In some ways, it was fitting that Tim Horton’s HQ was repatriated to Canada yesterday. It was painful for many of us to think of such an icon being headquartered south of the border.

Yesterday also marked the opening of the oral phase of the CRTC’s review of Globalive’s ownership.

How could Globalive’s foreign ownership be in question by the CRTC when it has already passed the standard set by Industry Canada? How much maple syrup needs to run through the veins of its board?

The CRTC’s hearings into the compliance with Canadian ownership and control requirements for Globalive opened with introductory remarks by Chairman Konrad von Finckenstein, setting out the reasons why the review was required.

With an infrastructure that connects virtually every household across the country, telecommunications play a vital role in Canada’s social and economic development. For this reason, the Telecommunications Act states that the control of telecommunications companies must rest in Canadian hands. It further sets out the acceptable level of foreign ownership and control.

In the minds of many observers, one of the key questions is how Industry Canada could have approved the ownership structure for the purpose of licensing, and yet the CRTC has already indicated that, at a minimum, it will require a number of changes to ownership agreements in order to meet its standards.

The opening remarks by the chair addresses this question in part: Industry Canada made its determination under the Radiocommunication Act at an earlier point in time and in the context of awarding a licence pursuant to the advanced wireless services auction process. On the other hand, the CRTC is looking at the issue now under the Telecommunications Act in the context of establishing and operating a telecommunications carrier network. In the chairman’s words, the two agencies may be applying the same test but in a different context and with a different focus.

The other major difference is that the CRTC process is completely transparent, with most of the evidence open to public scrutiny and comment, absent the potential for political intervention – although subject to the possibility of its determination being appealed to cabinet.

Based on the exchanges in yesterday’s hearings, there are some clear concerns about the ownership structure that was presented to the CRTC, but not all of the Commissioners share the view that these can’t be remedied. Today, the CRTC will be examining issues with Globalive in-camera, with redacted transcripts to be produced for parties to review.

The schedule has been modified to enable final arguments to follow the filing of new agreements and allow the transcripts to be produced. I will update when the public hearings are to resume.

In the meantime, can I suggest that eveyone practice: “R-R-Roll up the r-r-rim to win.”

Financial Times has an article called The broadband numbers racket, by former FCC chief economist Thomas Hazlett, now a professor of law and economics at George Mason University.

Hazlett points out that too many people use superficial selection of statistics to bolster questionable policy positions.

Cherry picking broadband penetration numbers to imply the US is slipping into Third World status is fine for a quickie term paper, at least if Wikipedia goes down. But adults ought sort through the multi-dimensional complexity of the real world –

The article refers to a paper published in the Review of Network Economics [ pdf, 138KB]. The paper looks at different models of regulation on broadband networks and among the findings, it states

incentives for network investment decline when network owners lose a set of valuable property rights.

Both articles – from Financial Times and Network Economics – make an interesting read.

FCC Chair Julius Genachowski, delivered a speech to the Brookings Institute yesterday and he proposed adding two new principles to the FCC’s internet freedom principles: non-discrimination and transparency.

It is quite likely that you will read excerpts from the speech that will fail to include some of the qualifying language he had regarding non-discrimination:

This means they [network operators] cannot block or degrade lawful traffic over their networks, or pick winners by favoring some content or applications over others in the connection to subscribers’ homes. Nor can they disfavor an Internet service just because it competes with a similar service offered by that broadband provider. The Internet must continue to allow users to decide what content and applications succeed.

This principle will not prevent broadband providers from reasonably managing their networks. During periods of network congestion, for example, it may be appropriate for providers to ensure that very heavy users do not crowd out everyone else. And this principle will not constrain efforts to ensure a safe, secure, and spam-free Internet experience, or to enforce the law. It is vital that illegal conduct be curtailed on the Internet. As I said in my Senate confirmation hearing, open Internet principles apply only to lawful content, services and applications — not to activities like unlawful distribution of copyrighted works, which has serious economic consequences. The enforcement of copyright and other laws and the obligations of network openness can and must co-exist.

FCC Chair Genachowski also called for the principles to apply to all forms of internet access, including mobile, but he also recognized that “how the principles apply may differ depending on the access platform or technology.”

Keep in mind that these are proposals – the FCC will be expected to issue a notice of proposed rulemaking to invite public consultation in fleshing out the details. As yesterday’s speech indicated, there will be an open process to figure out how to implement these principles. This speech is simply the first step in a long process: FCC to create and publish a Notice of Proposed Rulemaking; open consultation; deliberation; ruling.

While my goals are clear — to ensure the Internet remains a free and open platform that promotes innovation, investment, competition, and users’ interests — our path to implementing them is not pre-determined. I will ensure that the rulemaking process will be fair, transparent, fact-based, and data-driven.

As I have written a number of times in the past, the US doesn’t have an equivalent of Section 27 in its Telecom Act, so non-discrimination isn’t enshrined in their environment absent a new explicit rule. Canada benefits from technical neutrality in its legislation, leaving the US to play catch-up.

Transparency was a key issue raised by many parties in Canada’s Internet Traffic Management Proceeding. Improving the information of users has been an issue around the world and we can expect to see improved disclosure by all service providers driven by the marketplace, if not regulation.

With the CRTC’s ruling on traffic management expected before the end of the year, Canada will continue to lead its neighbours to the south in defining an internet regulatory framework.

The subject of Fee for Carriage, cable companies paying for the privilege of carrying local over the air TV stations, is beyond the customary scope of this blog.

But Thursday’s direction to the CRTC from Cabinet coupled with the response by the CRTC, raises an interesting point in respect of funding the participation of consumer voices.

Typically, the main participants in CRTC proceedings are corporate. Broadcasters or service providers have professional regulatory departments or specialized legal counsel are engaged to represent the interests of the company in written submissions or oral testimony.

To a lesser extent, consumers are sometimes engaged and in cases like the internet traffic management proceeding, thousands of individual emails or on-line comments become part of the official record to help inform the staff and Commissioners in making their determinations.

Often in major telecom proceedings, professional advocacy groups such as PIAC or CIPPIC or various national and provincial consumer associations participate. These groups have frequently been able to apply for their costs to be paid by the commercial service providers involved in telecom proceedings, but as the CRTC notes in its letter to the Deputy Minister of Heritage:

As you are aware, in broadcasting matters, unlike in telecommunications matters, the CRTC has no authority to award costs to consumer groups.

The payment of costs by telecom service providers dates back to a time of regulated rates of return, and the Telecom Policy Review Panel expressed concerns about such a formula in a market driven industry framework.

The Panel believes the government should review its approach to the funding of public interest group participation in telecommunications proceedings. The market-driven framework recommended by the Panel raises questions about the appropriateness of the current practice of awarding costs to such groups

Instead, the panel felt that funding for such participation should come from multi-year commitments by government to subsidize such participation, rather than costs awards imposed by the CRTC on individual telecommunications service providers.

Cost awards being sought in the internet traffic management case are getting extra attention. Bell asked for extra time to respond, since more than $430,000 was being sought for participation in that one proceeding, representing 20% more than all of the cost awards for all of the proceedings last year.

In its answer, Barrett Xplore expressed concerns about the levels of awards being sought [ pdf, 57KB]:

Despite the fact that [Barrett Xplore] was required to answer a significant number of interrogatories, that it presented comments and argument and appeared at the public hearing, the company managed to spend considerably less than each of PIAC, ARCH and CIPPIC on its legal fees (in fact Barrett spent less than half of what each of these parties spent on their counsel fees alone…)

The Commission gave parties an extension until September 25 to file their answers to the cost applications. The applicants will have the right of reply by October 5.

Luann Lasalle of Canadian Press has a good article previewing the Globalive ownership hearings taking place this week. I wrote about the upcoming hearings in my blog posting Friday morning.

In the Canadian Press article, I am quoted saying:

What everyone is looking to ensure is that we don’t have foreign control come in through the backdoor because that’s just a situation that isn’t fair.

What is important, I think, is for everybody to have the same understanding of the rules. You need that no matter what game you are playing.

Globalive Holdings chair, Tony Lacavera says that the regulator could make changes to the Toronto-based company’s structure, but that shouldn’t affect its launch.