Call this post a preview of coming attractions. Next Monday, the CRTC will commence hearings to look into the privatization of Bell.

It is the final exam for Teachers’. And it’s going to be oral, open book.

At the heart of the CRTC’s examination is the change in voting interest at CTV Globemedia. Bell currently holds 15% of CTVgm; Teachers has 25% of the voting shares. The transaction would result in Teachers’ increasing its interest to 40%, which requires regulatory approval.

The overall transaction for BCE equity is nearly $40B. Of that, only $110M has been allocated to the broadcasting undertakings. This is important because 10% of the value of almost any broadcasting transaction has to be allocated to “tangible benefits”: a kind of charitable gift to enhance broadcast life for those affected by the transaction.

Bell has proposed $11M in such benefits: $6.2 million over 7 years for the creation of HD programming that features “important and underserved Canadian entertainment properties on a pay or free per view basis.” It appears that 80% of these benefits would go towards “original programming that is both of popular interest and of specific relevance to viewers in Quebec.” Bell also proposed to add $4.1M to the Bell Fund and $700K to the Media Awareness Network, also over 7 years.

As a result, besides satisfying itself that “control of the broadcasting and distribution undertakings will be exercised by Canadians at all times”, the CRTC may look at the quantum of the transaction allocated to broadcasting, in order to extract the appropriate level of benefits for all Canadians.

Catalyst Asset Management, has continued its PR campaign against CRTC approval of the deal. In a full page ad in the Hill Times, Catalyst says:

The Pension Benefits Standards Act prohibits Teahers’ from holding, directly or indirectly, more than 30% voting control of BCE. To suggest this limitation allows Teachers’ to meet the Canadian ownership rules enforced by the CRTC is an artifice.

The CRTC’s file is filled with comments received from a variety of parties who wrote letters of support. Letters are on file from producers who have benefited from the Bell Fund in the past and look forward to the new money; letters from other Teachers’ buyouts such as Shopper’s Drug; Cybertip weighed in with its support – saying how happy it was to have received a new 3 year funding commitment.

On the other side sits Catalyst, a few disgruntled individual shareholders and citizens. Writing on behalf of “all Canadian Senior Citizens”, Paul Muser writes:

It is very obvious that BCE and Teachers are out “trolling” for letters in support of this transaction, as there are submissions from a number of groups like Kid Help Phone and others who are closely tied to BCE and Teachers, like Carol Stephenson of the Ivey School of Business, Michael McCain of Maple Leaf Foods, the Canadian Chamber of Commerce, and the Ontario Chamber of Commerce. All of these parties are closely linked economically to either Teachers’ and/or BCE.

It will be an interesting week of hearings. You can catch it live in Hull. The audio will be webcast. Prepare your own report card for the Teachers.

After reading a story in this past weekend’s National Post, I wonder if it is time to rethink how we fund rural broadband.

I have long questioned the need to apply universal subsidies. The Post story speaks of the boom in rural Canada, led by surging crop prices over the past year and a half.

You now see satellite dishes on farms because people need access to the Internet and international grain markets. Farms are doing those things themselves, instead of relying on others, because the technology allows them to do that.

There is a need to facilitate broadband in rural Canada, but not necessarily to subsidize it.

Maybe Canada needs to look at targeting broadband subsidies based on income, regardless of where people live. There is a gap in the level of connectedness among lower income Canadians in urban markets as well. Maybe it is time to consider making PCs and broadband part of our social welfare system.

Will a broadband tax credit be a part of the next federal budget?

Is it just my impression or is Cisco actually enjoying some consistent traction in deals with Canadian service providers?

Yesterday, Cisco and Bell had a joint press release and analyst conference call to announce they are partnering to develop and deliver a range of IP-based Managed Services as well as expand the pool of qualified technology professionals.

A couple weeks ago, Cisco and Videotron announced their wideband internet solution.

And TELUS and Cisco have had a couple announcements already this year – TELUS becoming a TelePresence user and service provider and TELUS announcing that it is deploying Cisco gear to improve its mobile messaging platform.

It all adds up to a lot of Cisco announcements in the first few weeks of February.

Michael Geist points to a private member’s bill introduced by Liberal MP Karen Redman last Thursday. Named the The Internet Child Pornography Prevention Act, the bill seeks to license all ISPs and have those ISPs adhere to some new guideines. In my view, it is well intentioned, but flawed.

The purpose of the bill is clear enough:

The purpose of this Act is to prevent the use of the Internet to unlawfully promote, display, describe or facilitate participation in unlawful sexual activity involving young persons.

The measures seek to place more responsibility onto internet service providers.

The bill introduces a CRTC licensing regime.

No person shall offer the services of, or operate as, an Internet service provider unless the person has been granted a licence to operate as an Internet service provider

This is not particularly onerous. We have all sorts of telecom service provider licensing and registrations today already. Those ISPs who are already providing voice services need to register already. The bill does not define what is an ISP. Does it refer to internet access providers, hosting companies, both?

This bill would allow the Commission to block previous offenders from operating an ISP, or being a director or officer of an ISP. Further, the bill would permit the Minister to order ISPs to block certain content found to be child pornography. The current legislation only allows the CRTC to authorize the blocking of content – a subtle but important distinction.

Among the biggest challenges are the requirements in section 5(1):

No Internet service provider shall knowingly permit the use of its service

1. for placing child pornography on the Internet or for viewing, reading, copying or retrieving child pornography from the Internet;
2. by any person who the provider knows has been convicted of an offence under this Act within the previous seven years; or
3. by any person who the provider knows has used the Internet within the previous seven years for a purpose that would be an offence under this Act.

Other portions of the bill appear to be redundant with existing legislation, although the new bill uses conflicting language.

South of the border, last week Congressman Ed Markey (D-Mass) introduced the Internet Freedom Preservation Act. Markey chairs the House Subcommittee on Telecommunication and the Internet, so his bill is more likely to generate active debate, especially since his bill is co-sponsored by Republican Chip Pickering.

There will be a session on Net Neutrality on Wednesday June 18 at The Canadian Telecom Summit.

Early bird rates end in less than two weeks on March 1. Book your place now!

According to a Globe and Mail article, TELUS CEO Darren Entwistle is not happy with the way his wireless division is operating.

Churn is higher than he would like, blamed in part on the flexibility users have with wireless number portability (WNP). Number portability makes it easier for people to leave, but the corollary, of course, is that WNP provides an opportunity for carriers to attract customers from their competition.

Clearly this aspect of Telus’s performance is one that I am less than satisfied with.

How far will carriers go to keep customers from churning?

Canada is sitting at 61% wireless penetration. That translates into an opportunity of 6M additional users to just bring us to the 80% level currently enjoyed south of the border. TELUS’ fair share would be about 2M of those users and Darren likes to see his team “punch beyond its weight class.”

More specifically, how will TELUS improve its wireless performance? Watch for more news to emerge from potential suppliers for its next generation mobile network. A project this big will be tough to keep under wraps.

Although the company’s official position is that network enhancements are a continual evolutionary process, we might expect to see a more dramatic repositioning. As The Toronto Star suggests, perhaps the network investment will likely be timed to try to grab a significant share of the Olympic roaming traffic in 2 years.

From an organizational perspective, will we see a return to a stand-alone TELUS Mobility reporting to an executive responsible for the entire business unit?

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