Barrett’s solution for rural competitiveness

January 25, 2017

My wife likes to go to estate auctions when we are at the cottage. She’ll come home with some interesting treasures, like a couple beautiful old phones. And often there will be a box of junk that was thrown in by the auctioneer in order to clear the table.

After all, the auctioneer has a responsibility to clear out the house. As a result, he’ll combine whatever isn’t selling into a lot that is more attractive. So, my wife ends up getting a collection of cut crystal shot glasses combined with some Tony the Tiger cereal bowls. Can you guess which she was actually bidding on?

Some would say that the AWS spectrum auction has proposed to combine lots the same way as estate auctioneers. Combining less attractive rural areas with more desirable urban territory.

I have mentioned in the past that I act as an advisor to Barrett Xplore Inc. (BXI). BXI has focussed on serving rural Canada:

Our vision is simple — more for rural Canada: more choice, competition, and availability of broadband access, applications, and accessories.

BXI’s submission in the AWS consultation has a novel suggestion to address the level of competition in rural markets.

Unlike many who suggest a set aside for new entrants or mandated roaming and access to incumbent infrastructure, BXI simply wants some of the regional spectrum blocks to be broken up into more manageable, bite-sized chunks. Barrett Xplore isn’t asking for a handout or help in lowering competition for the spectrum. Just let them bid for the parts they really want.

Barrett Xplore is a company that just wants the rural pieces. Without changes, most bidders will pick up unwanted rural territories when their target was the urban core.

The problem of urban-rural market segmentation can also be seen in the results of the 2.5 GHz MCS comparative selection process conducted in 2000 that awarded almost all of the Canadian licenses to Inukshuk Internet Inc. through a comparative licensing or “beauty contest” approach. Unfortunately the very large MCS license areas include both rural and urban markets. The lure of the large urban population and easier business case returns likely explains why the deployments, announced to date, focus on large urban areas.

Barrett Xplore’s proposal merits consideration. If there are bidders that want the cereal bowls, why would we make them pay for the crystal? And vice-versa.

John Maduri of Barrett Xplore will be speaking on June 11 at The 2007 Canadian Telecom Summit.

Who pays for uneconomic entry?

May 30, 2007
EastlinkBragg Communications, better known as Eastlink, has been a leader in introducing competitive services in Atlantic Canada. They pushed hard in launching voice services over cable, not waiting for VoIP. In doing so, Eastlink quickly grabbed a third of the Halifax telephone market.

Bragg Communications has been competing hard against Bell Aliant and many would say they have been winning.

According to its recent submission to the AWS consultation,

EastLink believes that its presence as a competitor in these markets has not only increased choice for Maritime residents and businesses, but it has also played a significant role in increasing quality of services and products to consumers. EastLink was the first company to offer bundled services, which provides special pricing opportunities for consumers.

Eastlink has accomplished all this without any handouts or subsidies. That is why it was particularly surprising to see Eastlink call for special new entrant incentives, such as a spectrum set-aside. The language in the Eastlink submission is couched in places, saying “measures should be implemented to enable new entrants to access spectrum.”

No one, or at least no reasonable person, would dispute that request.

Industry Canada should definitely enable new entrants to access spectrum. Any arguments? Is anyone really suggesting that the spectrum – or even any portion of the spectrum – should be set aside solely for incumbents?

Apparently, Economics and Technology Inc., in its appendix to one of the submissions, think so. ETI says that the TELUS / Bell / Rogers group have been arguing that “the creation of one or more new carriers with national market footprints is both unnecessary and inefficient.”

I think that is an incorrect statement of the national incumbents’ position.

In any case, the real question is whether the Department should intervene in the marketplace to constrain economic forces from an open bidding process. There is a difference between allowing the creation of a new carrier and artificially and uneconomically stimulating such market entry.

According to Eastlink, we shouldn’t worry about the resultant possibility of uneconomic entry:

The benefit to be gained by providing new entrants with the opportunity to access spectrum far outweighs the risks of potential uneconomic entry. Furthermore, uneconomic entry will eventually be corrected through market forces.

At least Eastlink recognizes the “potential” for uneconomic entry. But what does it mean that the impact will eventually be corrected? Eventually? After how many millions, tens of millions or billions of real shareholder dollars are lost?

Let’s move out of economics class here and look at the real world of investors. The potential for the government to stimulate uneconomic entry means financial houses face special risks in providing funding to Canadian carriers. Individual shareholders of corporations are people like me, my neighbours, pensioners. Mutual funds and institutional investors will look to other countries for growth opportunities. Individuals are just bound to get burned. The memories of the tech bubble are still too fresh to be happy about “eventual” corrections to uneconomic entry.

That set-aside also means that the federal government raises less than full value from the spectrum auction. I’m not sure that I’m willing to fund some new entrant or speculator with my tax dollars.

Eastlink was right when it said that new entrants should be able to access spectrum. The rules should ensure the auction allows for an open, competitive bidding process. Full stop.

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Too much paper

January 25, 2017

Last November, the CRTC launched a major inquiry into the nature of wholesale services that incumbents will need to provide to competitors. Telecom Public Notice CRTC 2006-14 is a 2-year process that saw a flurry of filings last weekend – jamming many an email box with more data than most humans would want to consume – especially on a holiday weekend.

The late night, last-minute filings led to a few clerical errors. At least two companies sent out follow-up email messages along the lines of:

It has come to the attention of [name removed to protect the already embarrassed] that in its Abridged distribution of responses to interrogatories issued on 18 May 2007 to the interested parties to this proceeding (PN 2006-14) that a partially abridged copy of the Confidential version of the Attachment … was inadvertently included in the abridged distribution. Per [our] covering letter, this attachment was filed in confidence only with the CRTC with no abridgement to be provided.

A real challenge in a digital environment is the ease by which such mistakes can be made and the challenge in recovering private information once placed into the public domain.

Where did Winnipeg go?

May 28, 2007
WinnipegSomehow, Canada has lost a major city of 700,000 people and two provinces. Manitoba and Saskatchewan, including the city of Winnipeg, have gone AWOL as far as some of the submissions in the AWS consultation are concerned.

Case in point: There is a report on current spectrum holdings attached to the submission by Mobilexchange, which seems to have forgotten about the Canadian mid-west.

The report states:

  • Canadian cellular licensing in 1983 and PCS licensing in 1995 both resulted in national license footprints for the carriers. In 2001 Industry Canada auctioned “additional” PCS spectrum divided into 14 license regions (“Tier 2” areas).
  • All of the spectrum from Canadian awards is now held by Rogers, Bell and Telus

“All” is a pretty powerful word. It means everything. The entire shooting match. Nothing but. So if “all of the spectrum from Canadian awards is now held by Rogers, Bell and Telus,” that would mean no one else has any spectrum.

Up until I read that report, I thought that the ILECs in Manitoba and Saskatchewan were facilities-based wireless carriers. I thought they got their spectrum in the original cellular license awards and have been paying license fees for 20 years. But the report says only Bell, Rogers and TELUS hold spectrum from those awards, so what happened to Sasktel and MTS Allstream. Maybe the report writers didn’t really mean “all.”

They meant all but the holders of licenses covering the 12% of the country’s land area smack in the middle of the map, including one of the 10 largest cities in the country. Any other errors and omissions? Don’t forget to check on some of the other license holders, like independent telcos.

Why is this important? One might ask if Winnipeg is an example of what can happen when 4 licensed facilities-based carriers compete to serve a major metropolitan area. There are interesting questions to examine. The competitive behaviour of a regional operator with 3 national carriers. The impact on penetration rates, end user pricing, deployment of new technologies and services, etc.

It would be a study worth looking at. But first we need to make sure that Manitoba and Saskatchewan are still considered part of Canada by respondents to the consultation process. Then we need a survey that provides the real details on spectrum holdings by all the carriers in Canada – even in those markets that have inconvenient truths.

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AWS Comments are posted

May 27, 2007
Maxime BernierIndustry Canada’s elves have been working through the weekend to try to keep their website current with comments filed in respect of the Consultation on a Framework to Auction Spectrum in the 2 GHz Range including Advanced Wireless Services.

Catchy title, don’t you think? The acronym doesn’t seem to be any better. Time for a contest, I think. Best name or acronym submitted for this official Industry Canada consultation. Get your letters and comments in today!

Not all the submissions are up on the Industry Canada website yet, but I would expect the rest on Monday. I will be continuing my reading and you can expect comments over the coming weeks. Notably absent from the weekend’s postings were submissions by Bell, TELUS, Rogers, MTS Allstream and Quebecor/Videotron.

Industry Minister Maxime Bernier is scheduled to deliver the closing remarks at The 2007 Canadian Telecom Summit on the afternoon of June 13. Earlier that afternoon, there will be a panel discussion on the state of competition in wireless services and an address by Sheridan Scott, head of the Competition Bureau.

With reply comments on the AWS consultation due to Industry Canada a few weeks later, spectrum should be one of the many points to be discussed this year at The Canadian Telecom Summit. Seats are almost sold-out. Book this week in order to avoid being disappointed.

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