Today is the day that reply comments are due for the Industry Canada consultation on the advanced wireless spectrum auction rules.

The process was started in February and the first round of comments came in last month. The issues were canvassed in an exciting debate on the final afternoon of The 2007 Canadian Telecom Summit.

Of course, a big question mark out there is how will TELUS address its comments. It had been opposed to new entrant concessions other than during its 4-day flirtation with the idea of acquiring Bell, when TELUS said:

Should Telus’ acquisition of BCE proceed, we believe that new wireless spectrum should be set aside for new entrants to ensure that Canada continues to have a third wireless network competitor.

We would also agree to certain other areas of support … to ensure that any emerging third player within the wireless industry was allowed to gain access to some of our tower infrastructure and was allowed to roam on favourable conditions.

We believe there are clear remedies to ensure vibrant and sustainable competition without divesting the mobile networks of either company.

Will TELUS revert to its former position? Has the prospect of wireless consolidation irreparably damaged the prospects of an unfettered auction?

My view is that Industry Canada should stay the course and avoid the temptation to tamper with an open auction. As a wise man once said to me, government has to stop trying to do indirectly what it can achieve directly.

A tangential approach to a problem only leads to a hypothetical solution. If there are concerns about possible industry consolidation, about lack of competitive behaviour, there are tools for direct intervention.

We’ll look at the instruments of government review in tomorrow’s posting.

The Government of Ontario has released details on its Rural Connections program: The Ontario Municipal Rural Broadband Partnership Program Guidelines.

The description of the program is somewhat confusing, leading me to wonder if the province is being advised by an agenda seeking to introduce symmetry into rural broadband connections when most urban customers seem to do just fine with asymmetric access. Citing the 2001 Report of the National Broadband Task Force, the preamble for Ontario’s program says

Based on today’s technology and applications, high-speed broadband is defined as a high-capacity, two-way link between end user and access network suppliers capable of supporting full-motion interactive video applications. A minimum symmetrical speed of 1.5 megabits per second per individual user is currently required to support these applications

The actual program requirements only require a minimum 1.5Mb download speed. Municipalities have until July 13 to get their applications into the province. The province will fund up to $1M of the project, as long as the money can be spent this fiscal year – by March, 2008.

The Ontario Municipal Rural Broadband Partnership Program will develop broadband infrastructure to provide connectivity to residents, businesses, and public institutions in rural areas that currently do not have access to high-speed Internet services, providing a foundation for growth and innovation. The infrastructure tendering process must be technology neutral, require open access, have a minimum download speed of 1.5 Mbps, and must be scalable.

If this program is truly technology neutral, I wonder how can any area be considered to lack access to broadband defined as 1.5 Mbps service?

As I have written before, my friends at Barrett Xplore have put all of Canada within reach of this kind of connectivity.

In interviews, Darren Entwistle has been waving the flag of Canadian nationalism and national security to help sell his plan to keep the whole shooting match of a merged Bell and TELUS entity. I find it interesting that other suitors, made up primarily of capital from Canadian and government employee pension plans are being characterized as “foreigners”.

In a call last Thursday with industry analysts, Darren referred to the high proportion of northbound connectivity that is controlled by foreign carriers, the number of countries with national scale incumbents, the fear of Canada’s national security assets falling under control of foreign investment or foreign carriers. He raised the threat of AT&T; and Verizon controlling Canadian telecom.

But at the end of the day, those aren’t reasons for TELUS to acquire Bell. Shareholders, Bell and TELUS alike, expect the deal to be good for them – in fact, they expect it to be the best deal for them. If it happens to be good for Canada too, that is serendipity, not a reason to do the transaction.

There is an interesting take on the issues from Derek DeCloet in the weekend’s Globe and Mail.

Technorati Tags:
Bell, TELUS, Globe and Mail, Derek DeCloet

My posting from last Sunday attracted a number of comments – way more than I would have expected on a beautiful Father’s Day.

Brian Gordon said:

So, it all comes down to whether or not Industry Canada believes it would be in the public interest to have more competition in the cellular market. IF they believe more competition is needed, then they have to determine if it would be in the public interest to introduce some specific measures into the auction process in order to give the competition they want a chance to succeed by allowing new players to have the ability to hit the ground running.

I am not certain that the decision tree necessarily starts with needing to determine whether it is in the public interest to have more competition in the cellular market.

It’s possible that there needs to be a decision made about what would give sufficient cause to intervene in the market place. Given other pronouncements from this government, one would assume that there must first be convincing evidence that the market isn’t working. The ex-post versus ex-ante thing.

We might want to start with the possibility of a Bell / TELUS combination. It is interesting that TELUS is suggesting that, under its combination proposal to retain all of the acquired assets of Bell, it agrees there would be a sufficient reduction in competition to warrant new entrant concessions in the spectrum auction, including a set-aside. Such concessions, characterized as a subsidy by TELUS just a few weeks ago, will ease the ability for, but not provide the assurance of, additional viable industry players.

More competition is always desirable: for cars, gas, groceries and communications services. I welcome the possibility of additional service providers. So the first decision in the tree (would it be in the public interest to have more competition in the cellular market) is easy to answer – of course it is.

The real question is whether it is in the public interest to introduce specific measures into the auction process, versus measures to prevent the market contraction. The concern, expressed by TELUS itself, is that interference in market forces in the auction could lead to disastrous unintended consequences. But that is another posting.