I’m not a lawyer. My legal training comes from watching legal themed shows on TV, so I am probably better trained for criminal law in California, or New York and I think would probably be able to hold my own, discussing cases with William Shatner on a Boston office patio with a scotch.

The writers for those shows never seem to look at the excitement of telecom law. It’s too bad.

There are interesting insights on the inner-workings of government that can be found in the Federal Court ruling that dismisses a judicial review of permitting Videotron to bid on set-aside spectrum in the $8.91B 3500 MHz auction last year.

Let’s start by stepping back to review the “pro-competitive measures” that were established in the Policy and Licensing Framework for Spectrum in the 3500 MHz Band. ISED defined national mobile service providers (NMSPs) as “companies with 10% or more of national wireless subscriber market share”, a euphemism for Bell, Rogers and TELUS. ISED decided that there would be set-aside spectrum and “Eligibility to bid on set-aside spectrum will be limited to those registered with the CRTC as facilities-based providers that are not national mobile service providers, and that are actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest, effective as of the date of application to participate in the 3500 MHz auction.”

The various license tiers describe the geographic size of a spectrum license. The entire country is Tier 1. The country is subdivided into 14 Tier 2 license areas and this continues to cascade down into 59 Tier 3 regional service areas, or 174 Tier 4 local service areas. The 3500 MHz auction was conducted at the Tier 4 level.

Also important as background is this section of the Framework:

64. In its assessment of a bidder’s eligibility to bid on the set-aside spectrum, ISED will determine whether commercial telecommunications services are actively being provided to the general public in the service area by the potential bidder. Potential bidders will be required to demonstrate this by providing relevant documentation to ISED, which will include, but not be limited to, descriptions of:
    • the services being offered in the service area;
    • the retail/distribution network; and
    • how subscribers access services and the number of subscribers in the service area.

A few paragraphs earlier, ISED determined that the term general public “can include businesses, enterprises and institutions, as well as ‘traditional’ residential consumers.”

As described by the Court [at paragraph 24], “Videotron applied, and was ultimately determined eligible, to be a set-aside bidder in the Tier 2 service areas in question for this judicial review, Manitoba, Alberta and British Columbia, on the basis of services provided by its affiliate, Fibrenoire Inc. [Fibrenoire]. On July 29, 2021, Videotron was the successful bidder for 128 set-aside licenses across 45 license areas in Western Canada.”

TELUS, the number one mobile provider in the west, immediately (August 3) challenged ISED on Videotron’s eligibility, asking ISED to produce the documentation filed. In a letter a week later, ISED refused to disclose Videotron’s documentation but said that it had verified Videotron’s eligibility.

Two weeks later, TELUS launched the judicial review that ultimately ruled (somewhat predictably in my view, but no one asked) that “the set-aside eligibility assessment process and the Minister’s decision to have been fair and reasonable”. As the judgement observed,

It is especially telling that TELUS is not joined in pursuing this application by any of the set-aside eligible bidders who participated in the Auction, who would have had a relatively greater interest in seeing set-aside eligibility determinations being made fairly, and who would have been even more directly affected by bidding directly against Vidéotron for set-aside spectrum. Their silence in this application has not gone unnoticed.

Despite the ruling, and a bit of reading between the lines (due to the judge trying to navigate between partially confidential filings from TELUS, Videotron and the government), we can see that bureaucrats wanted to ensure that Videotron – perhaps anyone – would be approved as a bidder in Western Canada.

Stepping back again for a minute, one can imagine that the folks developing the “procompetitive measures” for the auction must have been scrambling somewhat when it became evident that Shaw would not be participating in the auction. After all, the rules clearly favoured the regional mobile providers in each area, and were designed to try to avoid spectrum squatting and flipping. It would have been an embarrassment for the set aside spectrum to attract no bidders, so Videotron’s application to bid in the west must have been viewed as helpful.

However, we see that ISED wanted to verify Videotron’s claim that it offered services in each of Manitoba, Alberta and BC through its affiliate, Fibrenoire, but couldn’t using the company’s website. Videotron explained “Except in some areas of Toronto where Fibrenoire operates its own backbone Internet network, these fibre access facilities are sourced from business partners operating networks in the areas in question.” So, other than in Toronto, Fibrenoire uses wholesale services from other service providers in order to provide service to customers in the West, acknowledged by Videotron as “most often branches of large Quebec companies that already have a well-established business relationship with the company.”

I found it somewhat entertaining to read how ISED placed “mystery shopper” calls to verify that Fibrenoire would actually take orders from a mythical customer for services in a few Western cities. Very few notes were kept. At the bottom of the form confirming Videotron’s eligibility, the manager wrote “Provides internet services to business through Fibrenoire as wholesaler.”

On that basis, it seems the bar was not set very high for virtually any service provider registered with the CRTC as “facilities-based” anywhere in Canada to have been considered eligible to bid anywhere in the country.

While some people may see the outcome as a vindication of the government’s decision, a careful read of the Court’s ruling reveals what I think is an embarrassing lack of rigour in processes and record-keeping for administering multi-billion dollar spectrum auctions in Canada. I am left with a feeling of a certain amount of arbitrariness in Videotron’s approval as a bidder. Would ISED have reached the same conclusion had Shaw decided to bid in Western Canada? What if it had been Iristel?

At the end of the day, as noted in the decision, the Minister has considerable discretion in these matters and “the degree of procedural fairness owed by the Minister to TELUS was minimal and was limited to complying with the process it had set out for itself.”

At last week’s IIC conference, delegates heard a number of speakers say “regulatory stability is key for future of Canada’s telecom networks”.

With service providers making $9B investments in spectrum, and tens of billions more in deploying networks, a consistent (perhaps even predictable) policy framework should be a priority for leadership at ISED, and the industry in general.

To what extent will Cabinet’s disposition of the appeal of CRTC 2021-181 continue to advance that “Canada’s future depends on connectivity”?

I was struck by a story on CNN saying “Texas has declared open season on Facebook, Twitter and YouTube with censorship law”.

It wasn’t that Texas has introduced legislation that impacts the technology giants; Canada has a series of legislative proposals being considered to control online content. Indeed, we are seeing a wide variety of democracies around the world place restrictions or consider legislation to rein in, tax, and impose limits on some of the freedoms under which internet applications operated.

At the core of Texas House Bill 20 is a section examining discourse on social media platforms:

(a) A social media platform may not censor a user, a user’s expression, or a user’s ability to receive the expression of another person based on:

1. the viewpoint of the user or another person;
2. the viewpoint represented in the user’s expression or another person’s expression; or
3. a user’s geographic location in this state or any part of this state.

The term “censor” is defined in the legislation as “to block, ban, remove, deplatform, demonetize, de-boost, restrict, deny equal access or visibility to, or otherwise discriminate against expression”

I understand the intent behind the law. Whether true or not, many conservative voices believe their views are unfairly targeted by platforms.

I was more disturbed by a failure to understand the technology and an apparent lack of consideration of the potential unintended consequences arising from the law. For example, if a social media platform may not “censor a user”, what does that mean for efforts to limit spam-bots on social media feeds?

As described by CNN, “in oral arguments at the Fifth Circuit Court of Appeals, a three-judge panel confused social media platforms with internet service providers; disputed that Facebook and Twitter are websites; and expressed surprise that a service such as Twitter could “just decide” what content appears on its platform as a matter of course.”

The preamble of the bill says “social media platforms function as common carriers, are affected with a public interest, are central public forums for public debate, and have enjoyed governmental support in the United States”. What are the implications of such a definition?

While other commentators will certainly discuss the legislation and its further legal challenges, I’d like to look at how legislators and judges get so confused by some basic technology concepts.

It’s actually quite understandable. It’s impossible for them to be experts on every segment of the economy. They need to rely on advice from advisors. In most cases, legislation is drafted with the assistance of subject matter experts.

Sometimes, polemics from activist campaigns can overwhelm the filters of legislative debate. Clicktivist campaigns, based on barely a passing fidelity to the truth, can drive misinformation among legislators. A recent campaign from Canada’s OpenMedia organization claims “The copyright extension would block the works of dozens of established authors including Marshall McLuhan, Gabrielle Roy, and Margaret Laurence. Their works would be buried for generations.”

Extending copyright doesn’t block or bury any of these works. The campaign is simply not true.

Committee appearances by academics are also not immune from deeply flawed understandings of complex business, regulatory, and technology issues. Academics and legislators alike continue to be unaware that foreign ownership of telecommunications was liberalized a decade ago. A number of academics have confused “EBITDA” (Earnings Before Interest, Tax, Depreciation and Amortization) with “Profit”, and that has found its way into some legislative committee discussions, not recognizing that in capital intensive businesses, such as facilities-based telecommunications carriers, the interest, depreciation, and amortization amounts are substantial and require strong EBITDA to support continued investment.

Ten weeks ago, I wrote about misunderstandings and disinformation impacting debates of Parliament Committees in “Truthiness and Canada’s Telecom Industry” and I have published a few blog posts [such as here, here, and here] trying to dispel common myths surrounding Canada’s telecommunications industry.

I have written before that “Sometimes it’s easiest to simply respond to the loudest voices. There are lots of instances where we see government bodies respond to groups, large and small, making lots of noise.”

It’s even more important to ensure polemics don’t infect legislators abilities to filter fact from fiction.

Why would some people subscribe to a 25 Mbps broadband service if you could pay just a few dollars more to get a 50 Mbps service?

The answer is “Choice.”

People get to choose how they spend their money.

Phrased this way, most of you understand the options. However, I sometimes find that there are people who may have trouble empathizing with other people’s priorities, imposing their own selection criteria and preferences on others.

For some people involved in telecom policy issues, there is a belief that if the price of broadband was lowered across the board, then everyone would choose to subscribe to faster service. Taken to an extreme, let’s say prices were cut by 80% – people paying $75 per month for 150 Mbps service would have that broadband speed for just $15.

Under such circumstances, why would a lower speed option make any sense?

Choice.

Not everyone needs 150 Mbps service, so shouldn’t there be an even lower price option for them? In the extreme example, shouldn’t there be a slower speed option available for $10?

Mathematically speaking, if a 150 Mbps unlimited service can be offered for some arbitrary price point – let’s call that $P – then presumably, a lesser service (either lower speed or lower monthly capacity) should be priced at some amount less than $P. Shouldn’t consumers have the ability to make a choice to save money if they believe the higher price service is more than they need?

The CRTC’s basic service objective is for all Canadians to have access to a broadband service with at least 50 Mbps download speed, at least 10 Mbps upload, and unlimited monthly capacity. The key phrase in that sentence is “for all Canadians to have access”, not for all Canadians to subscribe to such a service.

We don’t have 150 Mbps service available for $15, and it is highly unlikely that we will see such prices. But, I am trying to demonstrate why the CRTC’s broadband objective sets a target for universal access to 50/10 speeds, not for everyone to subscribe to such a service.

The broadband service objective is one of the most misunderstood and misquoted CRTC policies that I have seen. Academic reports across the country have cited the basic service objective incorrectly, and those reports led Toronto’s Chief Technology Officer to mistakenly report to the City’s Executive Committee that there are infrastructure gaps in one of the world’s best connected cities.

There is nothing wrong with the fact that some people choose to subscribe to a service with lower speeds than the CRTC’s objective. No matter what the price is for 50/10 broadband, some people will wonder why they can’t pay some amount less for a slightly lower speed service that still meets their needs.

It is a matter of choice, and such choices are worth preserving.

Our focus should be on connecting those who don’t have access at any speed. That requires development of a digital literacy strategy, demonstrating the value of safely connecting online.

As I have said before, “Some technology problems just might be handled better without more technology.”

Size matters. When it comes to paying cost awards for public interest groups participating in telecommunications regulatory proceedings, allocations are generally based on relative size of the companies’ telecommunications operating revenues (TORs).

A recent series of cost awards associated with Telecom and Broadcasting Decision CRTC 2022-28, “When and how communications service providers must provide paper bills”, attracted a number of cost applications that were awarded $53,646.72 as follows:

• Telecom Order CRTC 2022-33: $2,015.00 to the Canadian National Society of the Deaf-Blind
• Telecom Order CRTC 2022-34: $15,463.97 to the CNIB Foundation
• Telecom Order CRTC 2022-35: $3,080.00 to the Canadian Association of the Deaf
• Telecom Order CRTC 2022-36: $4,338.00 to the Deaf Wireless Canada Consultative Committee
• Telecom Order CRTC 2022-37: $6,345.00 to l’Union des consommateurs
• Telecom Order CRTC 2022-38: $1,527.50 to Deafness Advocacy Association Nova Scotia
• Telecom Order CRTC 2022-39: $10,761.15 to PIAC-NPF
• Telecom Order CRTC 2022-40: $2,221.72 to the Consumers Council of Canada
• Telecom Order CRTC 2022-41: $7,894.38 to the Manitoba Coalition

As a matter of practice, the CRTC doesn’t allocate amounts less that $1000 in order to simplify cheque processing and collections for both the recipient and the payor. As a result, despite the possibility of allocating costs between Bell, Eastlink, Distributel, Videotron, Rogers, SaskTel, Shaw, TekSavvy, TELUS, and Xplornet, the formula used by the CRTC resulted in costs being charged just to Bell, Rogers and TELUS.

Rogers has filed an appeal of the awards [zip, 1.8 MB], questioning the CRTC on the correctness of the revenues used to determine the allocations between the companies footing the bills.

The total amounts under dispute are not huge, relative to some files we have seen, such as nearly half a million dollars sought by various groups in the 2008 internet traffic management proceeding.

Rogers is wondering what the CRTC used as the basis for its allocations. Did the Commission use wireless revenues or total revenues? Did the regulator include the revenues from all the related companies and subsidiaries on behalf of which Bell responded?

Rogers says it is paying the awarded amounts in the meantime to ensure the public interest groups aren’t caught without funding in the interim, saying that it will collect reimbursement from the other service providers, should the CRTC rule in its favour.

A similar issue arose a couple years ago when TELUS challenged cost award allocations in a proceeding that led to Telecom Decision CRTC 2020-33.

As you will recall, I have expressed concerns about some past recipients of funding. It is good to see the level of attention to detail being paid to relatively small amounts of money in these cost awards.

We have seen the expression “sustainable competition” used frequently in Canadian telecommunications policy circles.

In its rejection of an appeal on the CRTC’s Review of Wireless Services, just last month Cabinet said: “the Governor in Council considers that the Commission’s decision appropriately balances investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers”.

The terms “sustainable” and variations like “sustainability” appear 29 times in that CRTC decision.

Which brings us to the Competition Bureau filing with the Competition Tribunal to block the merger of Rogers and Shaw.

As reported by Bloomberg, the application is somewhat “baffling”. According to the Bureau, the merger “is likely to prevent or lessen competition substantially in Wireless Services in Ontario, Alberta and British Columbia.” Further, the Bureau says “divestitures proposed by the merging parties are not likely to alleviate the substantial prevention or lessening of competition from the Proposed Transaction.”

What causes many analysts to scratch our heads is an implicit presumption in the Bureau’s arguments that ending the merger will result in Shaw continuing to invest in operating its wireless business.

The lede in the Bloomberg story captures the issue. “The antitrust case against Rogers Communications Inc.’s takeover of a rival is thousands of pages long but comes down to one core idea: the company it’s buying is too good. Analysts don’t see it that way.”

Effectively, the Competition Bureau appears to be saying that Shaw would never be allowed to sell Freedom Mobile, because there are synergies with Shaw’s wireline business, even though the mobile business wasn’t originally integrated with a wireline company when it launched or when Shaw bought it. That seems pretty extreme. Earlier this week, BMO Capital wrote “We believe an outright rejection of this deal would not satisfy the government’s position of a four-player market (i.e., Shaw will not keep funding wireless, that’s why they sold)”.

The Bloomberg article notes “while Freedom may be a tough competitor, analysts question how healthy it really is. Shaw is struggling to generate much cash flow from it.”

As I wrote on Monday, Brad Shaw told the Parliamentary Industry Committee that the status quo is not an option, as the level of investment required for wireless was beyond the ability of Shaw to undertake. While the Competition Bureau may be correct in saying that Freedom contributed to competition in the wireless market, it does not say how Freedom can sustain its past level of competition if the merger is blocked. Shaw has clearly concluded that it cannot.

This is not a unique occurrence. Market consolidation has been happening, or is under discussion, in the U.S., Europe, the UK, Asia and Australia. One of the reasons for consolidation is that remaining competitive is an expensive proposition. GSMA estimates that the deployment and ongoing costs of 5G will be up to 71% more expensive than previous network generations. If Freedom is to remain a competitive force, additional financial resources are required.

Blocking the merger does not maintain Freedom’s contribution to competition in the marketplace; it weakens it.

New investors have apparently stepped up, enabling the “merging parties” to propose a divestiture. The multi-billion dollar purchase price being reported in the media implies that these potential buyers have developed business plans that are attractive to their investors and are willing to undertake the investments necessary to compete.

The outcome of the merger review process, like the CRTC and Cabinet reviews of wireless services, needs to “balance investment incentives to build and upgrade networks, and sustainable competition and the availability of affordable mobile wireless prices for consumers.”

The Competition Bureau’s position disrupts that balance, risking the long-term sustainability of all market participants.