Every so often, I run across an article that articulates telecom issues in such a way that I want to be able to refer back to it.

Daniel Lyons, a professor at Boston College Law School, wrote such a piece today: “Biden’s infrastructure plan: Implications for broadband”.

A few passages were especially concise in capturing the essence of the issues. Describing the digital divide in terms of both supply and demand:

America’s digital divide is a multifaceted problem. Closing the gap requires attention to both availability and affordability: subsidizing construction of networks in places where the business case does not support investment, and providing assistance to low-income families who have access to broadband networks but cannot afford the monthly service and equipment needed to get online.

And, on the subject of technical neutrality:

the plan says it will prioritize “future-proof” networks, without explaining what that means. Predicting the future of telecommunications networks is a fool’s errand — ask the congressmen who so carefully planned the future of local telephone competition in the 1996 Telecommunications Act. To the extent that this language signifies a preference for fiber networks over other forms of connectivity, that would be a mistake. Recent auctions have embraced a technology-neutral approach to subsidizing unserved areas; indeed, small wireless internet service providers have been some of the greatest success stories in our efforts to connect rural areas. Picking winners and losers among network models undermines the intermodal competition that pushes all technologies forward and increases the chances of finding the most efficient way of serving individual pockets of unserved customers.

Finally, on the issue of government subsidies to overlay networks:

The plan also seemingly equates “unserved” and “underserved” areas, which present two very different challenges for policymakers. Unserved areas lack any broadband access. By comparison, underserved areas have an existing provider whose network performance does not meet some (as-yet undefined) benchmark. Subsidizing a new company to compete directly against an unsubsidized competitor raises different issues than providing service where none currently exists, and it can effectively punish companies that have invested private dollars to connect hard-to-serve populations economically. Unserved areas should be the administration’s priority.

Although the article was written in response to a White House initiative south of the border, its discussion of issues is relevant to those of us concerned about similar challenges in Canada. I encourage you to read it and welcome your comments.

PwC’s Canadian Telecommunications practice released a report [pdf, 2.8 MB | Executive Summary, 1 MB] last week looking at Canada’s connectivity needs in a post-COVID environment.

COVID-19 has forced us to quickly change our ways of working and living, and this has been made possible by internet connectivity. Going forward, both connectivity and Industry 4.0 will be critical to Canada’s long-term economic success. While Industry 4.0 will drive productivity, efficiency and flexibility across the economy, it will rely on advanced connectivity networks such as 5G.

Right now, there’s a window of opportunity for Canada to more firmly leverage 5G as an investment catalyst. But this will require cooperation across government, the telecommunications sector and broader industry.

The report defines Industry 4.0 as “The Fourth Industrial Revolution: the ongoing automation of traditional manufacturing and industrial practices using modern smart technology. It leads to the end-to-end digitization of all physical assets and integration across the value chain using Internet of Things (IoT) hardware, software and connectivity.”

According to PwC, the high quality of Canada’s connectivity networks allowed industries to quickly adapt to digital ways of working during COVID-19. This, combined with Canada’s health and fiscal policy response, supported Canada’s economic activity showing more resilience than the average of its global peers. In addition, the report notes that of course, Canadians’ social well-being during COVID-19 has been supported by the ability to use connectivity for work and school and entertainment. “These uses of connectivity significantly increased overall broadband consumption in Canada, with daily average broadband usage increasing by 43% (Q2 2020 compared to Q2 2019) during the first lockdown period.”

PwC observed that Canada’s overall average mobile download speed (which was 71% higher than the average of global peers pre-COVID-19) maintained its leading position relative to peer countries, despite the significant increase in demand.

According to PwC, COVID-19 accelerated 6 key trends having implications for connectivity and broadband-enabled use cases:

1. Shifts in population centres: The rate of population growth in large urban centres is expected to slow down due to increasing unaffordability in large urban centres and increased viability of remote working and learning.
2. Shift in relationship and entertainment preferences: Increased social media, video streaming and video chat usage habits are likely to persist post-COVID-19.
3. Shifts in business operating models: Employers are expected to accelerate digital transformation and automation plans to increase business resiliency, respond to future disruption and manage increased costs from localized supply chains.
4. Shift to localized supply chains: Supply chains are expected to continue to trend towards onshoring to protect against geopolitical and unpredictable disruption risk.
5. Shifts in service preferences: Preferences for virtual services are expected to continue to increase, as COVID-19 has exposed consumers and businesses to new virtual service offerings.
6. Shifts in consumer purchasing habits: Canadians are expected to continue to increase eCommerce activity and their preference for digital service channels.

PwC examines the impact on connectivity of these trends and the implications for bandwidth usage and network densification.

Looking across the G7, plus Australia and South Korea, PwC says “governments have enacted policies and regulations across six key levers that incentivize and facilitate private investment in the deployment of 5G faster and in different ways than market forces would likely dictate.”

1. Spectrum timing, allocation and costs
2. Network investment incentives
3. Rural network subsidies
4. Regulatory standards
5. Research and innovation funding (technology development)
6. Vertical industry application funding (technology adoption)

The report looks at each of these, and each country’s use of these policy levers, in much more detail.

“Through cooperation between government and industry on 5G and Industry 4.0, Canada can support the mid to long term success of the economy, while providing the telecommunications networks required to meet the connectivity needs of Canadians’ economic and social lives post-COVID-19.”

Surfshark, a provider of online privacy and security solutions, has produced a study examining the quality of a digital wellbeing in 85 countries representing 81% of the global population.

The Surfshark Digital Quality of Life Index is based on five “fundamental pillars”: Internet affordability; Internet quality; Electronic infrastructure; Electronic security; and, Electronic government.

Canada (.78 index) ranked 3rd out of the 85 countries examined, behind Denmark (.79) and Sweden (.79), with its overall ranking brought down by only ‘moderate’ data protection laws.

Canada’s broadband affordability ranked first in the world, with the index looking at how much time on average needed to be worked to afford the lowest price plans.

Overall internet affordability, which included mobile broadband, placed Canada in second place, behind Israel. Surfshark’s ranking is consistent with the Inclusive Internet Index ranking by the Economist’s Intelligence Unit, placing Canada’s internet affordability in third place of 100 countries examined, based on cost relative to income and competitive environment.

And recall that a report by PwC released a little over a year ago showed “Canadian mobile services top G7 affordability ranking”.

So why do we keep hearing these deeply flawed statements like, “everybody knows Canada has some of the most expensive internet access prices in the world?”

While such statements may create eye-catching headlines, it is not a proper reflection of reality.

With so many important Canadian telecom policy issues under consideration, it is critical that discussions are based on the evidence. The Surfshark index, like the Economist’s Inclusive Internet Index and PwC’s study, all demonstrate that on average, Canadian telecom services are affordable.

As I said at the time of the PwC study last year, “there are indeed some Canadians unable to find an affordable device or service plan that they may need to participate in today’s economy.”

That needs to start with developing a greater understanding of those individuals and households on the wrong side of the digital divide and focus programs to target those inequities.

But it is long past the time to leave behind the flawed populist narrative on overall affordability of Canadian telecom services.

Ofcom, the telecom regulator in the UK, issued an important policy statement last week promoting investment and competition in fibre networks.

In its story about the policy statement, Computer Weekly said that infrastructure in the UK’s was recognized to be in “urgent need of an upgrade, especially as demand for data continues to accelerate, an issue made even more pressing by the need for mass remote working.”

Computer Weekly reported “To address these needs will require significant private investment in full-fibre broadband, said Ofcom, which noted that network competition had helped full-fibre coverage increase at its fastest ever rate over the past year – and that momentum had continued throughout the pandemic.”

when it comes to ultra-high-speed fibre services, Ofcom confirmed these would continue to be free from pricing regulation. The rationale for this decision is that people can choose the entry-level service as an alternative. Moreover, Ofcom added that Openreach could also “charge a bit more” for regulated products delivered over full-fibre instead of copper, because it regards full-fibre as consistently faster and much more reliable.

This echoes the policy set forward in Canada last summer, when Industry Minister Navdeep Bains pronounced “Canada’s future depends on connectivity”.

Ofcom wrote:

Our approach to supporting investment in gigabit-capable networks is focused on encouraging competition between different networks where viable, which will provide high quality services, choice and affordable broadband for consumers throughout the UK. We recognise that it will require significant investment from private companies to upgrade the UK’s networks, so they are fit for the future. Our decisions incentivise that investment – giving regulatory certainty and allowing companies to make a fair return whilst ensuring consumers continue to have access to affordable broadband as new networks are rolled out.

As I think back to an exchange between the Conservative Industry critic and a TELUS executive at Canada’s parliamentary industry committee last year, we can now see a clear statement from the UK regulator favouring competitive private sector investment in infrastructure, and creating regulatory incentives for facilities-based competition.

Favouring facilities-based competition has been Canada’s telecom policy approach for nearly 30 years. And other regulators are seeing the light.

The news of a $26B Rogers – Shaw merger will likely generate a lot of commentary on a lot of issues over the next year as the transaction moves through the approvals process.

One of the more immediate questions is how the transaction impacts the upcoming 3500 MHz spectrum auction in Canada.

The deadline for applying to participate in the auction is April 6.

Under the Policy and Licensing Framework, once again the Department considered what are termed “Pro-Competitive Measures”, such as spectrum set-asides and spectrum caps. In the end, it determined not to implement a cap, but to set-aside up to 50 MHz of spectrum (not every license area has sufficient unencumbered spectrum available due to wireless internet service providers operating in that band).

The discussion and determination on eligibility to bid on the set-aside spectrum was also interesting: “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 area of interest, effective as of the date of application to participate in the 3500 MHz auction.”

Which brings us to understanding who are “National Mobile Service Providers”, defined as “companies with 10% or more of national wireless subscriber market share,” which effectively means Bell, Rogers, and TELUS.

The rules also discuss associated and affiliated entities, “relating to the participation of affiliated and associated entities in order to ensure that each bidder is an independent bidder.”

Associated Entities are defined as “Any entities that enter into any partnerships, joint ventures, agreements to merge, consortia or any arrangements, agreements or understandings of any kind, either explicit or implicit, relating to the acquisition or use of any of the spectrum licences being auctioned in this process will be treated as associated entities.”

Under that definition, the announced “agreement to merge” appears to make Rogers and Shaw “associated” for the purpose of the auction. In most circumstances, Associated Entities are presumed to be non-independent bidders, but paragraph 265 states “Associated entities may apply to participate separately in the 3500 MHz auction. ISED is of the view that allowing associated entities that are competitors in the market to bid separately would not have an adverse impact on the integrity of the auction provided that auction participants comply with the information disclosure and anti-collusion rules.”

The anti-collusion rules are one gate, and Paragraph 266 sets out a second gate: “To obtain approval to participate separately in the auction, associated entities will be required to demonstrate to ISED’s satisfaction that they intend to separately and actively provide services in the applicable licence area.” Following statements by the companies in the wake of the merger announcement, it is difficult to imagine that Rogers and Shaw “intend to separately and actively provide services” anywhere.

If Associated Entities wish to bid separately, they must apply two weeks prior to the April 6 application deadline. That happens to be tomorrow, March 23.

Will Shaw participate separately in the 3500 MHz auction in June? Likely not, given statements when the merger was announced last week. “With telecom companies making multibillion-dollar investments to upgrade networks to 5G technology, chief executive Brad Shaw said he decided his Calgary-based company could no longer go it alone and agreed after years of takeover pitches from Rogers to embrace a $20.4-billion acquisition.”

Given restrictions on eligibility, that bidders must currently be offering telecom services in a license area to participate, it is possible that some set-aside spectrum may end up unsold, while vigourous competition drives up prices in the remaining bands.

Should we consider this a bug in the auction design or a feature?