Maybe I am getting too focused on telecom sector issues (likely due to preparations for Monday’s opening of The 2013 Canadian Telecom Summit).

As a result, when I caught a tweet from Rabbi David Volpe earlier today, the first thing I thought of was how it applies to our lack of a national digital strategy.

Relating this to a national digital economy strategy, the government has failed to set out a vision of what it is trying to build, let alone where that ship will sail.

At best, we have seen a stream of announcements in pursuit of fulfilling an unannounced digital strategy.

Executing tactics in place of a strategy.

Collecting wood when we need to teach a longing for the sea.

Canada’s wireless policy has been generating a lot of chatter in the past few weeks. Some articles suggest that we are seeing a failure in achieving the policy objectives of the government. I was on BNN-TV last week providing some of my viewpoints.

If we are failing at achieving the objectives, the first question that needs to be asked, of course, is “What exactly was the objective?” In the absence of an overall national digital strategy, it has sometimes been difficult to determine what the government would like to achieve.

In a March 7 speech, the Industry Minister said that he wants to see “at least four players in each market.” When the statement was made in early March, it was one of the first times we have heard a clear objective being stated. We want at least four players in every market.

Normally, if there is a clear objective, one might expect that people would start to align their actions in pursuit of that objective. Perhaps start by looking at where we see four healthy players competing and try to encourage the replication and expansion of those conditions.

Can the Canadian market support four facilities based mobile wireless carriers? Quite likely. In fact, seven of the 10 provinces have strong, well financed wireless players other than Rogers, TELUS and Bell. Indeed, in Manitoba and Saskatchewan, the so-called Big 3 share only a third of the market as they battle MTS and SaskTel.

Will we see a fourth national carrier? Not a chance. At least not with the national policy framework we have in place.

I would go further and state that in choosing its spectrum and auction policy, whether by intent or unintended consequence, Industry Canada effectively blocked a fourth national wireless provider.

How else can one explain Industry Canada’s designation of MTS and SaskTel as wireless new entrants? These are incumbent telephone companies that have held wireless spectrum since the beginning of time. With two-thirds of the market in their operating territory, each has the highest regional market share of any phone company in Canada. Yet both were eligible to bid – and win – in their home territory for “new entrants” spectrum. As I warned five years ago, Industry Canada effectively anointed these companies to be the spoilers for anyone with national aspirations.

Despite this, Industry Canada offered an extra five years of in-territory roaming incentives, reserved solely for new entrants that acquired national spectrum or combined with others to build a national consortium.

At the time, if the government had truly wanted a national providers, it might have put some or all of the new entrant block of spectrum up for sale as a single 40 MHz national block. It could have offered a 20 Mhz parcel. It could have put in place 10 year, or perpetual restrictions on the sale of the spectrum to Rogers, TELUS and Bell. It did neither. So why are we feigning surprise at the outcome, five years later, of seeing investors looking at every option to recover their capital assets?

The government was not considering strong global brands entering the Canadian market. Why else would the government have waited until after the AWS auction to reform foreign ownership legislation?

Regardless of messages being heard from Ottawa, the actual policies have encouraged the deployment of billions of dollars of capital in pursuit of regional players. There shouldn’t be surprises emerging from recent M&A activity. The government put in place a 5-year moratorium on the transfer of new-entrant spectrum to incumbents, and now that we are coming up on the five year mark, why is anyone surprised that the dealing has begun? Five years must have seemed like such a long time, five years ago.

The market is behaving the way one might expect, given the signals from Ottawa. When the government signaled uncertainty over spectrum license transfers, the uncertainty likely contributed to the urgency of Mobilicity’s decision.

It should have been a predictable outcome.

The lessons for Ottawa: Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.

I suspect this may come up more than once during the discussions at The 2013 Canadian Telecom Summit, taking place June 3-5, in Toronto. Have you registered yet?

It is way too easy to conclude that the plan for TELUS to acquire Mobilicity will result in a reduction in the level of competition in Canada’s wireless marketplace.

But that assessment is based on a superficial analysis.

Yes, one of the brands operating in a number of major cities may eventually disappear. But Mobilicity isn’t operating in any markets that don’t already have 5 or more other facilities based providers, with new entrants and incumbents battling for each customer.

The alternate scenario could include Mobilicity being shut down by its creditors. With losses of a million and a half dollars per week, Mobilicity’s backers have signalled that they are impatient for a deal to exit. After months of searching for a suitor, Mobilicity’s president and chief operating officer, Stewart Lyons, told Rita Trichur of the Globe and Mail that there are no other options.

We have spent a lot of time talking to a lot of people, including every single new entrant [carrier].

Stop to think about how the overall consumer marketplace will react to word that 250,000 Mobilicity customers woke up to phones reading “no service”, having to scramble to find a new service provider. We know that many people consider the activity of shopping for wireless services to be as appealing as a visit to the dentist. The damage to consumer confidence could impact the rest of the new players. How many consumers will simply decide that the price savings aren’t worth the risk of dealing with a service provider that is operating on the edge of financial security? All of the new entrants have been broadcasting their financial woes for the past few months. A network shutdown will clearly hit the remaining independent new entrants.

Then turn your mind toward the investment community. How will investors respond to being told that they cannot get the best deal for their money, that the company may have to be sold in a fire sale. With its accumulated tax losses, the best offer for Mobilicity will come from companies that can make use of those losses – that road leads to the doorsteps of the big three carriers. A rejection of the deal will impact more than just Mobilicity’s backers; Canada’s Industry Minister has been trying to drum up interest in market entry from investors around the world, in hopes of securing more bidders for the upcoming auction of the 700 MHz band. All of these potential global players will be watching to see whether they will face a friendly investment climate before they risk billions of dollars.

Culling the herd, allowing Mobilicity to be acquired quickly, painlessly by TELUS, may be precisely what is needed to strengthen the state of competition.

In two weeks, the leadership of Canada’s information and communications sectors will be gathering in Toronto at The 2013 Canadian Telecom Summit. The event will be covering these issues and so much more.

You need to be at The 2013 Canadian Telecom Summit, June 3-5, 2013. Have you registered yet?

Continuing Professional Development: Some of the time spent attending sessions at The 2013 Canadian Telecom Summit may be claimed as “Substantive Hours” towards LSUC’s CPD requirements.

Register today! Download the complete conference brochure here.

Not all companies report their financial metrics the same way. This became clear yesterday when international wireless carriers Vimpelcom and Orascom reported results that both showed data for their Canadian operation, Wind Mobile.

In the case of Vimpelcom’s 1Q13 results, we saw

Orascom also reported 1Q13 results yesterday, releasing its view of Canada’s Wind Mobile performance:

What is going on? Both companies are reporting the same subscriber figures; Vimpelcom rounds to the nearest thousand, while Orascom shows every subscriber. The change percentages differ – and frankly, I cannot reproduce the Vimpelcom change number. Clearly, Orascom took the growth in subscribers and divided by 1Q12 figures to come up with its report of change percentage.

But the more important question is how could both companies report different ARPU figures for Wind Mobile in 1Q13? Vimpelcom says it was $31.60; Orascom says it was $27.60. That is a $4.00 difference, representing a nearly 15% difference.

In today’s Globe and Mail, Rita Trichur got an answer from a Wind Mobile spokesperson who said the companies use different reporting methodologies.

What are the different ways that ARPU can be reported?

As the full name suggests, ARPU – average revenue per user – is a calculated average. Use revenues as the numerator, divide by number of users, et voila!

The differences are in what numbers are used for both the numerator and the denominator. Not all revenues are the same: does the company include non-recurring subscriber revenues in the numerator, such as handset sales, one time charges, etc.? In the denominator, different companies use different ways to count pre-paid subscribers. For example, if a prepaid card hasn’t been used in the recent past, it isn’t generating revenues, so should it be included in the ARPU calculation?

For financial reporting purposes, the most important consideration is consistency – enabling comparisons over time. As long as the method is unchanged between reporting periods, two companies can report the same key indicator differently, while both can be considered correct.

Yet another reason why care has to be used when trying to compare financial reporting data between different companies and different jurisdictions.

Spectrum policy issues are heating up as we approach the deadline for deposits for the 700 MHz spectrum auction. Will new entrants show up with deposits? Will rural Canadians actually benefit?

There is certain to be a lively discussion of wireless issues at a panel called “Unplugged: The next generation of wireless” at The 2013 Canadian Telecom Summit.

Earlier today, the moderator of the panel, Rita Trichur of the Globe and Mail, tweeted

Her story looks beyond the 700 MHz auction at the issues associated with the 3500 MHz band, spectrum that has been largely unused.

Internet service providers such as Xplornet Communications Inc. are accusing Rogers Communications Inc. and BCE Inc. of “hoarding” spectrum that they have held for years but failed to use. Now that those licences are up for renewal, Xplornet argues the companies’ ongoing control of those assets is stifling competition for Internet services in rural areas, to the detriment of some two million Canadians.

In an appearance on CBC’s The Lang & O’Leary Exchange, Open Media’s executive director, Steve Anderson, referred to Canada’s wireless policy as “incoherent”. [He went on to say things about Canada’s Industry Minister Christian Paradis, including unexpectedly colourful language from a registered lobbyist. Earlier in the interview, Mr. Anderson confused Former Industry Minister Jim Prentice, who led Industry Canada at the time AWS spectrum was set aside for new entrants, with Tony Clement, the Minister who preceded Paradis.]

As I have written before, the challenge Canadians face might be better described as drifting rudderless. Wireless competition and spectrum policy are among the areas that have suffered from the absence of a comprehensive national digital strategy. How does this impact investment in networks? How are Canadians competing in a global digital economy?

You need to be at The 2013 Canadian Telecom Summit, just 3 weeks away. Have you registered yet?

Continuing Professional Development: Some of the time spent attending sessions at The 2013 Canadian Telecom Summit may be claimed as “Substantive Hours” towards LSUC’s CPD requirements.

Register today! Download the complete conference brochure here.