service to enable call-in-progress location updates and text messaging;
• Database for lost and stolen phones;
• Wireless Code projects including data thresholds, early termination provision tracking, new contracts;
• Wireless site reporting database;
• among others on the way.

As the Treasury Board notes, there is a significant cost of red tape. According to Treasury Board, Canadian regulators are supposed to prepare regulatory impact statements and exchange regulations on a one-for-one basis.

With implications for consumer prices, it might be interesting to see red tape impact statements as part of CRTC decisions.

Earlier today, the CRTC issued a Public Notice, calling for comments on its “Fact-finding process on the role of payphones in the Canadian communications system.”

With this notice, the Commission initiates a proceeding to collect information on the current role that payphones play in the Canadian communications system, including the extent to which Canadians rely on payphones, and the effects, if any, that further payphone removals and possible rate increases may have on Canadians.

The timetable for the release of data from the CRTC’s fact-finding is expected to be around the middle of June, 2014, conveniently coinciding with The 2014 Canadian Telecom Summit.

I wonder if the CRTC should be undertaking an even broader examination of access to a broader range of communications services, including broadband internet service.

More than a year ago, I asked “Who uses payphones anymore?“:

You would think mobile devices should have killed off payphones by now. Those of us who have an alternative don’t go looking for a couple quarters to make a call from the shopping centre or the airport.

Most Canadians now have a mobile option, but 25% of households don’t.

That post attracted a number of comments that are worth a fresh examination.

But what about broadband internet services? Shouldn’t we be as concerned about ensuring broad access to current generation services as those services declining in utility?

In an economy increasingly dependent on digital literacy, should the CRTC be expanding the scope of this proceeding to include a broader range of communications services?

The OECD has released the latest edition of its biennial Communications Outlook and there appear to be significant changes in the reporting of how Canada stands relative to its peers.

The OECD observed that revenues from data services are growing at double-digit rates in most OECD countries and, in line with the surge of broadband wireless subscriptions, are now the main source of growth for network operators around the world.

The OECD warned “Policy makers and regulators might need to intervene to ensure there is enough supply to meet demand, especially in countries or areas where there is insufficient fixed access network competition.”

However, supply has not been an issue in Canada. As TELUS observed,

Today’s OECD report on global wireless pricing once again confirms that Canadian wireless pricing is extremely competitive internationally and that Canadians have access to some of the best wireless networks in the world, thanks to enormous investment by TELUS and its competitors.

The report shows Canada’s investment in advanced technology is almost double the OECD average.

What are your observations from this year’s OECD Communications Outlook?