Following up on my blog post from earlier in the week and to try to correct some serious errors in the main stream media, I thought it would be worthwhile to capture some references to the origins of the CRTC’s tangible benefits program.

One story suggested that the purpose of the tangible benefits program is “a sort of tax, a percentage of the purchase price, toward the development of the entire system” designed “to help to offset the negative effect that the resulting industry consolidation has on our viewing and listening options.”

There was a CRTC public notice issued in 1992 that provides a good discussion of the origins of the concept of tangible benefits to be paid on the transfer of ownership or control of a broadcast undertaking. I recommend reading the “Background” section of Broadcasting PN CRTC 1992-42, if you have an interest.

That section refers back to a 1977 decision by the CRTC where it stated:

The transfer of control of a licensed broadcasting undertaking frequently results in additional financial obligations being imposed, directly or indirectly on the undertaking involved. In such circumstances the Commission must be fully satisfied, before granting approval, that such a transfer will not affect the ability of the licensee to maintain existing broadcasting services; that it will benefit the subscribers and the communities concerned; and that it is in the public interest.

The 1992 public notice resulted in a determination in 1993 with the kernel of the policy in force today. It is noteworthy that there is considerable latitude to the breadth of expenditures that are permitted:

Tangible benefits generally fall into three broad categories: operating expenditures, such as in the areas of additional staff or programming improvements; capital expenditures for technical improvements; and grants and contributions to Canadian talent or program development funds.

The Commission considers that publishing a comprehensive list of acceptable benefits would be limiting, as many benefits that are accepted are tied to the particular circumstances of a transaction or a market.

The applicability of capital improvements proposed for Northwestel territory (as described in my blog post) could have been inspired by a statement in the CRTC’s 1993 document:

The Commission notes with respect to cable that it will also accept as benefits certain “normal course” capital expenditures identified in subsection 18(5) of the Cable Television Regulations, 1986 in cases where the applicant waives its right to submit fee increase applications for these items…

There are clearly competitive concerns that come into play as I mentioned earlier in the week. But it was inappropriate to suggest that the proposal is an attempt by Bell to weasel out of its tangible benefits obligations.

As I wrote last December, the CRTC had harsh words for the state of Northwestel’s aging infrastructure in its review of regulatory framework for the north (Telecom Regulatory Policy CRTC 2011-771). In that Decision, the CRTC required Northwestel to file a network modernization plan.

Three months later, BCE moved to acquire Astral Media for about $3 billion. As part of the regulatory approval process, the CRTC requires tangible benefits to be proposed, as described in the public notice released earlier today:

Under the Commission’s tangible benefits policy, applicants are required to propose tangible benefits amounting to at least 10% of the value of the transaction for all conventional and specialty television assets and 6% of the value of the transaction for all radio assets.

The Commission, in applying its benefits test, has been consistent and rigorous in requiring that (1) expenditures proposed as tangible benefits be truly incremental; (2) such expenditures be directed to projects and initiatives that would not be undertaken or realized in the absence of the transaction; and (3) applicants demonstrate that expenditures proposed as tangible benefits flow predominantly to third parties, such as independent producers.

BCE has proposed a tangible benefits package valued at about $200M, which includes $40M allocated to funding parts of the Northwestel modernization program. I was initially surprised to see that BCE has proposed that allocation. After all, the network modernization plan would have been required regardless of whether Northwestel’s parent company, BCE, decided to purchase Astral Media.

This is why it is important to read the filings. It is one thing to develop a network modernization plan; it is something else to fund that plan and implement it.

48. This Modernization Plan is very aggressive, but it reflects Northwestel’s desire to deliver the most possible benefits to the residents of the North in as short a timeframe as possible. However, absent the Astral funding, this very ambitious and far reaching Modernization Plan cannot be achieved.

49. Approval of BCE’s proposed uses of the Astral public benefits funding is the subject of a separate regulatory proceeding currently before the Commission. Northwestel respectfully requests that the Commission carefully weigh the considerable public benefits that would be realized through the proposed use of $40 million of Astral pubic benefits funding as part of the Modernization Plan. The Company reiterates that the expansion and upgrading of telecommunications and broadcasting infrastructure in the far North is a very capital intensive undertaking which for many communities cannot be economically justified. Such circumstances demand bold vision and choices to realize that which would not otherwise be possible. The Company strongly urges the Commission to approve the Astral funding component of the Modernization Plan as contained in BCE’s public benefits filings.

The CRTC opened the north to competition (as I wrote here), which created interesting challenges for a market friendly resolution to funding Northwestel’s upgrades. Without its monopoly, Northwestel is less able to finance the uneconomic portions of its upgrade plans. On the other hand, in a multiple service-provider environment, how can the CRTC grant the benefits funding without distorting the competitive landscape?

I am still hoping that a major carrier will show the leadership to launch a program for low income households to acquire connected computers. Perhaps this can be a fallback tangible benefits program?

The CRTC hearing opens September 10.

Twitter forces a discipline in writing. With only 140 characters, I have learned to review my tweets, removing extraneous words like “that” or future perfect sentence structures. There are some who write tweets that read like old classified ads; I lack the patience to decipher these. Others who write extended tweets marking them 1/4, 2/4… as though we follow them – and only them.

So I have an appreciation for Tweets that are especially concise in expressing a thought, such as Karen Selick’s exchange last night with Jesse Kline:

@accessd Govt can’t leave anything alone. If they’re not subsidizing something, they’re prohibiting it.

— Karen Selick (@kselick) July 8, 2012

I have precisely this concern with the national digital strategy.

Over the past few years, I have written about the potential for unintended consequences when government tries to pick winners, such as: “Weaning Canadians from government intervention“; and, “Toronto ICT plans“. I am continually troubled by the inequities of government handouts to certain businesses, which inevitably mean that one industry participant is receiving a subsidy from their competitors. I hate seeing Ministers flying coast to coast handing out cheques, while spending as much (if not more) on the photo op itself.

What are the areas that truly need the leadership role or guiding hand of government? Will government be able to resist the temptation to intervene in areas that should be left alone? Can we see leadership without increased spending?

It is summer camp season – a seasonal peak for post offices in cottage country as kids are forced to write letters and parents try to sneak snack foods in their packages to kids who got shipped off for the summer.

When my kids were of camping age, pen and paper were the only means of communicating with their camp. The nearest internet connection was a 30 minute drive away from the camp. We would sneak fax messages in through the camp nurse – an extended family member.

Today, my informal survey of friends indicates that different camps have different policies on the use of high tech for communicating home. A colleague tells me that his kid actually needs to write letters. He says that wifi and mobile devices are banned at the camp: “kids would never leave their cabins.”

I have been trying to picture the conversation that counselors have with their campers. Here is a pencil and paper. You are going to write letters to your parents and your sister and your grandparents. We will put a stamp on it and charge your tuck account $1 and it might take 7 to 10 days for the letter to get delivered. No, your parents won’t reply right away and there is no confirmation that the message was ever received.

LOL

Forget roughing it by going for a 7 day canoe trip with no flush toilets or hot showers; are kids actually managing to go without their technology for the summer?

Think about it for a few minutes. Could you go for a month with no internet or phone connectivity, relying on postal service alone?

Microsoft has released a research paper: “You’re Capped!” Understanding the Effects of Bandwidth Caps on Broadband Use in the Home [pdf, 362 KB] that is an important read. Its abstract says:

Bandwidth caps, a limit on the amount of data users can upload and download in a month, are common globally for both home and mobile Internet access. With caps, each bit of data consumed comes at a cost against a monthly quota or a running tab. Yet, relatively little work has considered the implications of this usage-based pricing model on the user experience. In this paper, we present results from a qualitative study of households living with bandwidth caps. Our findings suggest home users grapple with three uncertainties regarding their bandwidth usage: invisible balances, mysterious processes, and multiple users. We discuss how these uncertainties impact their usage and describe the potential for better tools to help monitor and manage data caps. We conclude that as a community we need to cater for users under Internet cost constraints.

The paper opens with a recognition that ISPs are looking at usage sensitive pricing models because they are faced with “increased network congestion from both the rise in bandwidth intensive applications and the growing number of Internet users”. The study observes that caps exist in countries such as “Australia, Canada, Turkey, South Africa, the U.K., and the U.S.” and are not restricted to home broadband but are also applied to mobile internet. The paper suggests that the pricing model is likely to persist.

we argue that it is time to re-examine the assumption that for end-users the only cost associated with network use is speed.

The study concludes that the IT community might want to rethink assumptions about unlimited bandwidth in the design of applications and devices. The paper is a refreshing contribution to the discussion on usage sensitive pricing models.