Yesterday, TELUS filed an expert economic study by NERA [pdf, 2.24MB] that concludes that a flawed auction design drove AWS spectrum costs up by an extra $2B.

That is $2 Billion transferred from the telecom industry that won’t be available for enhancing the speeds of broadband connections, accelerating wireless rollouts or serving remote and rural markets.

The study set out to answer two questions:

• Why did the Canadian AWS spectrum sell at a significant premium over U.S. AWS spectrum when prior economic evidence suggests the opposite?
• What are the economic consequences of the record high spectrum prices?

NERA posits that if the auction design was responsible for driving supernormal prices of the spectrum licenses, that this could confound the very policy objectives that Industry Canada sought to achieve.

As evidenced in the UK 3G (third generation) auction and other 3G auctions in the early 2000s, excessively high spectrum prices can negatively affect competition, as investors tend to sell their holdings when earnings decrease and/or debt ratings drop. In severe cases, it can lead to market exit (as evidenced by the fallout of the UK 3G auction) or market consolidation because weaker market participants go bankrupt or are acquired by a more solvent company, all of which has a direct effect on competition.

It also criticizes the definition of “new entrant”, as we had pointed out the day the rules were released.

Hard to say what will be done with this report. Is it more than a $2B “I told you so?”

Will incumbents be looking for relief to assist stimulating investment from other sides of their business?

If NERA is correct, how do we correct the impact of sucking $2B out of the industry that is supposed to be laying the foundation for Canada’s next generation economy?

I have been shopping for a new car for some time now. My kids don’t find my [not quite antique] car to be as amusing as I do. Do you really need an inside mirror? Air conditioning? A left turn signal that shuts itself off? Brakes?

So I have been doing a lot of internet research on various possibilities for a replacement. I get a lot of basic information from the company websites, but I get even more insights from third parties.

Whether it is consumer reporting websites, car magazine websites, or others, you can get all sorts of information about the performance and reliability of different cars. I notice that the manufacturers don’t provide all the details about the kind of paint or electroplating techniques being used – which some people would consider to be important for understanding whether the car will rust prematurely.

Actually, there are all sorts of details about the car that aren’t shown.

I go to the alternate sites because the level of detail that the collective wisdom of the internet provides contributes to my informed purchase decision.

I am saying all of this because of the amount of disclosure that some people are seeking for internet service providers to provide to customers.

There are all sorts of websites that provide continuous reviews of ISPs from around the world. There are quite a number that have sections about each of the Canadian ISPs.

In a competitive market, how much disclosure should the regulator require versus that which is available in the marketplace?

A couple weeks ago, I said I was moving to summer schedule for blogging, saying that posts would be less frequent.

Nay, nay!

At the time, I forgot that we had the CRTC hearing examining internet traffic management practices and that led to a busy week of posting. And it isn’t as though we have had weather that draws me away from the webcasts.

I’ll take some time away from the keyboard. Just not yet.

Michael Hennessy has recently started blogging and he points to a blog post by Stephen Taylor that found that the CRTC amended its new media decision (Broadcasting Regulatory Policy CRTC 2009-329), excising a paragraph from the concurring opinion that was written by Commissioner Tim Denton.

Apparently, the following quote was removed:

The history of the regulation of speech in this country does not engender confidence that such powers will be used wisely. Canada has experienced several instances in recent times where regulatory commissions of another type and armed with a different mission have challenged the right to say controversial things. The struggles of Ezra Levant¹⁴, Mark Steyn¹⁵ and others have served as important warnings that regulatory authorities charged with combating racism, hatred, and other evils have consistently expanded their mandates, have abused their powers and eroded fundamental liberties. Wherever there is official orthodoxy, disagreement is heresy, and where there is heresy, there is usually an inquisition to root it out. After centuries ridding ourselves of thought control agencies, 20th century Canada re-invented them.

The original version was cited by Mark Steyn on his blog, who nominated Denton to head up the CHRC. Steyn also picked up the issue of the removal of the paragraph.

While one might wonder whether this paragraph should have ever been in a CRTC decision, the usual way the CRTC has amended an officially released document is to issue an amendment, erratum, correction – usually by means of a “dash” order – resulting in say, Broadcasting Regulatory Policy CRTC 2009-329-1.

The CRTC’s public hearing looking at internet traffic management practices wraps up today.

There are many who seem to believe that the internet needs specific regulations to accommodate its unique nature – many failing to acknowledge that the general protections of S.27 and S.36 of the Telecom Act provide sufficient legislative authority to the CRTC. On the other side of the argument are those who argue that additional specific regulations could restrict innovation in the continued evolution of the network.

The catalyst for this debate in Canada has been application specific network management. It seems to me that we have seen such management before.

Telephone companies have always developed network management techniques to deal with usage and applications that cause congestion. I’m talking about more than just peak load events, such as snow storms, political crises, etc.

The economics of the telecom industry has always been predicated on sharing a network. As an industry, we do our best to make people think that the network is always there waiting for them, but there are times that traditional phone networks run out of circuits. Not just Mother’s Day.

Think back to radio station contest lines – we had special “choke networks” set up that helped to prevent contests from jamming up the rest of the network.

This wasn’t discriminating against radio station applications – it was managing the finite resources to benefit the maximum number of customers. Could the industry have built more infrastructure to accommodate these contests? Not always – some contests were ill-behaved and consumed as much network as was made available.

Generally, when a radio station said that they would give away tickets to the 5th or 6th caller, when you get a busy signal and assume that it is too late, so you wouldn’t bother to try again. Every so often, a disc jockey would get creative. There was an AM station that had the number 8 figure into its branding. Their DJ offered tickets to every eighth caller, dinner and tickets to every eightieth caller and backstage passes to the 800th caller.

Talk about an ill-behaved application of the voice network. Callers who heard a busy signal tried over and over and over again causing massive congestion of the local network.

The mass calling network pushed these calls into a throttled portion of the telephone network. How is this any different from the treatment of file sharing applications in terms of application discrimination?

Most importantly, it is the responsibility of network engineering to balance the economics and performance of the network to give everyone a satisfactory experience.

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Sidebar
I have been following the National Post live blog coverage of the proceedings and there was an interesting poll taken on Friday, asking readers to identify their ISP. more than half the respondents claimed to be served by independents, with is about 15 times the market share of these companies. The poll result is no longer posted, but there is a reference to the results in the comment at 9:17am.

Although the survey is not scientific, it is interesting that concern about the issue is so much more pronounced among the independent sector. Does this gives credence to the claims that network management is not a concern for most internet users?