Do screens make teens lonely? A recent article by Noah Smith got me thinking about the impact of so much screen time on our kids.

In “Honestly, it’s probably the phones”, Smith argues that the smartphone is the most plausible explanation for teenage unhappiness.

Doesn’t having access to all of their friends and acquaintances at all times via a device in their pockets mean that kids are less isolated than before?

Well, no. As the natural experiment of the pandemic demonstrated, physical interaction is important. Text is a highly attenuated medium — it’s slow and cumbersome, and an ocean of nuance and tone and emotion is lost. Even video chat is a highly incomplete substitute for physical interaction. A phone doesn’t allow you to experience the nearby physical presence of another living, breathing body — something that we spent untold eons evolving to be accustomed to. And of course that’s even before mentioning activities like sex that are far better when physical contact is involved.

He goes on to say that there is nothing about smartphone ownership that forces users to stop getting together in person. But, he provides several reasons why smartphones reduce the incentives:

• Distraction — “the rise of smartphones was also the rise of “phubbing”, i.e. when people go on their phones instead of paying attention to the people around them”
• Behavioral ease — “when your phone is right there in your pocket, it’s easier to just text a friend instead of going and hanging out”
• Network effect – “If 20% of people would rather be on their phones, that reduces everyone else’s options for in-person hangouts by 20%.”

Professor Jean Twenge of San Diego State University wrote an article in 2019, “Teens have less face time with their friends – and are lonelier than ever”.

“It turns out that today’s teens are socializing with friends in fundamentally different ways – and also happen to be the loneliest generation on record.”

Written before the impact of the pandemic, Professor Twenge observed, “Today’s 10th-graders go to about 17 fewer parties a year than 10th-graders in the 1980s did. Overall, 12th-graders now spend an hour less on in-person social interaction on an average day than their Gen X predecessors did.”

The study found that as the decline in “face-to-face time” accelerated after 2010, feelings of loneliness among teens increased dramatically. At the same time, research has found that teens who spend more time on social media also spend more time with friends in person. That should lead us to wonder why in-person social interactions have been going down, while social media use has increased.

The social teens are still more likely to meet up in person, and they’re also more active on their accounts. However, the total number of in-person hangs for everyone in the group drops as social media replaces some face-to-face time.

So the decline in face-to-face interaction among teens isn’t just an individual issue; it’s a generational one. Even teens who eschew social media are affected: Who will hang out with them when most of their peers are alone in their bedrooms scrolling through Instagram?

This study was published in March of 2019, a year before the world transitioned to a period of virtual social interaction.

In the face of a possibility that smartphones are behind the rise in teen unhappiness, Noah Smith suggests that our best move may be to simply wait for society to adapt to the changes effected by social media.

Perhaps that is the most pragmatic approach. Collectively, we aren’t going to put the smartphone genie back in the bottle.

Still, these articles should serve as important warning flags for parents, teachers and all those concerned about the mental well-being of a generation raised on always-on connected devices.

Some have argued that teens are simply choosing to communicate with their friends in a different way, so the shift toward electronic communication isn’t concerning.

That argument assumes that electronic communication is just as good for assuaging loneliness and depression as face-to-face interaction. It seems clear that this isn’t the case. There’s something about being around another person – about touch, about eye contact, about laughter – that can’t be replaced by digital communication.

The result is a generation of teens who are lonelier than ever before.

Many of the headlines last week talked about the CRTC’s 10% interim reduction on wholesale internet rates as part of the Commission’s Notice of Consultation for its latest review of the wholesale internet access framework. The bigger impact story may be in the CRTC’s preliminary view that access to FTTP (fibre to the premises) over aggregated wholesale HSA (high speed access) should be mandated on a temporary and expedited basis, “until the Commission reaches a decision as to whether such access is to be provided indefinitely.”

This was a significant reversal of long standing CRTC policy.

The temporary and expedited nature is noteworthy. After all, let’s say the CRTC, following an evidentiary-based proceeding, reverses its “preliminary view” and decides that its long standing policy was indeed correct, that aggregated access to the FTTP networks could harm incentives to invest in extending FTTP to additional communities. How will the CRTC reverse this temporary and expedited order? Does anyone think the CRTC would actually order companies to reverse these customer connections?

How does that genie go back in the bottle?

In a note to investors about last week’s Decisions and Notice of Consultation, Bank of America wrote:

This wholesale HSA review was anticipated. The outcome could take over a year to complete. We believe it is likely to result in lower wholesale rates and increased access to fiber-to-the-home (FTTH) through an aggregated HSA model where independent ISPs connect to a central point of interconnection to access the facilities-based provider’s entire operating territory (transport and last mile). We think the key will be at what rates. Any incremental reduction to the existing rates helps wholesales. Small changes should help wholesales and have a minimal impact on investment. The risk for the CRTC is overshooting. If rates are set too low, incremental network investment will suffer and consumers’ long-term interest will be harmed. After an impressive multi-year industry investment in fiber, the industry’s ROIC is down materially from five years ago. In our opinion thoughtful regulation will consider the returns such a substantial investment requires (above the cost of capital) to avoid destroying value while encouraging ongoing investment. The industry has a good track record of balancing the demand of shareholders, subscribers, the regulator, and policy makers.

With last week’s Telecom Decision CRTC 2023-53, the CRTC flip-flopped once again on its policies regarding aggregated versus disaggregated wholesale internet access.

Let’s start by defining those terms. Wholesale-based internet service providers (ISPs) resell a portion of a facilities-based telecom service provider’s network. As the CRTC described them in 2015:

56. Aggregated wholesale HSA service provides competitors with high-speed paths to end-customers’ premises throughout an incumbent carrier’s entire operating territory from a limited number of interfaces (e.g. one interface per province). This path includes an access component, a transport component, and the interface component. The inclusion of the transport component enables competitors to provide their retail services with minimal investment in transmission facilities.
57. Disaggregated wholesale HSA service would provide competitors with high-speed paths to end-customers’ premises served by an ILEC central office or a cable company head-end through a local interface at the ILEC central office or cable company head-end. These paths include an access component and the interface component.

Obviously, it is a lot easier for an ISP to get up and running with just one connection to the telecom service providers. On the other hand, the wholesale-based ISPs have said they can add more value and product differentiation by connecting closer to their customer. However, in its October 2020 intervention in the CRTC’s consultation examining network configurations for disaggregated wholesale internet access, CNOC complained about the cost of connecting to all of the central offices or head-ends.

Since at least 2010, ISPs have promised to climb the ladder of investment. The CRTC and Competition Bureau have each endorsed policies that maintain incentives to promote investment in telecommunications facilities.

Unfortunately, the preliminary view of the CRTC in its Notice of Consultation will see ISPs climbing down that ladder, heading in the wrong direction.

Let’s look at the history of moving back and forth between aggregated and disaggregated wholesale internet access.

• On – Requested by Teksavvy in 2009/2010 CRTC Wholesale Consultation 2009-261: “The problem with the current aggregated services of both the ILECs and the cable carriers is that it forces a lot of the characteristics of those services to be flowed through to the wholesale customers of the ILECs and cable carriers, which really limits the ability of competitors to innovate and offer new differentiated services.” (Counsel for Teksavvy in response to question from CRTC Chair)
• Off – Request for disaggregated denied by CRTC Policy 2010-632: “The Commission is not persuaded that the ILECs and cable carriers should provide new wholesale access services – in the case of the ILECs, an ADSL access service located at the central office, and in the case of the cable carriers, a local head-end-based cable access service. In the Commission’s view, there is no convincing evidence to indicate that there would be a substantial lessening of competition in the absence of these services.” Notably, there is a dissent appended to that CRTC determination, where Commissioner Denton describes disaggregated access as “a technical arrangement permitting significant service innovation, by allowing specialist carriers to differentiate significantly their service offerings from the underlying carrier.”
• On – July 22, 2015 CRTC Policy (2015-326): “the provision of aggregated services will no longer be mandated and will be phased out in conjunction with the implementation of a disaggregated service. Incumbent carriers are directed to begin implementing disaggregated wholesale high-speed access services, in phases.”
• On – May 27, 2021 CRTC Press release: “The existing model, which is an aggregated high-speed access service, is in the process of transitioning to a disaggregated high-speed access service. This will enable competitors to access the fibre-to-the-home networks of the large companies and offer their customers faster Internet speeds and more services for all Canadians… Since 2016, the CRTC’s objective has been to complete the transition to a disaggregated wholesale model for access to the large companies’ high-speed broadband networks. This model will foster greater competition and further investments, so that the industry can better serve the needs of Canadians.”
• Off – March 8, 2023: CRTC Decision (2023-53): “The Commission finds that the disaggregated wholesale high-speed access (HSA) service framework has not fulfilled its mandate and requires reconsideration. The Commission determines that the network configuration for disaggregated wholesale HSA services will remain in Ontario and Quebec pursuant to existing tariffs and will not be introduced in other markets at this time.”

A lot of engineering and regulatory resources were invested developing these wholesale internet access schemes. The importance of consistency and predictability in CRTC determinations cannot be stressed enough, especially in consideration of the capital intensive nature of telecommunications. The new Policy Direction speaks in terms of predictability: “The Commission should ensure that its proceedings and decisions are transparent, predictable and coherent.”

As the CRTC moves forward with its wholesale services consultation, Bank of America said, “the key will be at what rates.”

Last week, I wrote about the difficult tension in seeking increased investment while maintaining, if not improving, affordability. We should measure success in telecommunications competitiveness by how we approach and achieve these often competing objectives: quality, coverage and price.

There is still much work to be done to extend the reach of broadband networks and to upgrade existing facilities. That will require billions of dollars of additional capital investment. That investment is being made by Canada’s facilities-based operators.

For that to move forward, government policies and regulation have to preserve that delicate balance between lowering consumer prices, while preserving incentives for investment to extend and enhance Canada’s high quality networks.

You can’t measure competitiveness or competitive intensity simply by looking at prices or counting the number of competitors. Measuring competitiveness in the telecommunications industry can be complex and may involve multiple factors.

In a recent interview, the CEO of telecommunications supplier Ericsson said that Europe’s industry structure is “probably unsustainable”.

Börje Ekholm told CNBC, “I do believe Europe needs to consolidate.”

Mr. Ekholm said that in countries such as the US, China and India, consolidation had meant there were now just two or three operators nationwide. In Europe, he said there are “200 operators, pretty much four plus in almost every country. It is an industry structure that is probably unsustainable and that needs to be addressed.”

The issue is one of financial viability. “The big problem in Europe is really that our customers can simply not afford to build out the networks and I think that is going to hurt European competitiveness long term.”

As Ericsson’s CEO suggests, telecommunications is an economic enabler. Absent the macro economic conditions to encourage investment in networks, the overall competitiveness of the national economy can suffer. Protecting competition doesn’t mean protecting the number of competitors.

Once again, the words of previous Minister Navdeep Bains come to mind.

So our government understands that Canadians want three things from their telecom services.

• Quality. Is the service fast enough to do what I want it to do?
• Coverage. Is the service available where I want it to be?
• and lastly, Price. Is this service affordable?

These three areas are clearly where providers need to compete and that’s why our Government is doing our part to promote competition and investment.

In “Quality, Coverage And Affordable Prices”, I wrote, “There is a difficult tension in these objectives, seeking increased investment while maintaining, if not improving, affordability.”

How we approach and achieve these 3 outcomes: quality, coverage, and price, is the way we should measure success in telecommunications competitiveness.

The CRTC has launched yet another consultation, saying “its current approach is not meeting its objective of encouraging more competition in the Internet services market.” Telecom Notice of Consultation (TNC) CRTC 2023-56: Review of the wholesale high-speed access service framework, starts off with an immediate (interim) reduction in existing wholesale rates “that reflects a 10% decrease in the costs of traffic-sensitive components”. Revised tariffs are due March 17.

The Commission invites comments on several issues, including its preliminary views that (i) the provision of aggregated wholesale HSA services should be mandated; (ii) access to fibre-to-the-premises (FTTP) facilities should be provided over these services; and (iii) the provision of FTTP facilities over aggregated wholesale HSA services should be mandated on a temporary and expedited basis, until the Commission reaches a decision as to whether such access is to be provided indefinitely.

The first round of comments are due April 24.

I will have more comments on this proceeding over the coming weeks and months.

In the meantime, I’ll close with this observation (that I have cited previously). Dr. Christian Dippon has written, “Quite simply, a market cannot both be noncompetitive and offer some of the best mobile wireless services in the world.” The comment is as relevant for wireline as it is for wireless.

Last week, I looked at “The evolution of broadband services” and I thought it would be worthwhile to examine some of the implications of those trends.

As we saw in the subscriber growth figures, the overall market is maturing as broadband penetration rates approach saturation. That has important implications for industry participants. Recent investment analyst reports have highlighted the challenges for some carriers facing slowing growth, such as BMO Capital Markets February 23 report (Soft Q4 Reflects Mature Market) and Scotiabank’s February 24 report (Quebecor – Expansion Strategy Is Needed To Return To Growth). BMO wrote

Quebec market mature and competitive. Quebecor’s results over the past six quarters reflected a slowing growth profile based on two dynamics; 1) the maturation of its wireless franchise (which has reached its natural level of 25% share in a four player market); and 2) increased wireline competitive intensity as BCE is aggressively capturing share (reflecting its scale in its FTTH fibre footprint).

How can service providers grow their businesses in such an environment?

Let’s take a look at the CRTC data showing the evolution of consumer broadband services.

Consumers are choosing to subscribe to higher speed services, with three quarters of Canadians subscribing to broadband services delivering download speeds of more than 50 Mbps in the third quarter of 2022; sixty percent subscribe to speeds over 100 Mbps, up 10 percentage points from a year and a half earlier, when only half of Canadian households subscribed to broadband services over 100 Mbps.

Consumers have demonstrated a willingness to pay for faster broadband. That requires investment, but it is investment that pays off with higher revenues. Therein is one of the common sophomoric errors made by some telecom industry critics who confuse price with ARPU (Average Revenue Per User). In fact, the price of higher speed services has declined over time, which is one of the reasons that more consumers are electing to upgrade their connection to a faster service. Between third quarter of 2019 and third quarter 2022, average monthly downloads nearly doubled (from 204.8 GB to 394.4 GB). In the same three year period, average monthly uploads increased nearly 50% (from 25 GB to 34 GB).

The mix of customers at each product tier has changed for many carriers, transitioning toward higher speed premium services as consumers select a connection that delivers the best value for their steadily increasing connectivity needs. The Scotiabank report observed that Bell is spending close to $20B on its FTTH (Fibre to the Home) strategy, to bring FTTH to 9 million premises by 2025.

One way a carrier can grow its business is by investing, perhaps to be able to offer more advanced services, or to expand networks to underserved areas.

Another approach is by acquisition. As some industry participants look at the capital investment required to upgrade their services portfolio, some choose to exit, which may be a driver for many of the recent acquisition in the Canadian broadband market. Faced with the increased competitive intensity described by BMO, some ISPs have been acquired over the past year by bigger, facilities-based carriers. A Scotiabank report dated March 6 suggests that third party internet access (TPIA) and fixed wireless access (FWA) are tools that may enable mobile wireless carriers to offer bundled services beyond their traditional home territory.

Videotron is looking to expand the geographic reach of its mobile and internet services into Ontario and Western Canada by acquiring Freedom Mobile and leveraging the expertise of recent acquisition, VMedia. As BMO wrote, “The reality likely is, not only does Quebecor want the Freedom transaction, it NEEDS the Freedom transaction.”

It is a natural evolution of a maturing market.

Businesses operating in maturing markets need to find ways to differentiate themselves from their competitors, through innovation, improving customer service, or creating unique products or services that meet the evolving needs of consumers.

These continue to be interesting times in Canadian telecom.

Last month, in “Net neutrality 20 years later”, I wrote “Canada’s policy framework for net neutrality is among the most prescriptive and restrictive.”

That led me to wonder: Is it time for that framework to be reviewed?

After all, the United States has operated without such regulations for more than half a decade and the sky has not fallen.

The UK regulator, Ofcom, has been reviewing submissions to its recent consultation on the subject, seeking a more nuanced approach. In its call for comments, the regulator observed:

because the net neutrality rules constrain the activities of the ISPs, they may be seen as restricting their ability to innovate, develop new services and manage their networks. This could lead to poor consumer outcomes, including consumers not benefiting from new services as quickly as they should, or at all. These potential downsides might become more pronounced in the future, as people’s use of online services expands, traffic increases, and more demands are placed on networks.

As Ofcom has noted, as technology evolves and we continue to move even more activities online, it is important for net neutrality regulations “to support innovation, investment and growth, by both content providers and ISPs. Getting this balance right will improve consumers’ experiences online, including through innovative new services and increased choice.”

I noted last fall that Ofcom was proposing:

• most zero-rating offers will be allowed;
• ISPs have flexibility to offer retail packages with different levels of quality;
• ISPs can use traffic management measures to manage networks;
• ISPs have more scope to develop specialised services, such as network slicing;
• Ofcom will not prioritise enforcement action where there is clear public benefit, in relation to:
  • the prioritisation and zero-rating of all communications with the emergency services;
  • traffic management of internet services provided on transport;
  • the use of parental controls and other content filters involving the blocking of traffic; and
  • blocking access to fraudulent or scam content.

Last week, I thought it was interesting that the CRTC itself chose a more nuanced approach to zero-rating in its determinations in TRP CRTC 2023-41: Mobile wireless service plans that meet the needs of Canadians with various disabilities. In that policy determination, the question of permitting (and even mandating) zero-rating was at issue for Video Relay Service (VRS). The CRTC found that “zero-rating VRS clearly benefits the public interest, with minimal associated harm, and would be consistent with the DPP (Differential Pricing Practices) framework”. Still, the CRTC did not consider it to be necessary to mandate zero-rating of VRS by all of the service providers, finding that consumers have access to competitive choice of providers that offer zero-rated VRS services and other suitable solutions.

Competitive choice, freedom to innovate and develop new services. Those might be clues that the CRTC should reassess its overly prescriptive approach to net neutrality.

Last week also saw President Biden renominate (for the third time) long-time net neutrality advocate Gigi Sohn to fill a seat on the Federal Communications Commission that has been open for 2 years. David McGarry writes “Should she gain the Senate’s approval, she will break the agency’s current 2–2 Democrat-Republican logjam and allow the agency to re-enact Obama-era net neutrality regulations, which are economically nonsensical and largely unnecessary.”

According to McGarry, “Mandated net neutrality was the worst sort of technocratic overreach. Bureaucrats dreamed up an overbroad market intervention to ameliorate an imagined crisis—to the detriment of innovation and consumers.”

In 2017, Ken Engelhart wrote about the natural experiment created when the the US got rid of its net neutrality regulations under previous FCC Chair Ajit Pai while Canada established its framework.

When Canada banned zero-rating, the United States didn’t. As a result, T-Mobile, an American cellphone company, started zero-rating video services. The other wireless carriers in the U.S. retaliated with unlimited data offers. Now, the U.S. has unlimited wireless offers and Canada doesn’t. Can I say definitively that this is a permanent difference or that it can be attributed to our zero-rating rules? No, but it is the kind of anti-consumer impact that happens when regulators regulate too much.

Two years later, he followed up saying, “You might have expected that as a result two very different internets would develop in the two countries.”

Of course, that didn’t happen. He noted that the US and Canada have similar internet services, with similar average speeds. Indeed, fixed broadband speeds in the US are now about 35% higher than Canada. The sky didn’t fall as predicted by US Senate Democrats.

As Engelhart wrote, “In the end, it seems that public interest groups and regulators were selling the public elephant repellant: a harmless, but useless spray, meant to defend against a threat that does not exist.”

In his 2017 primer on net neutrality, Professor Daniel Lyons wrote, “A small delay in packet delivery may be imperceptible to someone browsing the web but can erode the quality of a video stream or a telemedicine app. Prioritizing these packets could improve the experience for Netflix users or rural doctors, without adversely affecting users of congestion-insensitive services.”

I’ll give Professor Lyons the final word. “More generally, net neutrality discourages innovation by broadband providers. It assumes that the way broadband is currently delivered is the way it must always be, which limits providers’ ability to test new business models.”

Isn’t it time to review Canada’s net neutrality framework?