Momentum may be building in public support for digital infrastructure to play a significant role in the government’s economic stimulus plans to be released in the January 27 budget.

As the Globe and Mail writes:

The most “shovel-ready” infrastructure projects, such as most of those in the list that the Federation of Canadian Municipalities released on Wednesday, tend to be the least forward-looking. The projects that predominate in the federal budget’s stimulus package, however, should represent real advances in the real economy. Canada needs to deploy the opportunity of the financial crisis to promote technological change, though the basics of public capital should not be neglected.

A companion news story has similar messages.

Infrastructure usually involves bridges and roads and now the Harper government is expected to expand that definition to include high-speed Internet access for everyone in the country in its coming budget.

Sounds similar to what we wrote earlier in the week and indeed, what we have been saying ever since our opening remarks at The Canadian Telecom Summit in June. We’ll continue to monitor this file.

Last Friday, I wrote about investment in telecom infrastructure and I included a reference to a chart that I prepared a number of years ago that looked at the amount of capital sucked out of global wireless carriers in the year 2000 by (mainly European) 3G spectrum auctions.

Former CRTC vice-chair Richard French sent me a copy of a paper called “Governance and game theory: When do franchise auctions induce firms to overbid?” that has been accepted for publication later this year in Telecommunications Policy.

Rick’s paper argues that overbidding, especially in the German and British auctions in 2000 aggravated the tech collapse which led to a loss of value by the successful bidders.

Canonical auction theory states that bidders make valuations of objects to be auctioned and bid rationally in the light of their valuations. In the case of spectrum auctions, this means that bidders make business plans and bid up to their minimum return on investment. In the ideal auction, they will bid away supranormal profits (economic rents) to the benefit of the public treasury.

While auction theory accounts for the possibility of a winner’s curse, in which the winning bidder is the one which overestimates the value of the auctioned object the most, it fails to account for a case in which not only the winning bidder(s), but also the last losing bidder, so grossly overvalue the object.

Rick suggests that in a small minority of cases, this kind of overbidding can be anticipated and should be planned for.

By the way, Rick tells me that he does not believe that Canada’s AWS auction was a case of overbidding.

Write Rick for a copy of the paper.

Answers to the CRTC’s first round of questions in the network management proceeding have been filed. They will be available on the Commission website soon.

Twelve companies were asked 15 questions. Many of the answers have been filed with confidentiality claims – reasonable, considering the competitive nature of some of the information being sought.

It would be interesting to see a table that summarizes key information from the respondents. Any students up for the task?

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CRTC, network management

Pity poor Cybersurf. They know that the Rolling Stones taught us that you can’t always get what you want, but these days, Cybersurf must be feeling like it is having trouble ever getting anything that it wants.

They thought they had won a major victory with the CRTC when the Commission ruled in their favour to permit wholesale access to all the same speeds of ADSL service that the incumbents offer.

I thought the executive summary of the Decision was pretty clear in the Commission’s intent:

that incumbent local exchange carriers be required to provide speeds for wholesale asymmetric digital subscriber line services that match the speeds made available to their retail Internet service customers.

I read that as meaning that if an incumbent sells a retail internet service rated at X Mbps, then a reseller can buy a wholesale version of that service to be able to offer the same speed. I’m pretty sure that most people read the decision that way.

Nay, nay, says Bell.

In a letter to the CRTC on Monday, Bell argued that the Commission did not intend for the Decision to apply to all of Bell’s retail internet services. In Bell’s view, there is some kind of special mystique behind the Commission’s use of the term “copper” in paragraph 22 of the Decision, where it says:

With respect to the submissions of Bell Canada et al. and TCC that the relief sought by Cybersurf would dampen investment in alternative facilities (Bell Canada et al.) and broadband in general (TCC), the Commission notes that this proceeding is limited to addressing the issue of matching service speeds of the ILECs’ aggregated ADSL access services, which are provided over copper facilities.

Bell says that its higher speed services are provided over “FTTN” technology and so it feels that the CRTC

explicitly excluded next generation services, such as those that are not pure copper facilities provided over the fibre to the node (FTTN) network.

I’ll observe that the word “pure” doesn’t appear anywhere in the Commission’s decision. Equally, I would note that FTTN is hardly “pure” fibre.

How does Bell think the connection goes from the Node (the “N” of “FTTN”) to the customer premises? Is it a magical mystery connection or maybe the last little bit is using ADSL over copper? [Apologies for mixing the 40 year old musical references]

Further, paragraph 22 is a descriptive paragraph, not a determination. The conclusion of the Decision was pretty clear.

The Commission directs that the ILECs … consult with their aggregated ADSL customers and file, within 45 days of the date of this Decision, proposed revised tariff pages to include any matching-speed with respect to existing retail service speeds offering where there is demand by any such customer.

Customers aren’t being sold technologies – they are sold high speed internet service. And this whole process started when Cybersurf asked to be able to resell Bell’s 7 Mbps service.

The Commission should dispose with this clarification right away, register the original Decision 2008-117 with the courts. The clock is ticking – the telcos have 45 days from December 11 to file matching tariffs. Absent a stay, they need to file matching rate tariffs or face the consequences.

Patience Cybersurf. If you try sometime, well you just might find, you get what you need.

From the “Grass is always greener” files.

The UK regulator, Ofcom, has released a report on consumer internet services. It turns out that the UK internet experience is not that different from what we see in Canada.

For example, according to the report,

UK consumers receive an average broadband speed of 3.6 megabits per second (Mbit/s), comprehensive new Ofcom research reveals today.

That’s less than the average maximum possible speed of 4.3 Mbit/s across the UK and significantly below advertised headline speeds.

Most consumers surveyed were reasonably happy with their broadband service, with only 9% expressing dissatisfaction overall. 93% of consumers were satisfied with their web browsing experience.

UK based Analysys Mason says that the Ofcom study shows that consumer demand for internet services is not far ahead of supply and people understand the limitations of what they are buying. According to their interpretation of the study, the customer satisfaction numbers indicate that consumers understand that speed is dependent on variables including how many people are online at any time.

There are of course ISPs that provide a materially better service than others, but the overall low level dissatisfaction would suggest that accusations of mis-selling have been somewhat over-hyped.

I especially enjoyed the closing paragraph of the Analysys Mason press release:

The telecoms industry is used to hearing tales of consumer dissatisfaction and of ‘pent-up’ demand for bandwidth – often from excitable bloggers, or from parties that have an obvious interest in promoting that view. Research often misinterprets long-term predictions of bandwidth usage as indicators of demand. What this survey shows above all else is that, so long as people are aware of what they are buying, supply to a large extent informs demand and that the two are in truth substantially aligned.

Good lessons for Canadians to keep in mind as we prepare to see the filings for the CRTC’s network management proceeding.

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internet, Ofcom, Analysys Mason