The budget implementation bill has introduced the expected changes to open Canada’s telecom market to more liberalized foreign ownership.

Bill C-38, the Jobs, Growth and Long-term Prosperity Act, contains provisions to amend the telecom act to permit foreign ownership of carriers that have less than 10% share of the total Canadian telecommunications market. This is accomplished by introducing an “or” clause (part c) to the eligibility section:

2. A Canadian carrier is eligible to operate as a telecommunications common carrier if

1. it is an entity incorporated, organized or continued under the laws of Canada or a province and is Canadian-owned and controlled;
2. it owns or operates only a transmission facility that is referred to in subsection (5); or
3. it has annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues, as determined by the Commission, from the provision of telecommunications services in Canada.

This definition is basically designed to cover all current telecom carriers in Canada other than Bell, Rogers and TELUS.

Foreign owned carriers can grow beyond the 10% limit, as long as it isn’t through acquisition:

6. A Canadian carrier that is eligible to operate under paragraph (2)(c) remains eligible to operate even if it has annual revenues from the provision of telecommunications services in Canada that represent 10% or more of the total annual revenues from the provision of telecommunications services in Canada as long as the increase in its annual revenues from the provision of telecommunications services in Canada to 10% or more of the total annual revenues from the provision of telecommunications services in Canada did not result from the acquisition of control of another Canadian carrier or from the acquisition of assets used by another Canadian carrier to provide telecommunications services.

Foreign ownership will be among the areas discussed at the Regulatory Blockbuster at The 2012 Canadian Telecom Summit, June 4-6 in Toronto.

Is the rural-urban digital divide growing?

In the text of his speech to Canada 3.0 earlier this week, Industry Minister Christian Paradis is quoted saying:

We know Canadians lead the world in Internet use.

But there remains a gap between rural and urban Canadians in terms of access to leading-edge broadband.

The press release that accompanied his address used slightly different language:

The Minister underlined the Harper Government’s commitment to creating a competitive and viable digital sector, promoting greater adoption of technology across the entire Canadian economy and bridging the growing gap between urban and rural Canadians.

In the text of the speech, the Minister did not use the adjective “growing”. A review of the video of the actual speech seems to correspond to the distributed text, stating that there is a gap, but not calling it a “growing gap.”

In fact, the digital services available to rural and urban Canadians are increasingly similar, thanks to massive levels of investment by the private sector, supplemented by strategic investments by various levels of government. Xplornet has begun to offer service on its fourth generation satellite, and rural subscribers also have access to savings through bundles, thanks to a Shaw, Xplornet joint marketing agreement.

If there is a “growing gap” in adoption of digital services, it is based on household income. That is a problem that spans our vast national geography.

For Canada to lead in a global digital economy, we need to develop digital literacy and access among low-income Canadians. Nearly half of the households in the lowest income quintile have no computer at home, let alone a broadband connection. That is more than a million households with no computer.

To bridge that gap, we need a program that can work in the urban core of Canada’s largest cities as well as in remote regions. The information technology and communications services industries need to do more to expand opportunities for economically disadvantaged households.

We need to start with ensuring that all school aged kids have access to a connected home computer. That is an objective that is measurable and attainable. The US introduced a program last fall that has no government funding, just leadership.

In his address at Canada 3.0, the Minister indicated that the long overdue national digital strategy will be released later this year and will include components to address a literate workforce: “when we put that strategy forward, it will only succeed if industry as well as federal, provincial and territorial governments work together.”

Greg O’Brien, editor of Cartt.ca, engaged the Minister following his address in Stratford.

I asked: “Is there a way for your office to say ‘hey Rogers, hey Bell, hey CRTC, let’s get together and get this program put together where we can, for $10 a month, get broadband to low income families in Canadian cities, who are being bypassed by the digital world?”

His answer: “The principle is what I said: We don’t want any (digital) gap. We want to have as (many) Canadians as possible to have access to the internet, rural, urban, and of course if there are some other possibilities that could be looked at, why not? We have to work together. We have to understand the provinces, the federal government, the private sector – this is exactly why I said let’s work together so if some interesting things are worth it to look at, this is something we can look at for sure. If there are some good ideas that can be repeated here, why not?”

You should read Greg’s Commentary: Canada 3.0 COMMENT: Is Canadian broadband for all, do-able? Maybe, says the Minister.

Minister Paradis will be delivering a keynote address on June 5 at The 2012 Canadian Telecom Summit (June 4-6 in Toronto). Greg will be the moderator of the Regulatory Blockbuster panel earlier that day. On June 6, there is a panel looking at Building a Digital Canada.

We’ll be looking for an action plan to address the real digital divide – based on income.

Industry Canada issued its Consultation on the Licensing Framework for the 700 MHz Band, proposing the use of a Combinatorial Clock Auction (CCA) format to replace the Simultaneous Multiple Round Ascending that has been used for 5 of the 6 auctions held to date.

The proposed CCA format has many advantages. The exposure risk is eliminated, anti-competitive behaviour is reduced, substitution among similar licences is enhanced and the auction duration will likely be reduced.

The proposed switch to a new auction format appears to be a recognition by Industry Canada that there were problems with the last format, as the incumbent carriers had charged:

The use of a set-aside can also impair the auction process. As Rogers, Bell and TELUS all illustrated, the set-aside created gaming opportunities that were exploited by almost all the new entrants, removing hundreds of millions of dollars from the wireless industry.

The department will hold an information session for potential bidders on May 30 (registration required by May 14). The session will be held in Ottawa, but it will also be webcast.

And it will certainly be a source of discussion and debate at The 2012 Canadian Telecom Summit on June 4-6 in Toronto. Have you registered yet?

 

I have just returned from a trip to Israel where I had an opportunity to engage briefly with Gideon, a friend of my son, a graduate student at the Technion. His research combines mathematical game theory with development of inter-carrier agreements, so my son thought that we should meet.

During an interesting range of discussions, he and I shared different perspectives on competition in telecommunications. How many carriers are enough? How much profit is fair? Why are roaming rates and SMS charges so high?

But prices exceeding costs are not unusual in other businesses. For example, I paid $4 at a snack bar for a bottle of cola – coloured water, flavour and sugar. We routinely pay huge mark-ups on coffee.

There are competing options for travellers. I turned the mobile network connectivity for my Blackberry off for the past week, sync’ing when I was within range of a WiFi hotspot; I have prepaid SIM cards for a number of countries that are frequent destinations. Yes, lower priced roaming might have been convenient for people in Canada trying to reach me, although the locals in Israel would have needed to international long distance prices to reach me. So I chose to pay for great coffee and get free WiFi, rather than pay for higher roaming rates for my data connectivity.

But, I also tried out a Wind Mobile phone while I was there. Wind has recently enabled roaming with Orange and I was happy to test the arrangements for them. When I turned on the phone, I received a message that clearly set out the terms of use:

Welcome to Israel! FYI: a call home is $4/min, a text is $1.50 & data is $20/MB. For CS dial 611 &  for VM 777 as usual. Enjoy your visit!

Clear information about the rates enabling consumers to make choices about how to deal with their communications needs.

Lots of consumers choose international mobile services based on trade-offs. Paying for convenience; value based pricing. That is how the market works. Isn’t the fact that some people pay for roaming indicative of the products being priced to market? Of course, it might be great for consumers if overseas roaming rates were pennies, not dollars, but there are alternatives, like buying a local SIM card.

Gideon and I chatted about profits in less capital intensive businesses, some related to communications and content; why do people harbour such resentment for profit by some sectors while casting no slings and arrows toward firms making outrageous fortunes?

Why such different perspectives?

The Canadian Telecom Summit, June 4-6 in Toronto, is where Canada’s information and communications stakeholders exchange perspectives and engage in a frank exchange of ideas. You should plan to attend.

Have you registered yet?

Seeking Alpha reports that US wireless companies lost customers in the first quarter.

According to Phillip Cusick, a JPMorgan Chase & Co analyst in New York, US wireless carriers shed a combined 20,000 contract customers in the first quarter.

Where did they go?

Is this a single quarter aberration or the beginning of a new trend? Does the ability of employees to bring their own device to work result in fewer subscriptions overall? Is pre-paid gaining at the expense of post-paid customers? Are customers looking for increased flexibility and avoiding contracts?

To find out more about trends in communications, you need to come to The 2012 Canadian Telecom Summit, June 4-6 in Toronto. Have you registered yet?