A communications failure earlier today at Fredericton International Airport was caused by thieves stealing copper cable.

Bell has experienced 60 such incidents in the past 12 months just in New Brunswick. Although a news report says 4 people were arrested last November for copper theft, the damage to critical infrastructure is continuing.

New Brunswick Power and individual homes have also been victimized by theft of power cables and copper pipes. A man died in 2019 after breaking into a power substation in Bathurst, NB.

Last October, the New Brunswick legislature amended its Salvage Dealers Licensing Act, so that scrap yards are no longer able to pay cash and are required to check government issued identification.

Bell is asking provincial and federal governments to increase fines and make changes to the Criminal Code of Canada saying such measures are necessary to improve the resiliency of Canada’s telecommunications networks. Addressing the scourge of thieves stealing copper cable was identified as a top priority in the recent report [pdf, 475KB] from the Canadian Telecommunications Network Resiliency Working Group

This isn’t just a problem for telecom service providers, as we saw with the impact on flights in and out of Fredericton today. Stealing copper cable from power and communications networks can be a matter of public safety, impacting access to emergency service bureaus, hospitals and first responders. And, it cost at least one would-be thief his life.

As Bell CEO Mirko Bibic wrote, urgent action on the part of government is needed as part of protecting Canada’s critical infrastructure.

As promised, here is further look at the 2022 edition of ISED’s telecom price study report [pdf version, 1.8MB].

In its press release, ISED claims the government “continues to deliver on more affordable telecom services”.

The report is clear, Canada’s wireless prices declined by an average of 2.6% across all levels, with declines up to 16% for the largest data plans in 2022. For home Internet, prices declined or were stable, an 11% decline was recorded for mid-range plans. The report also shows that regional competitors are offering prices up to 39% lower than the major national service providers.

I’m not convinced the telecom price study report, or the press release for that matter, is so clear. That paragraph starts with a sentence about wireless plans, then a line about home internet.

To which service does that third sentence refer? “Regional competitors are offering prices up to 39% lower than the major national service providers.” All of the facilities-based internet service providers are regional; the national providers are the wholesale based ones. You have to search the report to find Table 3, to find that the 39% refers to Freedom Mobile’s Level 7 price plan in Ontario. Level 7 is defined as “unlimited nationwide talk and text along with 20-49 GB of data.”

The report also indicates that “Average prices in Quebec tend to be among the lowest in the country.” This has been a highlight driving a number of policies out of Ottawa. Yes, prices have been lower in Quebec but do we actually understand the reasons? Is there enough focus on what is driving lower prices in some parts of the country?

Are lower prices in Quebec actually due to the presence of Videotron as a “disruptor”? Or, are lower prices driven by lower rates of adoption and attempts by service providers to stimulate demand in a province with lower average income levels?

Let’s look at what the press release says is “clear”. “Canada’s wireless prices declined by an average of 2.6% across all levels, with declines up to 16% for the largest data plans in 2022.” I’m not sure the data in the report is really that clear.

The source for this line appears to be this chart (found on page 10 of the pdf version):

As can be seen readily, the average price change (-2.6%) is heavily skewed by the nearly 13% price increase in Level 2 pricing. Of course, very few people choose to subscribe to such a plan any more. Indeed, the report itself acknowledges “very few providers currently have a stand-alone 1 GB plan. Only Virgin offers this service across the country and only one regional provider (SaskTel) offers this type of plan.”

Also, recall that the mid-range plans had already dropped by more than 25% prior to the start of last year. That helps explains why one might expect modest price declines for those price baskets.

Although the press release says “The report is clear, Canada’s wireless prices declined by an average of 2.6% across all levels”, what is actually clear is that prices declined significantly more if you exclude the obvious outlier.

As with other international price comparisons, look at the data with a critical eye. As a test, see if you can find the typo at the bottom of page 69 of the pdf version (Table A3.1).

The missing caveats from the older editions of ISED’s telecom price study should be returned. As I wrote earlier this week, “Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks.”

In the absence of such notes to the reader, is it fair to describe any price study as “clear”?

A week and a half ago, ISED released the latest edition of its series of telecom price studies. I’m going to look at that report over the course of a few posts.

It’s a real challenge to create meaningful international telecom price studies.

Remember when two dozen leading economists and academics said, “The Rewheel story is easy to understand. It is also completely wrong.” and “Rewheel’s rankings are of no value in comparing prices and assessing the level of competition in wireless markets.” Rewheel’s reports were characterized by ICLE as “a careless mish-mash of data points from which no reliable conclusions can be drawn.” Last week’s report [pdf, 1.2 MB] lives up to that billing.

I looked at a couple well publicized international telecom price studies about a year and a half ago. In that post, I write of my frustration with “the misinformation from pseudo-statistical studies being circulated with viral velocity”. I pointed out what should be easy to detect flaws with the methodology being used by Cable.co.uk.

Typical problems with telecom price studies arise from overly simplistic examination of the different countries. While most studies adjust for currency variations, very few make adjustments for PPP (purchasing power parity). If consumers are earning 80% less in one country, it doesn’t help for them to pay 25% less for their digital connections.

Fewer still account for variances in quality of the products and services, such as speeds, coverage, costs of building networks. That can be like comparing prices for bicycles and motorcycles. A recent PwC study [pdf, 660 KB] compared Canada to the rest of the G7 plus Australia. Canadian carriers invest almost double the amount capital measured on a per subscriber basis ($168 vs $87), with capital intensity 35% more (19% versus 14%).

There are hundreds (or thousands) of price plans available in each country. It is virtually impossible for telecom price studies to look at which plans are the most popular in each market. And then, how would a study start to compare those to the plans in other countries? Arithmetic averages (means or medians) are somewhat meaningless. Are the plans that most consumers are buying are weighted more heavily than those on extreme ends of the menu? In countries with 150 to 200% mobile penetration rates, does the study account for people paying multiple bills?

Let’s consider the telecom price study released earlier this month by Innovation, Science and Economic Development: “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions: 2022 Edition” [pdf version, 1.8MB]. Wall Communications prepared the report for ISED.

As in some other recent years, the 2022 edition is missing a section on caveats to the interpretation of the findings. Those notes used to be an important part of the study. For example, in 2016, the ISED study included a page of notes, including these two paragraphs:

Prices in Canada and international jurisdictions are driven by a complex mix of a number of factors: cost of service, competitive positioning, technological advances, consumer behaviour and regulatory frameworks. As wireless technology is constantly improving and consumers demand ever more bandwidth and data caps, service providers are constantly increasing features. In the Study, these changes are reflected by the need to regularly update the definition of service baskets. Hence, price increases in those baskets may in part, simply reflect better service levels offered to consumers.

This Study did not take into account the network technologies deployed in the networks nor the speed or quality of service of those networks. Finally, this Study did not account for any cost of service or socio-economic factors that may be relevant for price differences across different domestic and international jurisdictions. Thus, factors such as population density, terrain and climate have significant impacts on the cost of service. Similarly, socio-economic factors such as affordability indicators (i.e. mobile prices in relation to disposable income), number of handsets per subscriber, number of minutes of usage per subscriber and other factors were not within the scope of this Study.

The 2022 edition includes a few caveats in its Introduction, but it would benefit from a separate “reader’s notes” section.

I’ll look at the results of ISED’s 2022 price report in another post later this week.

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.