Search Results for: affordable

Canada’s Parliamentary Standing Committee on Industry, Science and Technology, better known as “INDU” has released its report “Affordability and Accessibility of Telecommunications Services in Canada: Encouraging Competition to (Finally) Bridge the Digital Divide” [pdf, 3.5 MB].

The 68 page report is largely unintelligible gibberish, representing a complete waste of time for our Parliamentarians, the witnesses and the parties who prepared representations before the Committee. Seven of those pages are completely blank, so a little better than 10% of the report is useful as scratch paper. Not all of the witnesses who appeared are acknowledged in the report, and the list of submissions by parties is incomplete.

I note that the report is not tagged as a preliminary draft. It should be. The release of this report, in this condition, should not be considered one of the prouder moments for the INDU Committee.

Recommendation 3 is indecipherable:

That the Canadian Radio-television and Telecommunications Commission establish an affordability standard for telecommunications services across Canada after consulting with various stakeholders, taking into account an affordability standard for wholesale Internet rates ensuring equitable treatment of network owners and virtual operators in order to significantly reduce the cost of bandwidth among providers, thereby encouraging more competition and reducing the price of consumer packages, and that it issue its decision within a year.

What does it mean to establish an “affordability standard” that takes into account a wholesale affordability standard?

Recommendation number 4 is also a beauty:

That the Government of Canada increase service costs by 50 cents for Canadians who are willing and able to afford the incurred cost in order to come to the aid of neighbors that can not afford high prices.

Isn’t that what we usually consider to be the role of government social benefits?

Recommendations 5 and 6 show that the committee clearly didn’t understand how government has completely failed lower income households in developing affordable connectivity solutions.

Recommendation 5
That the Government of Canada create a benefit for large band services until the end of the pandemic for low-income Canadians, seniors or Canadians who have lost their jobs during the pandemic.

Recommendation 6
That the Government of Canada change some of the parameters for the Connecting Families program to improve accessibility by, for example:

• Changing the eligibility criteria and better targeting families to ensure all low-income households have access to it;
• Requiring service providers to participate in the program and funding them directly; and
• Promoting programs more strategically so that more low-income families are aware of them.

Repeat after me: “Connecting Families is a private sector initiative.” And, as I wrote in “The broadband divide’s little secret”, research has shown that low prices aren’t enough to get more people online.

Oh, can someone tell me what the heck are these “large band services” in Recommendation 5?

Recommendation 12 is just plain silly:

That the Government of Canada put in place a variety of means to support improved connectivity in rural and remote areas. For example, it could:

• Provide financial support to help build infrastructure for carriers or service providers who are in areas where it is not economically beneficial for them to build it on their own in order to help reach the objective of providing an appropriate level of service;
• Ensure or promote competition in areas where there is only a small number of providers by allowing resale, allowing access to third parties to then provide services using the facilities of the incumbent

The first part, subsidizing rural builds, is precisely what governments have been doing since what seems like the beginning of time. The second part says the government should allow competition? Hello? Competition is already allowed by the Government of Canada. The CRTC also allows competition. It just doesn’t mandate certain types of competition, although it does mandate others. There is a difference between allowing competition and mandating resale. How could this committee not know the difference?

The report is, or at least should be, an embarrassment to the members of the committee and the staff who supported it. If I marked this as an undergraduate paper, I would assign a failing grade. It’s really not surprising given the political theatrics that took place during meetings seeking evidence for the report. Perhaps the quality of such studies would benefit from INDU Committee actually listening to witnesses and reading submissions to learn about subject areas, rather than trying to score cheap political points through ‘gotcha’ style cross-examination.

As it stands, the report is unworthy of the seal of the House of Commons coat of arms that adorns its cover page. Given the subject matter, “Affordability and Accessibility of Telecommunications Services in Canada”, that’s especially disappointing.

Data on Tap, otherwise known as DOTmobile, says that it has appealed the CRTC’s recent Regulatory Policy – Review of Mobile Wireless Services to Cabinet.

Recall that the Telecom Act prescribes three channels of appeal for a CRTC decision: to Cabinet (the Governor in Council); to the Federal Court of Appeal; or, back to the CRTC itself.

A “petition” to Cabinet must be filed within 90 days of a CRTC Decision. The Commission’s policy was issued on April 15th, less than 3 weeks ago; Cabinet has a year from the date of the decision to respond.

The press release says:

“The CRTC decision misinterprets Canada’s wireless policy. Industry analysts, telecom experts, competitive regional providers and even the dominant carriers all recognise that this decision will not have any meaningful, immediate or nation-wide effect on the wireless market,” said Algis Akstinas, CEO of Data on Tap Inc. “It is not addressing the pain points that kicked off the Review of Mobile Wireless Services and were validated by the Commission and Competition Bureau Canada during the proceeding.”

Given that the CRTC’s model largely adopted the competitive framework proposed by the Competition Bureau, it is hard to understand the validity of this statement.

In its Application, DOTmobile asks Cabinet to:

1. Make wholesale access to dominant networks available to Full MVNOs by removing the requirements targeting regional MNOs:
• Remove all spectrum licensing requirements.
• Remove the seven-year limitation on mandated wholesale access.
• Remove the requirement to own and operate an existing radio-access network.
2. Set a maximum wholesale rate to allow Full MVNOs to offer plans that meet the affordable and occasional-use plan requirements identified by the CRTC:
• $0.0070 per voice minute (based on 500 average minutes of usage)
• $0.0010 per SMS message (based on 500 average minutes of usage)
• $0.0060 per MB of data (based on 3GB of average data usage)
• Wholesale cost for the $35/month 3GB plan would be $22.00, leaving a moderate 37% average retail margin to cover operating costs and investments.
3. Direct the CRTC to review maximum mandated wholesale rates every two years to determine if they allow for competitive retail pricing, based on a margin equal to the average reported wireless EBITDA margin of the dominant networks in the CRTC’s Communications Monitoring Report.

It is a hefty request with a degree of specificity that is extremely unusual to expect from Cabinet.

DOTmobile’s Application itself recognizes the close relationship between the CRTC’s Decision and the Competition Bureau’s proposed model. Recall that the Competition Bureau is an agency that reports to the Minister. As the CRTC observed, “The Commissioner [of Competition] suggested that, relative to facilities-based competitors, service-based MVNOs are inferior because, without any networks of their own, they must rely on network operators and the regulator to set the bounds in which they operate” and “proposed that the Commission [CRTC] adopt a narrowly focused, facilities-based MVNO access policy.”

It is worthwhile looking at a part of the introduction to the CRTC’s Policy Decision:

the Commission considers it necessary to apply certain targeted regulatory measures to ensure that the needs of Canadians are met, having regard to the policy objectives of the Telecommunications Act and both the 2006 and 2019 Policy Directions.

In considering its regulatory approach, the Commission must take care not to disrupt the competition that is already occurring, but instead foster an environment where this competition can grow and be sustainable over the long term.

I suspect the Minister will follow a similar approach, taking care not to disrupt the competition that is already occurring.

We’ll be following this file.

Broadband adoption is lower in low income households compared to higher income households. Absolutely true.

So why don’t we just lower the monthly price and solve the income divide?

That was my thought process way back, when I first started looking at income data correlated with computer ownership and home internet subscriptions.

Unfortunately, after introducing Connected for Success, Internet for Good, Connecting Families and other targeted programs, we have learned that getting people online isn’t just a matter of price.

Economists Gregory Rosston and Scott Wallsten wrote about this last year:

Well-meaning policymakers and advocates typically say that the biggest issue keeping low-income people from subscribing is the cost. Surveys consistently list that as one of the top two reasons. If that were so, the solution would be obvious: increase subsidies. And, to be sure, lower prices for low-income households would encourage additional adoption. As economists, far be it from us to argue that demand curves do not typically slope downwards.

But evidence from people’s behavior, as opposed to survey responses, has shown that the price of broadband service is not the primary factor that keeps many low-income households from subscribing.

The paper talks about the need to gather more evidence, such as experiments conducted by the FCC in the US that tested different price points. “Only about ten percent of the expected number of households signed up, even with the price of one plan set at $1.99 per month.”

Last week, Policy Options carried a piece by Doug Brake and Alexandra Bruer, asking “Is the link between internet adoption and broadband pricing overstated?” The subtitle summarizes the article saying, “Pricing is often identified as a barrier to internet adoption, but the data is unclear. Policy-makers should focus on subsidies for low-income users.” That article cited the 2020 Inclusive Internet Index by The Economist Intelligence Unit, that gave Canada a high ranking, based on internet availability, affordability, relevance (which measures the availability of content relevant to local users) and readiness. Earlier this week, the 2021 edition was released and Canada moved up (into 6th place of 120 countries) and first in Affordability, saying “The competitive Canadian broadband market is a key factor underpinning relatively affordable fixed broadband costs and Canada’s 6th place overall ranking.”

There are certainly many households that have trouble paying the generally available rates for broadband service, just as those households have difficulty paying generally available prices for food, shelter and other basic needs. The “broadband affordability” argument often gets extrapolated to say that prices need to be lowered across the board [see: Myth 2: Pricing equals Affordability].

We use a direct subsidy approach for other basic needs. Why are communications services treated differently? Across Canada, there are low priced plans for disadvantaged households that are provided on a voluntary basis by participating service providers, not government funding.

But we have learned, lower prices aren’t enough to get people to connect.

We have well-meaning advocates and academics in Canada pushing agendas for municipal broadband with no evidence, or in the case of ConnectTO, deeply flawed evidence, to support their assertions that gaps in adoption rates are all about price.

The mistake that emerges from a lack of good economic and social data analysis is that governments are tempted to apply the wrong solution to solve the wrong problem. We see that with Toronto’s misguided and ill-informed Connect TO project. The Policy Options article concludes by saying “We should look instead at improving existing subsidy systems to address broadband affordability head-on, rather than through wholesale changes to industry structure.”

Professor Mark Jamison warns that the US is embarking on a similar, but even more elaborate $100B broadband boondoggle.

President Joe Biden wants Americans to have broadband in the worst way. His $2.3 trillion American Jobs Plan — which isn’t a jobs plan, but that’s another topic — includes $100 billion for broadband using the worst plan imaginable: He wants broadband provided by the government institutions that bring us the U.S. Postal Service, Amtrak and our failing transportation, water and other infrastructures. What could go wrong?

Bridging the income divide will take more than just lower prices. We are going to need to do more to build increased digital literacy and trust among those who aren’t already comfortable online. As I have said so often, we need better quality data to inform our policies and implementation plans.

As Economists Rosston and Wallsten found, we need to look beyond price to find the secret to bridging the digital divide.

Robert Ghiz, President and CEO of the Canadian Wireless Telecommunications Association (CWTA) was the featured keynote speaker for the penultimate session of STAC2021, the annual conference of Canada’s Structure, Tower and Antenna Council, held online this year, after having to cancel last year’s event due to COVID-19.

In my years hosting The Canadian Telecom Summit, I have had the pleasure of welcoming Robert a number of times. His talks are typically packed with statistics and topical information about the wireless industry and its impact on Canadians and Canada’s economy. And he is arguably the most prominent public figure pushing Prince Edward Island as the tourist destination of choice when we get past these pandemic times.

Today, he shared important perspectives on Canada’s wireless and telecommunications industry as a key part of nation building, saying “Our industry today is what the railway was 150 years ago.” STAC members and the telecommunications industry have met the challenges of the pandemic head-on. “Canada’s wireless industry has been recognized as a national success story throughout this pandemic.”

CWTA members ensured that “even with intensified network traffic and altered usage patterns, that Canadians can continue to rely on the high-quality networks to which they have become accustomed.”

He told STAC that “Canada’s telecom network operators continue to invest billions each year in expanding Canada’s digital infrastructure while ensuring that Canada maintains its global leadership in quality of service by deploying next-generation technologies such as 5G.”

These investments have also outpaced our global peers. In the G7, Canada ranks first for investment by spending $255 per capita on telecoms, compared to $156 for the average OECD country and re-investing 23 cents for every dollar of revenue, compared to the average of 15 cents in OECD countries.

A report by Accenture estimates that $26 billion will need to be invested by facilities-based carriers between 2020 and 2026 in order to deploy the network infrastructure for 5G. Accenture found that Canada’s facilities-based wireless carriers have invested over $72.3 billion in building Canada’s wireless networks since 1987.

With its focus on facilities-based competition, yesterday’s CRTC decision [decision, backgrounder, news release] appears to endorse the federal government’s statement last summer that “Canada’s future depends on connectivity.”

In a statement following the release of the CRTC’s decision, Minister Champagne wrote:

Throughout the COVID-19 pandemic, Canada’s telecommunications service providers and their front line workers have been doing their part and providing essential services to keep Canadians connected. Now more than ever, Canadians are relying on telecommunications services for work, school, finances and health care – making access to high-quality and affordable services essential.

Returning to the address by Robert Ghiz to STAC 2021, he closed by emphasizing the importance of investment in telecommunications services. “COVID-19 has highlighted the need to invest in providing digital access to all Canadians.”

Canada’s future depends on connectivity.

A few years ago (ok, maybe 8 years ago), Scotiabank published a report: “Canadian Wireless Myths and Facts”, that gave rise to my blog post “Top 10 myths on Canadian wireless”.

With so much going on in area of telecom policy I figured this would be a good time to update the list and expand it to include more than just wireless.

Policy decisions should be evidence-based, but unfortunately there are a lot of myths that keep being repeated, so much so that some even show up in the media and elsewhere.

Let’s take a look at some of the most common myths. We’ll start with these five, and follow-up with some more sometime soon.

1. Myth: Canadians pay more for less

Whether it’s mortgage payments, the gas bill, or internet connectivity, nobody likes paying bills. The feeling is even worse when you think that someone is getting a better deal. So it’s understandable that Canadians get upset when repeatedly told that they pay more than others for the same or worse service. But like most folklore, it’s not true.

So why do people think this? There are number of international price comparison studies that purport to show that prices in Canada are higher than in most other countries. Unfortunately, most people just read the headlines and do not examine how the study was conducted, what data was used, or critically assess the conclusions. To quote a review of one such study, these price comparisons are often little more than “a careless mish-mash of data points from which no reliable conclusion can be drawn.”

To be clear, there are differences in prices between carriers and between countries. But in addition to using faulty methodology and outdated data, one-dimensional price comparisons make no effort to understand the differences or determine the underlying value that customers are receiving from country to country.

To give one hypothetical example, consider a mobile plan that provides 10GB of data per month with an average download speed of 60Mb/s for CA$60 versus a plan that offers 10GB of data with an average download speed of 3Mb/s for CA$40. Which is the better plan? Based on the methodology of some price comparison studies, consumers would be better off with the 3Mb/s plan because it costs less. That may be true for consumers who don’t use data intensive applications, but for those who do, the $60 plan provides better value.

Another factor to consider is the cost of providing the service. One study found that the cost of building wireless networks in Canada is 83% higher than the average of a group of benchmark countries (Japan, Germany, France, U.K., Italy and Australia) and 34% higher than the U.S.. This makes sense as Canadian network operators, among other challenges, must serve a much lower customer base spread over a wide area, purchase equipment in $U.S., and face much higher spectrum costs.

The point is, price comparisons are meaningless unless one takes into account the plan attributes, quality of service, country attributes and cost of providing the service. While they don’t generate the same headlines, there are studies which take these factors into consideration. For example, a U.S. industry association commissioned a study to compare the value received by wireless subscribers across 36 countries, including Canada. It concluded that Canadians receive more value for their dollar – or “more bang for their buck” – than all other G7 countries plus Australia.

2. Myth: Pricing equals Affordability

Similar to the previous myth, the term “affordability” gets thrown around without enough consideration of the facts. A couple of months ago, I wrote that the expression has been getting hijacked and applied to alternate agendas, such as ISPs seeking to bypass wholesale broadband access with taxpayers footing the bill for capital investment.

We all want lower prices for everything, but that doesn’t mean that current prices aren’t affordable. To look at affordability, we need to look at price relative to the ability to pay. As I wrote recently, Canadian communications pricing actually ranks pretty well using that metric.

That is certainly not saying that that all Canadians can afford the cost of connectivity, or the devices to connect. Unfortunately, there are Canadians who find it difficult, if not impossible, to purchase mobile devices or computers, and basic internet connectivity. As long time readers know, for nearly 15 years, I have been campaigning and advocating for solutions to this important social challenge.

When people can’t afford necessities such as housing, electricity, food, and dental care, we do not try to resolve the problem by forcing the repricing of these goods and services for the entire marketplace. Instead, governments provide targeted social assistance.

In the U.S., the government recently introduced the Emergency Broadband Benefit which provides a monthly subsidy of between $50-75 that can be used to acquire broadband connectivity. There are also efforts to make such programs permanent.

A similar government program may ultimately be required in Canada, but in the meantime, we applaud the efforts of service providers like Rogers with Connected for Success, TELUS with Internet for Good, and the various carrier partners delivering the Connecting Families initiative.

Meanwhile, prices are falling. Statistics Canada data shows that prices for wireless services are continuing to fall while the prices of other goods and services are rising.

3. Myth: MVNOs aren’t allowed in Canada

Yes, Mobile Virtual Network Operators (MVNOs) should be allowed in Canada. And, (surprise!) they already are.

Indeed, there are a number of MVNOs that have been operating in Canada for years, as well as newer MVNOs like CMlink and CTexcel. Just like most countries in the world, MVNOs are permitted in Canada but, just like almost everywhere, MVNOs aren’t mandated by the regulator.

There are very few countries in the world where the regulator has ordered mobile carriers to make their networks available to MVNOs, and I’m not aware of any regulators that have set wholesale rates. Rather, in the majority of countries with MVNOs, the MVNO must negotiate an arrangement for network access with the mobile network operator. As in all commercial negotiations, there must be a benefit for both parties to the arrangement. This could be through having a well-known brand or reaching a market that the network operator is not targeting. In the end, the MVNO must be able to attract new subscribers to the network operator’s network that the network operator cannot gain by itself.

4. Myth: Government has set a 50/10 minimum speed target for everyone

Over and over I keep reading people say that the CRTC set a minimum basic internet standard of 50 Mbps (down) and 10 Mbps (up) with unlimited download capabilities. A recent ‘Framing Paper’ for a workshop series from Ryerson’s Leadership Lab on ‘Overcoming Digital Divides’ perpetuates the myth that 50/10 is a minimum basic speed.

The CRTC did indeed set a target with those characteristics, but the intent was for all Canadians to have the choice to subscribe to such a broadband service, not a statement that 50/10 is a minimum basic speed that all Canadians require.

There is an important distinction to be made. Some people may choose to subscribe to speeds and capabilities below the infrastructure target; not everyone needs a 50/10 service.

So if you read a report that says X% of households in a given area do not have broadband connectivity that meets the 50/10 target, look closely to see if the report makes clear whether those households do not have that level of connectivity because it is not available or because, for whatever reason, they have chosen not to subscribe to that level of connectivity.

It will be difficult to overcome digital divides if we can’t keep the targets straight.

5. Myth: Other countries have a lot more competitors

Some people say that Canada’s mobile wireless market is too concentrated. But what standard are they applying when making these statements?

Of 29 European countries (including the UK), as of the beginning of 2019, there were 19 countries with 3 mobile operators and 10 with 4 mobile operators. In the period between 2010 and 2018, there 4 European countries that went from 4 to 3 mobile operators, and 3 countries that went from 3 to 4. [pdf, 889KB]

In the United States, the number of tier 1 national mobile operators went from 4 to 3 when T-Mobile and Sprint merged in 2020.

Canada has 3 national operators and a number of regional operators that serve different parts of the country.

In addition to the number of competitors, a common measure of market concentration is the Herfindahl-Hirschman Index (HHI). The HHI is determined by squaring the market share of each firm competing in the market and then summing the result numbers. The lower the HHI the less concentrated is the market.

According to data from GSMA Intelligence, as of 2018, the HHI for Canada was 2518. The HHI for the United States, prior to the merger of T-Mobile and Sprint, was 2664, while the weighted average HHI for the EU was 2966.

Whether looking at the number of mobile wireless operators or the HHI, to say that Canada is an outlier is simply not true.

Which other myths you would like addressed in a follow-up?