The Montreal Gazette ran an editorial yesterday entitled “Canada’s wireless policy is clueless“. It left me scratching my head.

The article was based on a superficial assessment of the wireless market in Canada, ignoring facts that didn’t agree with its agenda. I had to wonder about the lack of depth in researching its position.

Take for example the paragraph bemoaning Canadian cell-phone penetration:

About 58 per cent of Canadians now have cellphones; in the U.S. the figure is 77 per cent and Britain, the Czech Republic, and several other European countries have more than one such device per person.

Let me be perfectly clear. “More than one such device per person” makes no rational sense. It is a statistic driven by customers arbitraging aberrant pricing plans. Canada should not strive to have disfunctional European pricing models that lead to supra-normal penetration rates. The Gazette apparently thinks that it is good to have multiple phones so that when you call someone on the Bell network, you use a Bell phone; have another phone for your Rogers-based friends and a third for TELUS calls. That is one of the phenomena that drives European penetration in excess of 100%. People holding onto foreign country pre-paid SIM cards is another contributor.

Europeans typically receive no subsidy for their phones. Would the Gazette also want each of us to pay upwards of $150 more for our phones as well?

As the old commercial use to say, “you can pay me now, or pay me later.” Canadians like to pay later. We also like to be able to call local numbers for free from our home phones. Europeans get gouged.

With multiple phones per person, Europeans are also paying multiple bills per user – paying more for the privilege of claiming superior penetration rates over those of us in the colonies.

Here is another juicy paragraph from the Gazette editorial:

As the well-informed University of Ottawa professor Michael Geist explains on the opposite page, lack of competition in the mobile-data business means prices are high, which is keeping Canadians off the newer sections of the information superhighway. Hardly anybody in Canada would be able to afford the mobile Internet service provided by the iPhone, and certain other handheld devices – because all of Canada’s service providers keep their mobile data rates sky-high.

As I have written before, blaming high data plan pricing for the delay in iPhone’s launch is just not credible. The iPhone hasn’t been launched in Germany or any country other than the US. Other countries are said to have better suited data prices; their markets are bigger. But no iPhone. Why is that?

Could it be that Apple is rolling out the product on their own schedule?

Canadians continue to buy the latest versions of Blackberry. Carriers have introduced special plans for Mobile TV that don’t charge by the bit. Canadians are continuing to buy wireless services for the first time increasing our penetration rates, and add new enhanced multi-media features which speaks louder to affordable prices than repeated rantings from opinion pieces in papers.

Rogers’ launched its Vision service in April, beating any of the US carriers to market with truly advanced high speed mobile internet. Barrett Xplore has made broadband internet universally available to every household and business in Canada, coast-to-coast, sea-to-sea-to-frozen tundra.

It seems to me that The Gazette should get better informed before calling Canada’s wireless policy clueless.

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Let me again point out the OpEd by FCC Commissioner Robert McDowell has an Opinion piece in the Wall Street Journal on July 24, called Broadband Baloney. He refutes the tendency for people to want government intervention in communications markets that are working pretty well on their own:

Looming over the horizon are heavy-handed government mandates setting arbitrary standards, speeds and build-out requirements that could favor some technologies over others, raise prices and degrade service. This would be a mistaken road to take — although it would hardly be the first time in history that alarmists have ignored cold, hard facts in pursuit of bad policy.

As I wrote on Tuesday, his piece concludes:

When it comes to broadband policy, let’s put aside flawed studies and rankings, and reject the road of regulatory stagnation. In the next few years, we will witness a tremendous explosion of entrepreneurial brilliance in the broadband market, if the government doesn’t micromanage. Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.

The NY Times is reporting that FCC chairman Kevin Martin said that he circulated a draft proposal that would require the winning bidders in the upcoming AWS spectrum auction to be receptive “to all kinds of devices and applications” provided by independent consumer electronics makers and third-party software providers.

His proposal would set aside a third of the new spectrum for bidders who agree to operate wireless services in a more open fashion.

A variety of companies have proposed set-asides for spectrum in the upcoming Canadian auction. Those proposals would simply open up additional spectrum for new entrants but none have suggested that they would commit to the kinds of consumer benefits being proposed by Martin. Their proposals implicitly suggest that consumers will benefit from additional industry participants, but none have said that open access should be a precondition for bidding on a reserved block.

Of course, there are lots of questions that come to mind. Among them:

• If a company promises to provide open access, what enforcement mechanisms will ensure that the commitments are fulfilled? Would there be substantial penalty fees?
• Who will interpret the definitions of open access?
• Under an open access rule, can carriers lock consumers into multi-year contracts in order to recover handset subsidies? If consumers aren’t receptive to paying full price for devices, are contract termination fees consistent with the open consumer access commitments?

Martin is proposing a novel approach that might add teeth to the ‘trust us’ types of competitive benefits that were submitted to Industry Canada from the potential new entrants.

Is open access a sufficient consumer dividend – a quid pro quo – for the free market distortions that could be created by a spectrum set-aside?

Technorati Tags:
Industry Canada, FCC, wireless, spectrum auction, AWS

Some people who represent various disabled communities may be cheering a CRTC decision that maintains a 50% discount for hearing impaired and speech impaired teletypewriter phone users. It is a hollow victory for the hearing and speech impaired. Further, it is disappointing that the CRTC missed an opportunity to take a stand on system access fees.

I suspect that their stakeholders can find a better deal. After all, basic rates remain in the order of 40-50 cents per minute (rounded up to the next minute). Yep, these are still mileage sensitive relics from days of old. For the purposes of pure nostalgia (and to educate our kids about the good old days) here is the ‘inside Canada’, inter-provincial rate table for Manitoba based customers:

Rate Distance (Miles)	Rate Per Minute or Fraction
0 – 8	$0.13
9 – 20	0.13
21 – 36	0.29
37 – 56	0.35
57 – 80	0.40
81 – 110	0.42
111 – 144	0.43
145 – 180	0.44
181 – 228	0.45
229 – 290	0.46
291 – 400	0.47
401 – 680	0.48
681 – 1200	0.49
1201 – 1675	0.50
Over 1675	0.51

So the CRTC says that the hearing impaired can get 50% discounts off rates that are 10 times higher than market prices.

Try dial-around on YAK or Telehop and pay 4 cents to most places on the planet that Canadians call. Telehop will give you 15 minutes for a quarter for those countries. But we will allow the hearing and speech impaired access to rates that are only 5 times higher than what people should be paying.

Bell and TELUS supported the 50% discount but wanted the program extended to all competitors:

Bell Canada indicated that it would not be opposed to retaining the 50 percent discount for TTY users. Bell Canada submitted that, to be made compliant with the principles of symmetry and competitive neutrality, the 50 percent discount must apply to any telecommunications service provider offering or providing toll services within the company’s operating territory. TCC also supported this view.

The CRTC rejected imposing the obligation on the competitive industry, hopefully recognizing that market prices are already well below the manufacturer’s suggested retail price.

Ho-hum. Would it have been a political hand grenade for the CRTC to have said ‘go shopping’?

50% off. What a deal!

The CRTC failed to address a substantive concern raised by PIAC and endorsed by YAK: will consumers be protected from the phone companies introducing mandatory system access fees. Until now, basic rate subscribers could avoid the cash grab from these official-sounding fees by refusing to accept a toll plan.

the Commission is of the view that there is a variety of cost-efficient alternatives available to consumers who do not wish to subscribe to a toll plan, including various dial-around services, prepaid calling cards, and toll plans of competitive long distance service providers. In many cases, these toll services are offered at lower rates than are available under the ILECs’ toll plans and some do not have subscription or network access charges.

So, when the phone companies add on a universal $4.95, or $7.95 or $10.95 toll network access fee, how do customers avoid the rip-off? Will the Commissioner for Complaints for Telecommunications Services be empowered to deal with system access fees?

How will we dial around that?

Technorati Tags:
CRTC, Bell, TELUS, Yak, Telehop, PIAC, system access fee

The OECD has released its latest OECD Communications Outlook.

On his blog, Michael Geist provided an overview of his opinions on reading the report last week.

I agree with one aspect of Michael’s review, that I would encourage you to download the report and read it yourself. As Michael says, it is necessary to have an objective reading of the report.

there is so much in this report that everyone can find something to either gloat or criticize

Personally, I don’t end up with the same conclusions that some people have found in the report. It just seems to me that there is much that is being taken out of context.

While Canadian wireless prices were found to be better than US prices in all OECD baskets, I would like to suggest that this was not evidence of anything other than the inability to compare pricing in global markets. There are just too many variables.

For example, some countries offer substantial handset subsidies that simply aren’t counted in any monthly pricing study I have seen.

Further, the OECD study was biased by Euro-centric usage models with low volumes of outbound calls and high numbers of SMS messages. For example, the low volume basket had one call per day, 1.1 SMS messages per day and 8 MMS messages per year. High volume had only 4.5 calls per day (any of you ever had that light a day of usage, excluding days you forgot your phone at home?), nearly 2 SMS per day and a MMS per month.

What the OECD has demonstrated is that pricing studies can show different results based on the baskets being studied.

Contrary to impressions you may have picked up elsewhere, I don’t think the OECD study found that Canadian ARPU increased because of lack of competition. Indeed, the OECD had a review of the competitive landscape in various global markets (see Table 2.2) and Canada’s marketplace looks pretty good. In fact, if you want to get selective in excerpting factoids, the OECD study acknowledges that

The largest growth in total cellular mobile traffic from 2003 to 2005 was in Turkey (67%), followed by the United States (43%), Greece (40%), Denmark (36%) and Canada (36%).

In its comments on the issue of Average Revenue per User (ARPU), Michael Geist says that

The OECD found that, on average, mobile revenue per subscriber dropped from 2003 to 2005 due to increased competition. In Canada, revenue increased during that period.

Let’s have a look at what the report says:

Fierce competition in mobile markets has led to a decline in the average revenue from mobile subscribers in the OECD. Between 2003 and 2005, the average revenue per mobile subscriber fell just over 0.3%. The largest drops in income per subscriber were in the Netherlands, Poland and the United States. Revenues tend to fall in areas with intense competition among operators, areas with increasing proportion of pre-paid accounts, or areas that have historically had very high mobile prices and are now experiencing more competition. Japan leads the OECD in mobile revenue per subscriber at USD 860 per year. The lowest revenues per subscriber are in Turkey, Poland and the Czech Republic.

The OECD report failed to mention another factor that impacts ARPU: SIMs per user. The OECD is really reporting revenue per SIM; the more SIMs per user, the lower the revenue per SIM.

Figure 3.8 on page 77 of the report graphically shows the ARPU shift in the OECD countries. The average reduction is more or less rounding error – 0.3%, or $0.12 per month on a $40 per month bill. Canada’s ARPU increase is in line with that of most countries usually proclaimed as ‘more advanced’ in their states of competition: Austria, Belgium, Korea, Norway, Denmark, Greece, France, the UK, Germany, Italy and on and on.

ARPU rose in Canada and these countries because users found value in adopting additional mobile services. As we all know, rates fell and are continuing to come down. Obviously, people in almost all of the OECD markets have purchased more services.

Comparative studies are far more complex than the simplistic and self-serving excerpts that are typically getting presented by all kinds of groups. Let’s make sure that we’re not selective in presenting partial facts.

I would love to see a more academic and more complete discussion and review of the factors that lead to differences between countries. Without an agenda.

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By the way, the OECD report is marred by at least one glaring data error: BCE’s revenues in Table 1.1 ($3.345B) appear to be for one quarter, rather than the entire year. As a result, BCE is listed farther down the table than it should be.

What other errors aren’t as obvious?

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Update [July 24, 11:00 am]
FCC Commissioner Robert McDowell has an Opinion piece in today’s Wall Street Journal, called Broadband Baloney. He also notes Euro-centric methodological flaws in the OECD report.

He concludes:

When it comes to broadband policy, let’s put aside flawed studies and rankings, and reject the road of regulatory stagnation. In the next few years, we will witness a tremendous explosion of entrepreneurial brilliance in the broadband market, if the government doesn’t micromanage. Belief in entrepreneurs and a light regulatory touch is the right broadband policy for America.

Technorati Tags:
OECD, wireless, Michael Geist

What the heck is a Yoggie?

I’m glad you asked. I was introduced to Yoggie by my friend Jeff at Gentek, around the corner in Concord, Ontario.

Yoggie is a security tool for a computer – designed primarily for corporate users of laptops – that keep them secure when on the road. I think Yoggie can be useful for home users as well.

Once loaded, the computer will not connect to the internet without going through the Yoggie device – an off-board processor to physically separate security functions from the rest of the machine, including its Layer 8 Security Engine, protecting the machine from unknown attacks, spyware, etc.

There are two versions – USB and in-line – and the Yoggie can be used as a device to physically limit kids access to the internet; just remove the Yoggie and the computer is isolated – it simply won’t connect to the internet. When it is plugged in, Yoggie provides a safer surfing environment.

For anyone who has found that their software-based virus protection is killing processing power of their computer, Yoggie may also be a solution.

I sense we’ll be seeing more about Yoggie.

Technorati Tags:
Yoggie