Amid the releases of year-end prognostication, the release of the Rogers Innovation Report caught my eye. The Report is said to be the first of what will be a regular survey exploring Canadians’ habits and views on technological innovations.

Highlights of the predictions for 2012 are said to be:

• Smaller and lighter laptops
• Faster network speeds
• Bulging back pocket begone
• Turn on the lights with your smartphone
• Smartphone love
• Living in the cloud
• Books are here to stay

There is data in the release to back up each of these statements. I’m not sure I agree with the interpretation of “79 per cent of those surveyed expect that more people will use their smartphones to make purchases over the next few years” that has been translated into a reduction in the number of credit cards in our wallets. There are competing views of how “Mobile Commerce” will evolve – a subject that we will explore at The 2012 Canadian Telecom Summit.

Nearly 2 in 5 Canadians say they take their smartphones to bed or have them on the nightstand and a quarter of us use our smart phones in the bathroom. Remember that information when you are tempted to borrow someone’s phone. Is there a disinfectant for electronics?

Canada’s policy makers should take a look at AT&T’s comments following the decision to abandon the proposed acquisition of T-Mobile. The title of the press release says it all: “AT&T Ends Bid to Add Network Capacity Through T-Mobile USA Purchase”.

To meet the needs of our customers, we will continue to invest. However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.

AT&T was prepared to spend almost $40B in the T-Mobile purchase, but the resultant concentration of the US mobile marketplace was more than regulators could accept.

But there are lessons for those that tightly control the availability of spectrum in the US and Canada as well. Carriers on both sides of the border have been challenged by massive shifts in network demand from smartphones and mobile computing. In the US, the prime 700 MHz block was auctioned off nearly 4 years ago – Canada still hasn’t firmed up plans for the auction, putting us 5 years behind assuming the rules get released early in the new year.

The mobile Internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces.

The Canadian government has an ever growing list of issues to address: foreign investment in telecom, spectrum, digital literacy and more. Will the new year bring a more proactive approach to the transition of Canada’s digital economy?

The CRTC is opening the north to competition in May, 2012. On Wednesday, I wrote about part of the CRTC’s regulatory framework Decision for Northwestel. In that post, I talked about the performance improvement plan that the Commission is imposing, requiring Northwestel to prepare and file detailed capital plans to upgrade aging infrastructure.

The other side of the Decision is starting the process to open the final frontier to competitive entry by alternate local phone service providers. Initially, the communities of Fort Nelson, Inuvik, Iqaluit, Whitehorse and Yellowknife will be required to offer number portability within 6 months of a competitor’s request. Number portability is expected to be introduced in remaining communities as the network is upgraded.

While there will be competitive pressures on Northwestel’s top line revenues, the CRTC denied a request to raise local rates for business and consumers, requiring Northwestel to apply cost reductions and efficiency gains instead.

Who will want to compete in these small, remote markets? Watch for SSi to take the lead. It has expressed a willingness to start with line side interconnection in order to get off to an early start. Jeff Philipp, SSi’s founder said in response to the CRTC Decision:

SSi strongly believes competition should be open across Canada, for the benefit of all.  With today’s decision, the CRTC has clearly ruled on the side of of choice and innovation.

Headquartered in Yellowknife, SSi has been offering broadband services in more than 60 northern communities. Expect SSi to take the lead in offering a range of alternative services, perhaps in partnership with familiar players from larger urban centres in the south.

The CRTC is threatening disconnection of a service provider for failure to comply with registration requirements.

In a Public Notice, the CRTC is hauling Brama Telecom, a Richmond Hill, Ontario based service provider, to a public hearing to be held in Gatineau on March 22, 2012 for having failed to comply with the requirements to register with the Consumer Complaints Commissioner. It was just over a year ago that the CRTC expanded the scope of the mandate for the CCTS, requiring registration for virtually all telecom service providers, regardless of their size and including internet services.

The CRTC’s is using the tools available to it for enforcement of the requirement. Brama will have to show cause:

• why the Commission should not order disconnection of Brama’s telecommunications services for failure to comply with the requirement to become a member of the CCTS, as set out in Telecom Decision 2010-921 and Telecom Regulatory Policy 2011-46; and
• why the Commission should not issue a mandatory order pursuant to section 51 of the Act with respect to Brama’s failure to submit information to the Commission as required by subsection 37(2) of the Act.

Section 51 of the Act says:

51. The Commission may order a person, at or within any time and subject to any conditions that it determines, to do anything the person is required to do under this Act or any special Act, and may forbid a person to do anything that the person is prohibited from doing under this Act or any special Act.

Subsection 37(2) says:

37. …

(2) Where the Commission believes that a person other than a Canadian carrier is in possession of information that the Commission considers necessary for the administration of this Act or any special Act, the Commission may require that person to submit the information to the Commission in periodic reports or in such other form and manner as the Commission specifies, unless the information is a confidence of the executive council of a province.

What makes a service provider operate with such defiance of the rules? The Public Notice indicates that Commission and CCTS staff held discussions with representatives of the service provider in August, and in a subsequent letter, the Commission ordered Brama to produce by August 24:

• proof that it had become a member of the CCTS or arguments demonstrating that Brama does not provide services within the scope of the CCTS’s mandate; and
• identification of the service providers from which Brama obtained service from as well as a list of the services provided to it.

It has not complied.

So now, it has been ordered to Ottawa on March 22, 2012. In addition, all service providers in Canada have effectively been told to check their records to see if they are providing any services to Brama and if so, describe the services to the CRTC by February 2.

Will Brama show up in March or risk finding itself in Court?

The CRTC has decided that “additional regulatory oversight is required” for Northwestel, in the wake of the Commission’s review of its regulatory framework.

The Decision is unusually harsh in its tone, with such statements as:

The Commission is concerned that Northwestel’s shareholders have benefited from the price cap regulatory framework to a far greater extent than its customers. Since 2007, Northwestel has received over $20 million in annual subsidy for the provision of service in remote communities and its annual income from operations has nearly doubled to $69.3 million in 2010. Despite this, the company has failed to make the necessary investments in its network. Northwestel’s infrastructure is aging and services comparable to those provided in the rest of Canada are unavailable in many remote communities. The Commission is also concerned that this situation has likely affected the quality, reliability, and choice of services available to customers, as evidenced by a number of outages in various communities and the lack of service options.

As a result, the CRTC is going to be putting Northwestel through what can best be described as a performance improvement plan. The first part of that process appears to be the first telephone company construction program review that I can remember in about 20 years. Gather round, kids. The old man is going to tell tales of when he was younger.

Back in the olden days, telephone companies submitted their capital program for regulatory review. Since companies’ rates were based on an allowed rate of return on their capital assets, the regulator wanted to be assured that the spending was appropriate. The public would be represented by various interest groups who would pore through mountains of paper and cross-examine technologists on why various lines of spending were necessary. Afterwards, the CRTC would make a change here and there and issue a finding phrased in the double negative: “we are unable to find the program to be unreasonable.” I use to enjoy the process, and there were a few restaurants in Vancouver and Ottawa that benefited from my participation in the old Bell and BC Tel review meetings.

In paragraphs 39-42 of today’s Decision, the CRTC has launched precisely this kind of review for Northwestel:

… additional regulatory oversight is required in the short term to allow for a more holistic review of Northwestel’s regulatory framework. Consistent with that determination and in order to address its concerns with Northwestel’s aging infrastructure, the Commission finds it appropriate to include an examination of Northwestel’s network modernization plan as part of that review.

I’ll have more on competitive aspects of today’s ruling later.

The CRTC has sent a strong message. The Policy Direction tells the CRTC “when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.”

The measures in today’s Decision reflect a belief that light touch regulation has been unable to deliver telecommunications services of a quality consistent with the policy objectives set out in the Telecommunications Act.  Northwestel is on probation, under a heavy regulatory regime and while simultaneously facing new competition.

How will Northwestel respond? How long will it take for the company to redeem itself?